HQ H019499 - Importation; Intent; Warranty Work; 19 U.S.C. § 1202 - United States International Trade Commision Rulings

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HQ H019499

November 9, 2007

VES-12-02-OT:RR:BSTC:CCI H019499 JLB

CATEGORY: CARRIER

Ms. Barbara Ehrich Locke
Holland & Knight, LLP
701 Brickell Avenue
Suite 3000
P.O. Box 015441
Miami, Florida 33131

RE: Importation; Intent; Warranty Work; 19 U.S.C. § 1202

Dear Ms. Locke:

This letter is in response to your correspondence dated November 7, 2007, in which you request a ruling on whether the yacht, the M/Y SECRET, is subject to importation and payment of duty as a result of its proposed entry into the United States. Our ruling on your request follows.

FACTS

MY SECRET II, LLC is a limited liability company incorporated in Marshall Islands, authorized to do business in the Cayman Islands with the ultimate beneficial ownership of the company belonging to a United States resident. For purposes of this ruling, the requestor concedes that the yacht is owned by a resident of the United States. The corporation proposes to temporarily enter their 200-foot Feadship motor yacht, the M/Y SECRET ("the vessel"), into the United States as part of its shakedown cruise to undertake repair and warranty work.

The vessel was built in the Netherlands in compliance with the United Kingdom Maritime & Coastguard Agency Large Yacht Code. The vessel was designed primarily for European service coming equipped with only 220 volt outlets and a European Shore Power transfer unit. The yacht is offered for charter through a European-based management firm with its winter location being the Caribbean and its summer location being the Mediterranean. Prior to departing on the shakedown cruise, the vessel was based in Antibes, France for its chartered Mediterranean cruises.

The vessel will travel to Florida for two or possibly three two-week periods for repairs and warranty work on its two tenders which were manufactured and warranted by Nautica International, Inc., headquartered in Florida. Additionally, while the warranty work is performed the corporation will conduct its annual safety inspections including an inspection to see if any more repair work is needed. The first temporary visit to Florida is expected to last from November 10 to November 25, 2007. No guests or passengers will be aboard the vessel while the work is conducted. The vessel will then sail to St. Maarten and will return to Florida from March 1 to March 11, 2008 for continued warranty work. During this second period, the owner's family members and guests will be using the vessel as their sleeping quarters but the vessel will remain moored to the dock the entire period. Around March 11, the vessel will depart the United States for the Bahamas with the guests aboard and may return to the United States temporarily if additional work is needed.

ISSUE

Whether the subject yacht, owned by a United States resident, may temporarily enter the United States for the purpose of obtaining repairs and warranty work without being considered an importation which would result in the assessment of duty under the Harmonized Tariff Schedule of the United States Annotated?

LAW AND ANALYSIS

General Note 1 of the Harmonized Tariff Schedule of the United States Annotated ("HTSUSA") (see 19 U.S.C. § 1202) provides that "[a]ll goods provided for in this schedule and imported into the customs territory of the United States from outside thereof are subject to duty or exempt therefrom as prescribed in general notes 3 and 4." The customs territory of the United States is defined in General Note 2, HTSUSA, as including "...only the States, the District of Columbia and Puerto Rico."

To properly classify a pleasure yacht as imported merchandise subject to the appropriate duty, it must be found that: (1) the vessel was "imported into the customs territory of the United States" within the meaning of TSUS [now HTSUSA] general headnote 1; and (2) that it was a yacht or pleasure boat owned by a resident of the United States or brought into the United States for sale or charter to a resident thereof. See American Customs Brokerage Co., Inc. v. United States, 375 F. Supp. 1360 (U.S.C.C. 1974).

U.S. Customs and Border Protection ("CBP") has ruled that a pleasure vessel owned by a foreign corporation, the stock of which is wholly owned by one or more residents of the United States is considered "owned by a resident of the United States." See Treasury Decision (T.D.) 54680; Headquarters Decision 111495, dated July 9, 1991. In this case, it is conceded that ownership of the subject vessel belongs to a United States resident. Importation has been held to mean the bringing of goods within the jurisdictional limits of the United States with intent to unlade. See The Sherwin-Williams Co. v. United States, 38 C.C.P.A. 13, C.A.D. 432 (1950); Porto Rico Brokerage Co., Inc., et al. v. United States, 76 F.2d 605 (1935), aff'd on rehearing, 80 F.2d 521 (1936); United States v. Estate of Boshell, 14 Ct. Cust. Appls. (1926). This definition, however, cannot be applied literally in the case of a seagoing vessel or yacht entering the United States under its own power. Therefore, with respect to yachts, importation has been defined as "if coming into this country temporarily as carriers of passengers or merchandise, they are not subject to customs entry or the payment of duty, but if brought into the United States permanently they are to be considered and treated as imported merchandise." See American Customs Brokerage Co., 375 F. Supp. at 1366 quoting Treasury Decision (T.D.) 37376.

When a resident of the United States brings a yacht that he purchased abroad into this country it is presumed, in the absence of clear evidence to the contrary, that the owner intends to use it permanently in the United States and therefore it constitutes an importation. See Estate of Lev H. Prichard v. United States, 43 C.C.P.A. 85, 88-89, C.A.D. 612 (1956). This presumption can be rebutted by satisfactory evidence that the owner did not intend to bring the yacht into the United States permanently. See American Customs Brokerage Co., 375 F. Supp. at 1367. The court noted the difficulty in determining the owner's intent:

"Intent is a state of mind which is difficult of precise proof and can only be inferred from acts and circumstances. A person's intent is usually evidenced by his conduct or statements. Expressions of intent, however, may be used for self-serving purposes. Hence, the court must scrutinize them carefully, together with the conduct of the person making them, and the external circumstances which might tend to confirm or refute them." American Customs Brokerage Co., 375 F. Supp. at 1366-67.

The Customs Court in that case found that the owner did not intend to bring the yacht to the United States permanently since the warranty repairs were only available in the California shipyard, the voyage was part of a shakedown cruise which ended in the Mediterranean, the yacht was only equipped with European features and the owner intended to change his residence to Europe. See id. at 1368. Additionally, the court noted that the limited pleasure use of the vessel did not change the fundamental character of the post-repair shakedown cruise.

In the present case, the M/Y SECRET is being brought into the United States for repairs including warranty repair work on the vessel's two tenders which were purchased from a corporation headquartered in Pembroke Pines, Florida. The owner's agent has stated that his intent is to remain in the United States only for the duration of the aforementioned repairs and then to return to cruising the Caribbean. The vessel is only equipped with European design features, and is to be offered for charter through a European-based management firm with its winter location being the Caribbean and its summer location being the Mediterranean. Consequently, we find that the owner has met the burden of proof and has demonstrated that there is no intent to permanently remain in the United States. The M/Y SECRET may temporarily enter the United States to receive repairs without being considered an importation and subject to the HTSUSA.

HOLDING

The subject yacht, considered owned by a United States resident, may temporarily enter the United States for obtaining repairs and warranty work without being considered an importation which would result in the assessment of duty under the Harmonized Tariff Schedule of the United States Annotated.

Sincerely,

Glen E. Vereb, Chief

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