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HQ 225098


June 6, 1994

CON-13-CO:R:C:E 225098 CB

CATEGORY: ENTRY

Director
Regulatory Audit Division
U.S. Customs Service
909 S.E. 1st Avenue
Room 632
Miami, FL 33131

RE: Request for Internal Advice - Authority to Withdraw Bonded Warehouse Merchandise Duty Free for Transfer to Cruise Ship Gift Shops

Dear Madam:

This is in response to your request for internal advice (your file AUD-1-O:R RKR) dated November 23, 1993, regarding withdrawals of merchandise from bonded warehouses for transfer to cruise ship gift shops.

FACTS:

The company in question maintains a class 2 bonded warehouse from which it withdraws and transfers bonded merchandise to gift shops on various cruise ships. During the cruises, the vessels may visit foreign ports or may be "voyages to nowhere" - departing and returning to the same port without any intermediate stops at other domestic or foreign ports.

ISSUE:

Whether merchandise may be withdrawn from a bonded warehouse for transfer to cruise ship gift shops under the duty- and tax- free exemptions in 19 CFR 10.59 - 10.65 and 144.35?

LAW AND ANALYSIS:

Under the present statutes, Customs Regulations, and directives, there are three options available to a cruise line or airline:

1. Section 309, Tariff Act of 1930, as amended (19 U.S.C. 1309 (a)), in pertinent part, provides that supplies for vessels or aircraft registered in the United States and supplies or equipment for vessels or aircraft registered in any foreign country may be withdrawn duty free. Treasury Decision (T.D.) 49815(4) defined the term vessel supplies and equipment as used in 1309. These definitions of supplies and equipment have likewise been applied by Customs to aircraft supplies and equipment. (ORR Ruling EV 235N dated January 12, 1955, and July 12, 1960). Articles which fall under the definition of supplies and equipment are "deemed" exported when laden on a qualifying flight or voyage. T.D. 49815(4) defined "supplies" as including those articles commonly known as "sea stores". The term "equipment" includes portable articles necessary and appropriate for the navigation, operation and maintenance of the vessel and for the comfort and safety of the persons on board. Merchandise carried on board a vessel for sale to passengers or crew is considered to be ship's stores pursuant to the Convention on Facilitation of International Maritime Traffic, 18 U.S.T. 411, TIAS 6251, which the United States ratified on March 17, 1967, and implemented in the Customs Regulations by Treasury Decision 71-169, 5 Cust. Bull. 314 (1971). Therefore, this merchandise would not qualify for withdrawal under 19 U.S.C. 1309.

2. Customs Directive (C.D.) 3280-08, issued on May 9, 1991, sets forth appropriate Customs procedures for the treatment of articles which may be sold aboard aircraft during international flights for exportation by passengers. Customs has allowed airlines to import this "international travel merchandise" for retention at a facility at the airport for a period not to exceed one year. This merchandise is not considered aircraft supplies.

3. Duty-free shops operated at port. Orders for the merchandise must be taken at the port in compliance with 19 U.S.C. 1555(b)(2); and, the goods must be distributed on the vessel when it is on the high seas in compliance with 19 U.S.C. 1555(b)(3)(A) (to provide reasonable assurance that the merchandise will be exported from the Customs territory). Passengers on a "cruise to nowhere" are not able to purchase duty-free merchandise because a "cruise to nowhere" does not stop at any foreign ports and, thus, the merchandise would not be considered exported.

Therefore, the answer to your question is: (1) merchandise cannot be withdrawn from a bonded warehouse and laden on a "cruise to nowhere" under the duty and tax-free exemptions in 19 CFR 144.35 and 10.59 - 10.65; and (2) ship's stores do not qualify as vessel supplies nor equipment under 19 U.S.C. 1309; therefore, merchandise sold aboard cruise ship shops is not eligible for withdrawal under 19 CFR 10.59 - 10.65 and 144.35.

HOLDING:

Bonded merchandise may not be withdrawn from a bonded warehouse for transfer to cruise ship gift shops under the duty and tax-free exemptions found in 19 CFR 10.59 - 10.65 and 144.35.

The Office of Regulations and Rulings will take steps to make this decision available to Customs personnel via the Customs Rulings Module in ACS and to the public via the Diskette Subscription Service, Lexis, Freedom of Information Act and other public access channels within 60 days from the date of this decision.

Sincerely,

John Durant, Director

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