VES 3-13-CO:R:IT:C 112533 BEW
Richard Ward
Director
Mariglass Sales PTY LTD
287 Ramsay Road
Haberfield, NSW 2045
RE: Use of a Australian-built sailing catamaran for bareboat
charters in the waters of the United States
Dear Mr. Ward:
This is in reference to your letter of November 21, 1992, in
which you request a ruling on whether you may use a foreign-built
sailing catamaran for the purposes of coastwise trade, to wit,
chartering for day sailing, overnight chartering, and/or day
charter with a skipper or skipper and crew, within U.S. waters.
FACTS:
You state that the boats are 24 ft., 28 ft., and 33 ft.
SEAWIND Australian-built sailing catamarans. You state your
company manufactures these vessels for use in both the private
leisure and commercial charter market. The charter use is either
for bareboat charter, i.e., the hire of the boat for 6 to 10 hours
without a skipper or crew) and day charters with a skipper. You
also ask the following:
1. Can these Australian-built boats be accepted for charter
operations in the USA.
2. If these vessels can be built in Australia, what design
& construction standards apply to these vessels for commercial
use in USA waters.
3. What import or customs duties are applicable on
Australian-built commercial vessels.
ISSUE:
May a foreign-built pleasure sailing catamaran vessel be
bareboat chartered in the U.S. without violating the coastwise
statutes.
LAW AND ANALYSIS:
You should be aware that foreign-flag or foreign-built vessels
are prohibited from engaging in the coastwise trade. Generally,
the coastwise laws (e.g., 46 U.S.C. App. 289 and 883, 46 U.S.C.
12106 and 12110) prohibit the transportation of merchandise or
passengers between points in the United States embraced within the
coastwise laws in any vessel other than a vessel built in and
documented under the laws of the United States and owned by persons
who are citizens of the United States. The penalty for violating
this section of the law is $200 for each passenger so transported
and landed.
A "passenger" is defined in section 4.50(b) of the Customs
Regulations (19 CFR 4.50(b)), as "any person carried on a vessel
who is not connected with the operation of such vessel, her
navigation, ownership, or business". The family and legitimate
guests of the owner or bareboat charterer of a vessel used for
pleasure purposes are not considered passengers.
Customs has consistently ruled that a yacht chartered under
a bona fide bareboat charter and used only for pleasure purposes
is not considered to be used in the coastwise trade. However, a
pleasure vessel chartered under a charter agreement other than a
bareboat charter (e.g., a time or voyage charter) and used in the
U.S. waters is considered to be used in trade.
In review of charter arrangements to determine whether or not
they are bareboat charters, we have generally held that:
The nature of a particular charter arrangement is a
question of fact to be determined from the circumstances
of each case. Under a bareboat charter or a demise
charter the owner relinquishes complete management and
control of the vessel to the charterer. On the other
hand, if the owner retains a degree of management and
control, however slight, the charter is a time or voyage
charter and the vessel is deemed to be engaged in trade.
The crux of the matter is whether complete management and
control have been wholly surrendered by the owner to the
charterer so that for the period of time of the charter
the charterer is in effect the owner. Although a charter
agreement on its face may appear to be a bareboat or
demise charter, the manner in which its covenants are
carried out and the intention of the respective parties
to relinquish or to assume complete management and
control are also factors to be considered.
The Customs Service has also ruled, for purposes of the
coastwise law, that a charter agreement which permits the owner to
act as master or as a member of the crew, or which permits the
owner to accompany the vessel during its charter period, would not
be considered a bona fide bareboat charter.
When a vessel is chartered under a charter arrangement other
than a bareboat charter (e.g., a time or voyage charter) and is
used in coastwise transportation, the owner of the vessel is
subject to penalties under the coastwise laws. The charterer of
a vessel chartered under a bareboat charter would also be subject
to penalties if the vessel is used for other than pleasure purposes
or if the actions of the parties negated the terms of the bareboat
charter agreement (e.g. if his "guests" paid for or contributed to
the expenses of the trip).
The Customs Service has consistently held that when a vessel
is chartered under a bona fide bareboat charter, the charterer is
treated as the owner of the vessel for the period of the charter
and, because owners are not considered "passengers," for purposes
of the coastwise laws, the charterer is not prohibited by the
coastwise laws from using the vessel during the charter for
pleasure purposes only, including the transportation of family and
guests.
Accordingly, a bareboat charterer may transport family and
guests from one port in the United States to a another port without
violating the coastwise laws.
With regard to question 2 relating to the vessel's design and
construction standards, documentation and safety requirements are
under United States Coast Guard jurisdiction. You should address
questions relating to these issues to:
Mr. Thomas Willis
Chief, Vessel Documentation
U.S. Coast Guard (GMVI-6/13)
2100 Second Street., SW (Room 1312)
Washington, D.C. 20593-0001
Question 3 - IMPORT OR CUSTOMS DUTIES RELATING TO FOREIGN-BUILT
VESSELS
Under the Harmonized Tariff Schedules of the United States
(HTSUS), Heading 8903.00.00, Yachts and other vessels for pleasure
or sport, rowboats and canoes, Subheading 8903.91.00, Sailboats
with or without auxiliary motor are dutiable at the rate of 1.5 percent ad valorem. A sailboat owned by a resident of
the United States or brought into the United States for sale or
charter to a resident thereof, would be subject to this duty
provision of the HTSUS.
Duty on the vessel is collectable when it is first imported.
The determination of whether or not a yacht is dutiable when it
has previously been subject to Customs entry and payment of duty
is dependent on whether it has been exported from the United States
after its first importation. If it has been exported, it is again
dutiable as an importation under items 8903.91.00 or 8903.92.00,
HTSUS. Exportation, in this context, is defined as occurring when
the yacht is severed from the mass of things belonging to this
country with the intention of being united with the mass of things
belonging to some foreign country (see section 101.1(k), Customs
Regulations (19 CFR 101.1(k)). Merely removing a yacht from U.S.
territorial waters on a temporary foreign pleasure cruise with the
intent to return it to the United States thereafter would not
constitute an exportation. In addition, it should be noted that
any past or future transfers of ownership of a vessel that take
place while it remains within the United States do not affect its
duty-paid status provided the circumstances surrounding the
transfers of ownership do not indicate that an exportation has
occurred within the meaning of section 101.1(k).
Bringing vessels in for sale or for the chartering of the
vessel to a U.S. resident would subject the vessel to Customs
consumption entry procedures and the duty provisions of subheading
8903.91.00 of the HTSUS.
Title 19, United States Code, section 1433, provides that
immediately upon the arrival at any port or place in the United
States or Virgin Islands of: (1) any vessel from a foreign port or
place; (2) any foreign vessel from a domestic port; or (3) any
vessel of the United States carrying bonded merchandise, or foreign
merchandise for which entry has not been made, the master of the
vessel shall report the arrival at the nearest Customs facility.
The report of arrival shall be in accordance with the procedures
in section 4.2, Customs Regulations, as amended by T.D.87-150.
The master of any foreign vessel arriving in a United States
port, whether from a foreign port or another United States port,
is required to make vessel entry under title 19, United States
Code, section 1435 (19 U.S.C. 1435), and section 4.3 of the Customs
Regulations (19 CFR 4.3). Such vessels are also required to clear
when bound for a foreign port, and must have a permit to proceed
from one United States port to another.
Title 46, United States Code, Appendix, section 104 (46 U.S.C.
App. 104), authorizes the issuance of cruising licenses to pleasure
vessels of countries which extend reciprocal privileges to United
States pleasure vessels. Australia is such a country. Section
4.94 of the Customs Regulations, concerns the issuance of cruising
licenses which exempt foreign yachts from formal entry and
clearance procedures. Subsequent to the receipt of the cruising
license, yachts may arrive and depart from the United States and
cruise in specified waters of the United States without entering
and clearing, without filing manifests and obtaining or delivering
permits to proceed, and without the payment of entrance and
clearance fees, or fees for receiving manifests and granting
permits to proceed, duty on tonnage, tonnage tax, or light money.
The license is granted subject to the condition that the vessel
will not engage in trade or violate the laws of the United States
in any respect.
HOLDING:
A foreign-built sailing catamaran, or other pleasure vessel
may be bareboat chartered for pleasure use without violating the
coastwise statutes provided under the charter agreement the owner
relinquishes complete management and control of the vessel to the
charterer.
A sailboat brought into the United States for sale or charter
to a resident thereof, would be subject to Customs consumption
entry procedures and the duty provisions of subheading 8903.91.00
of the HTSUS.
Sincerely,
Acting Chief
Carrier Rulings Branch