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HQ 228952




October 23, 2000

CON-9-04 228952 EAB

CATEGORY: TEMPORARY IMPORTATION BOND

D.M. Dorsch, President
Charles Dorsch Shipping Agent, Inc.
1981 Main Street
San Diego, California 92113

RE: Temporary Importation under Bond, TIB; 19 U.S.C. 1434; vessel as merchandise

Dear Mr. Dorsch:

This is our reply to your letter dated August 21, 2000, in which you request a ruling letter on customs treatment of a pleasure yacht.

FACTS:

The vessel in question was substantially built in Taiwan, where it was laded onto the DON FRANE BULIC (bill of lading no. POBUKAOLAX03605) for delivery to Long Beach, California. Following the posting of a bond for temporary importation (TIB), the yacht was floated in Long Beach harbor, the intent being, because of its size, to move it under its own power, rather than ship it overland, to the facility in San Diego where finishing work would be done. Once completed, the yacht would depart US waters under its own power.

Customs/San Diego has determined that the yacht may not be entered under bond and thereafter operated in US waters (for purposes of obtaining alterations); rather, a formal vessel entry pursuant to 19 U.S.C. 1434 must be made.

ISSUE:

Whether a yacht arriving in the US as cargo may be entered for temporary importation under bond to sail coastwise for repairs or alteration prior to foreign sailing, or is subject to the formal vessel entry requirements of 19 U.S.C. 1434.

LAW AND ANALYSIS:

As a general rule, any vessel, unless otherwise provided by law, from a foreign port or place shall make formal entry within 48 hours after arrival at any port or place in the US, in accordance with regulations prescribed by the Secretary of the Treasury. See 19 U.S.C. 1434. None of the exceptions to formal vessel entry and clearance requirement set forth in 19 U.S.C. 1441 are applicable here.

Regulations prescribed by the Secretary pursuant to 19 U.S.C. 1434 are found in Part 4, Customs Regulations, "Vessels in Foreign and Domestic Trades" (19 CFR Part 4). For purposes of these regulations, the "word vessel includes every description of water craft or other contrivance used or capable of being used as a means of transportation on water, but does not include aircraft." See 19 U.S.C. 1401(a) and 19 CFR 4.0(a). Additionally, "merchandise means goods, wares, and chattels of every description . . .". See 19 U.S.C. 1401(c).

While the foregoing statutory and regulatory definitions suggest that the terms "vessel" and "merchandise" are each broad in scope and mutually exclusive, Customs has long held that a vessel which is carried aboard another vessel is considered cargo and as such, is "merchandise" required to be manifested rather than a "vessel" that is required to be entered. See HQ 112612 (March 23, 1993) and citations therein. This is consistent with historic judicial treatment of the issue:

. . . judicial precedent has limited the definition of vessel for tariff purposes and has established that not every watercraft meeting the bare terms of the definition is entitled to entry into the United States duty free. In particular, the scope of the term "vessel" has been narrowed to limit duty-free treatment to water-craft that are instrumentalities of commerce as opposed to articles of commerce.

United States v. Seagull Marine, 627 F.2d 1083, 1084 (CCPA, 1980).

We find that a yacht under such circumstances as being manifested as part of a transoceanic shipment is an article of commerce that consti-tutes merchandise classifiable under the Harmo-nized Tariff Schedule of the United States (HTSUS). As a general matter, the subject yacht appears classifiable under heading 8903, HTSUS, the provision for "Yachts and other vessels for pleasure or sports; row boats and canoes." Such a yacht of Taiwanese origin would be dutiable at the column 1 General rate of 1.5 percent ad valorem.

Notwithstanding the foregoing, U.S. Note 1, Chapter 98, HTSUS, provides in part as follows:

. . . Any article which is described in any provision in this chapter is classifiable in said provision if the conditions and requirements thereof and of any applicable regulations are met.

Thus we note subheading 9813.00.05, HTSUS, which provides in part that "Articles to be repaired, altered or processed . . . [may be entered] Free, under bond, as prescribed in U.S. note 1 to this subchapter [XIII]."

Finally, U.S. Note 1(a), subchapter XIII, HTSUS, provides in part as follows:

The articles described in the provisions of this subchapter, when not imported for sale or for sale on approval, may be admitted into the United States without the payment of duty, under bond for their exportation within 1 year from the date of importation, which period . . ., may be extended, upon application [etc.].

We note here that certain limited conditions set forth in U.S. Note 2, subchapter XIII, HTSUS, and applicable to TIB entry of merchandise classifiable under subheading 9813.00.05, HTSUS, do not affect TIB entry of the subject yacht.

In conclusion, the subject yacht is not a vessel for which the master must make a vessel entry as required by 19 U.S.C. 1434, but merchandise classifiable under subheading 9813.00.05, HTSUS, which may be so entered and released from Customs custody in accordance with all applicable Customs Regulations.

HOLDING:

A yacht manifested as cargo on board a vessel is not subject to the entry requirements of 19 U.S.C. 1434. Such a yacht is merchandise which may be classified in subheading 9813.00.05, HTSUS and entered accordingly; otherwise, such a yacht may be classifiable in accordance with the terms of heading 8903, HTSUS, the provision for, inter alia, "yachts".

Sincerely,

William G. Rosoff, for


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