VES-12-02-RR:IT:EC 114276 GEV
Harold M. Grunfeld, Esq.
Harold I. Loring, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman LLP
245 Park Avenue
33rd Floor
New York, N.Y. 10167-3397
RE: Foreign-built, U.S.-Flagged Yacht; Importation; Dutiability;
Warranty Repairs
Dear Messrs. Grunfeld and Loring:
This is in response to your letter dated March 3, 1998, on
behalf of your client, L.A.W. Limitless, LLC, requesting a ruling
concerning the dutiability of its yacht, M.Y. LIMITLESS, to be
brought into the United States for repairs. Our ruling on this
matter is set forth below.
FACTS:
The M.Y. LIMITLESS is a German-built, U.S.-flagged,
recreational yacht owned by L.A.W. Limitless, LLC, a Delaware
corporation whose sole member is a U.S. citizen and resident who
maintains multiple residences abroad. The yacht, which is 96.25
meters long and is designed for international long-distance
cruising, has two large diesel engines designed to propel it
through water at a speed of 25 knots. It is warranted to have a
sufficient fuel capacity to enable it to travel a minimum of
8,000 nautical miles without refueling. It recently completed a
transatlantic voyage on approximately one-half of its fuel
capacity. The yacht is equipped with state of the art
navigational and communications equipment permitting it to cruise
through international waters with relative ease, and has its own
on-board water treatment facility which can produce 80,000 liters
of potable water a day.
The yacht was purchased under a contract dated June 18,
1993. It was delivered in Bremen, Germany, pursuant to that
contract on or about April 25, 1997. Since its delivery the
yacht has visited ports in Germany, Spain, France, Bermuda and
the Caribbean, but has never been in the United States. It is
now located in the British Virgin Islands and its owner plans for
it to sail to the United States solely for the purpose of having
warranty repair work done.
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It is contemplated that the yacht will arrive in the United
States at Jacksonville, Florida, where it will be drydocked for
approximately one to two weeks for warranty work on the hull.
Thereafter, it will proceed to Ft. Lauderdale, Florida, for
detail warranty work, including work on the yacht's Caterpillar
engines which were purchased from Caterpillar in the United
States. The Caterpillar representative is located in
Caterpillar's Ft. Lauderdale, Florida office. The detail
warranty work is estimated to take anywhere from two to four
months.
Upon completion of the repair work, the yacht will engage in
one or more shakedown cruises in U.S. waters to test the repairs.
Thereafter, the vessel will depart for Bermuda.
ISSUE:
Whether a U.S.-flagged, foreign-built yacht owned by a U.S.
citizen and resident which has never been in the United States
may temporarily enter the United States for the purpose of
obtaining repairs and engaging in one or more shakedown cruises
in U.S. waters 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) (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."
In regard to a yacht owned and brought into the United
States by a resident thereof, the Customs Court, in the case of
Estate of Lev H. Prichard v. United States, 43 CCPA 85, 87-88,
C.A.D. 612 (1956), held that such a yacht, in the absence of
clear evidence to the contrary, would be presumed to be brought
into the United States for use here "permanently" so that it
would be properly classifiable as imported merchandise and thus
subject to the appropriate Customs duty.
However, it should be noted that the above presumption can
be rebutted by satisfactory evidence that the owner did not
intend to bring the yacht into the United States permanently.
American Customs Brokerage Co., Inc. A/C Astral Corp. v. United
States, 72 Cust. Ct. 245, 253, C.D. 4546, 375 F. Supp. 1360,
1365-66 (1974) ("The Astral"). The Customs Court in The Astral
examined the factors under which a vessel, which is brought into
the United States by a United States resident, is considered
imported. In that case, a United States resident brought into
United States waters a foreign-built and documented pleasure
yacht for warranty repairs and an extended shakedown cruise. The
court noted the difficulty of divining intent:
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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.
The Astral, 72 Cust. Ct. at 254, 375 F. Supp. at 1366-67
(citations omitted). In determining that the owner did not
intend to bring his yacht permanently into the United States, the
court stated that the owner brought the vessel into the United
States for repairs in the only qualified repair yard available,
that the design features demonstrated that the vessel would
cruise in the Mediterranean, that the owner intended to change
his residence to Europe, and that the voyage of the vessel
finally terminated in the Mediterranean. 72 Cust. Ct. at 256,
375 F. Supp. at 256, 375 F. Supp. at 1368. The court stated that
pleasure use by the owner did not change the essential nature of
the shakedown cruise following the repairs. Id.
Applying these principles, we determine that the M.Y.
LAWLESS may be brought temporarily into the United States for the
above-described warranty repairs and shakedown cruises without
subjecting the vessel to duty. In regard to the issue of the
vessel owner's intent in this matter, aside from his/her stated
intent that the subject yacht would remain in the United States
only for the duration of the aforementioned repairs and shakedown
cruises(s), we note that the work in question includes warranty
repair work to be done on the vessel's Caterpillar engines that
were originally purchased in the United States and would be
serviced by Caterpillar's representative located in Ft.
Lauderdale, Florida. Further, we note that although the U.S.
citizen owner is a U.S. resident, he/she nonetheless maintains
multiple residences abroad. In addition, the yacht's design
evidences its intended use for international long-distance
cruising. Finally, although the yacht is documented under the
laws of the United States, that factor does not, in and of
itself, constitute an importation into the United States.
(Customs ruling letter 223889, dated July 8, 1992)
In addition to our resolution of the above-discussed issue,
in your letter you also request guidance concerning the
procedures to be followed by the M.Y. LAWLESS upon its arrival in
the United States. Consequently, we are enclosing a copy of our
pamphlet entitled, "Pleasure Boats" for your reference. The
procedures to which you refer are contained therein.
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HOLDING:
A U.S.-flagged, foreign-built yacht owned by a U.S. citizen
and resident which has never been in the United States may
temporarily enter the United States the purpose of obtaining
repairs and engaging in shakedown cruises in U.S. waters without
being considered an importation which would result in the
assessment of duty under the Harmonized Tariff Schedule of the
United States Annotated.
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers
Branch
Enclosure