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HQ 116563

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January 18, 2006

AIR-4-02-RR:BSTC:CCI 116563 CK

CATEGORY: CARRIER

Lee A. Bauer
Roller & Bauer, PLLC
1020 Nineteenth Street, N.W.
Suite 400
Washington, DC 20036

RE: Private Aircraft versus Commercial Aircraft; 19 CFR Part 122

Dear Mr. Bauer:

This is in response to your ruling request dated October 20, 2005 on behalf of your client Servicious Aereos Regiomontanos, S.A. de C.V. (“SARSA”). Our response follows.

FACTS:

Servicious Aereos Regiomontanos, S.A. de C.V. (“SARSA”), a Mexican corporation, operates Mexican-registered aircraft between points in the United States and points in Mexico. You state on occasion that SARSA will also operate a flight between a point in a third country and a point in the United States.

Formento Ecodomico Mexicano, S.A. de C.V. (“FEMSA”) is a major Mexican holding company engaged in the manufacture and distribution of beer and soft drink beverages. SARSA is a wholly owned subsidiary of Grupo Industrial Emprex, S.A. de C.V. (Emprex), and EMPREX is in turn owned 99.99% by FEMSA. FEMSA, through EMPREX, established SARSA as an aircraft operator.

SARSA’s sole function is to provide air transportation to corporate executives of FEMSA and FEMSA affiliated companies. In this capacity, SARSA operates approximately 120 flights annually to the U.S. with an average load of three to four passengers per flight. You state that although the authority that SARSA holds from the Government of Mexico and the U.S. Department of Transportation would allow SARSA to provide commercial air taxi services, SARSA does not do so. You argue that if SARSA did provide or invoice for such services to parties outside the FEMSA family, then those operations would be commercial and outside the scope of the present request.

You state that the only companies that SARSA invoices for air transporation services are three affiliated companies: Cerveceria Cuauhtemoc Moctezuma, S.A. de C.V., FEMSA Servicios, S.A. de C.V., and Refrescos y Aguas Minerales, S.A. de C.V. As set forth in the attached chart, all three companies are affiliated with SARSA, and all three companies are direct or indirect subsidiaries of FEMSA. You state that all three companies are closely affiliated with SARSA, and all three companies are direct or indirect subsidiaries of FEMSA.

You state that SARSA also invoices Mr. Eugenio Garza Lagtiera for air transportation services. He is a beneficiary of a trust that controls the majority of the voting shares of FEMSA. He is also Director and Honorary Life Chairman of FEMSA and Director and Honorary Life Chairman of FEMSA Coca-Cola.

You argue that the payments that SARSA receives from each of the three affiliated companies and Mr. Lagtiera do not qualify as payments under 19 CFR 122.1(d). You argue that each payment that SARSA receives from one of the three affiliated companies is a payment supplied by a business that is directly connected with SARSA’S air transport business by virtue of, first, the common ownership between SARSA and each affiliate and, second, the fact that SARSA’s sole function is to provide air transportation to support the business objectives of the FEMSA enterprise and the specific business objectives of each affiliate company.

You argue that SARSA does not receive payments from businesses such as those cited in CBP’s Aircraft Status Declaration, i.e., hotel resorts, casinos, travel agencies, charter brokers, etc., which typically have indirect connections with aircraft operations.

ISSUE:

Whether the above-described SARSA operation qualifies as private or commercial aircraft pursuant to 19 CFR 122.1(d) and (h).

LAW AND ANALYSIS:

Types of aircraft for CBP purposes of administering the Air Commerce Regulations (19 CFR Part 122) are defined in Subpart A of Part 122 of the Customs Regulations. Section 122.1 of the Customs Regulations (19 CFR §122.1) sets out the general definitions. Section 122.1(d) defines “commercial aircraft” as follows:

A “commercial aircraft” is any aircraft transporting passengers and/or cargo for some payment or other consideration including money or services rendered.

Section 122.1(h) defines “ private aircraft” as follows:

A ‘private aircraft’ is any aircraft engaged in a personal or business flight to or from the U.S. which is not:

Carrying passengers and/or cargo for commercial purposes; Leaving the U.S. carrying neither passengers nor cargo in order to lade passengers and/or cargo in a foreign area for commercial purposes; or Returning to the U.S. carrying neither passengers nor cargo in ballast after leaving with passengers and/or cargo for commercial purposes.

In this case, you state in your submission that SARSA provides flight services for FEMSA executives, and for executives of Cerveceria Cuauhtemoc Moctezuma, S.A. de C.V., FEMSA Servicios, S.A. de C.V., and Refrescos y Aguas Minerales, S.A. de C.V. SARSA also provides services for Mr. Lagtiera. You state that SARSA invoices and receives payment from its three affiliated companies and Mr. Lagtiera.

We note that SARSA is a wholly-owned separately incorporated entity from its holding company FEMSA and its three sister companies. As SARSA is an incorporated entity, neither FEMSA, nor the three above-named sister companies are directly connected with the actual operation or ownership with the aircraft. Further evidence that SARSA is considered a separate company is the invoicing and payment for SARSA services by the related companies and Mr. Lagtiera. For purposes of the customs laws and regulations CBP will look to the structure of the organizations, their relationships, and practices in dealing with each other. The fact that separately incorporated companies are considered a “family of businesses” is not relevant for customs purposes. See, HQ 116025, dated September 29, 2003.

Thus, SARSA aircraft is providing commercial services to its holding company, its related subsidiary company, and the honorary chairman of FEMSA, since it is a separate company, invoices for its services, and collects payment for those services.

HOLDING:

The above-described SARSA operation does not qualify as private aircraft under 19 CFR 122.1(h) and is in fact commercial aircraft pursuant to 19 CFR 122.1(d).

Sincerely,

Glen E. Vereb

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