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HQ 115987




May 15, 2003

VES-4-RR:IT:EC 115987 CK

CATEGORY: CARRIER

Robb R. Maass, Esq.
Alley, Maass, Rogers & Lindsay, P.A.
321 Royal Poinciana Plaza, South
Post Office Box 431
Palm Beach, FLA 33480-0431

RE: Charterer; M/V REVERIE; dutiability under Chapter 89, HTSUS

Dear Mr. Maass:

This is in response to your letters dated May 1, 2003 and May 6, 2003 in which you seek a ruling regarding the potential dutiability of a vessel, which your client would disembark after chartering and cruising in the Caribbean. Our ruling on this matter is set forth below.

FACTS:

A British Virgin Islands company owns the 70-meter, foreign-built, non-duty paid motor yacht, M/V REVERIE. The M/V REVERIE is registered in Bermuda as a commercial yacht and engages principally in the business of carrying passengers for hire.

The company has entered into a charter agreement with a U.S. charterer. The charterer will board the M/V REVERIE at a Caribbean port and the entire charter will take place in Caribbean waters. The plan is for the charterer to disembark the M/V REVERIE at Galveston, Texas, and the vessel would subsequently leave U.S. waters as soon as practicable after dropping off the charter guests (and possibly taking on fuel and provisions, if necessary).

ISSUE:

Does the disembarkation of a U.S. charterer of a foreign-flagged yacht at a U.S. port at the conclusion of a charter that commenced at a Caribbean port and was operated solely in Caribbean waters give rise to a duty obligation?

LAW AND ANALYSIS:

Generally, a yacht or pleasure vessel, regardless of length or tonnage, whether motor, sail or steam propelled, owned by a resident of the United States or brought into this country for sale or charter to a resident of the United States, is dutiable under the Harmonized Tariff Schedule of the United States (HTSUS). Such vessels are dutiable under Chapter 89 of the HTSUS, subheadings 8903.91.00 or 8903.92.00, at the rate of 1.5 percent ad valorem.

The operative language referenced above is that the vessel is brought into the United States for “sale or charter.” In the facts presented in this case, the charter is begun and taken outside U.S. territorial waters and ends when the vessel reaches Galveston, Texas. The proposed arrival at the U.S. port in this case is to allow the U.S. charterer to disembark in Galveston, Texas at the conclusion of the charter term after boarding and carrying out the charter within the Caribbean. The vessel, M/V REVERIE, would arrive in Galveston, Texas for the purpose of allowing the U.S. charterer to disembark. Only for this limited circumstance of allowing the disembarkation of the charterer (and perhaps taking on fuel and supplies) would the vessel not be required to pay duty upon arrival at Galveston, Texas. However, duty would be owed if the vessel was to be offered for sale or charter to another U.S. resident, while in the U.S. before it departures from Galveston, Texas.

HOLDING:

The disembarkation of a U.S. charterer of a foreign-flagged yacht at a U.S. port at the conclusion of a charter that commenced at a Caribbean port and was operated solely in Caribbean waters does not give rise to a duty obligation.

Sincerely,

Glen E. Vereb

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