VES-12-02:OT:RR:BSTC:CCR H319559 TNA
Mr. Martin Brooks
ENTERPRISE III
Currently lying Ventura
California
RE: Yacht; Dutiability; Documentation; Importation; Exportation
Dear Mr. Brooks:
This letter is in response to your ruling request of July 7, 2021, concerning potential duty to be paid on a purchase of a yacht. Our ruling is set forth below.
FACTS:
The vessel in question is a Nordhavn 55 trawler that was built in Taiwan in 2005. It was imported into the United States that same year. The vessel was formally entered and duties paid at the time of importation. The importer sold the vessel to a United States citizen, who obtained a recreation endorsement for the vessel from the United States Coast Guard. When the vessel was sold a second time, it was sold to another United States citizen who retained the Coast Guard endorsement. In 2013, the second owner sold the vessel to the Australian citizens who currently own the vessel. The Australians removed the recreation endorsement from the vessel, as they were not eligible to hold such an endorsement because they are not United States citizens.
Since taking delivery of the vessel, the Australian owners have lived aboard it and sailed within the waters of the west coast of North America. They spent 961 days in United States waters on a series of one-year cruising permits before spending 399 days in Canadian waters. They then spent 1585 days in Mexico on a 10-year Temporary Import Permit (TIP). They have submitted documentation showing that during their stay in Canadian waters, they regularly sailed back to United States waters for various lengths of time. Once they arrived in Mexico in November of 2018, they remained there until returning to the United States on March 24th, 2021.
The Australians claim that their extended time in Mexico was due primarily to Covid lockdown during 2020-21 and their inability to get back to Alaska and the Pacific Northwest, as had been their intention. They now intend to sell the subject vessel and currently have an offer from a United States citizen.
ISSUE:
Whether the subject vessel would be subject to duty upon its sale within the United States to a U.S. citizen.
LAW AND ANALYSIS:
The determination as to whether a yacht is dutiable when it has previously been subject to entry and payment of duty is dependent upon whether it has been exported from the United States after is first importation. If it has been exported, it is again dutiable as an importation under items 8903.91.00 or 8903.92.00, HTSUS. See, e.g., HQ H213415 (July 8, 2014); HQ 111731 (February 19, 1992); HQ 114301 (March 25, 1998); HQ 110970 (July 17, 1990); HQ 103386 (September 27, 1978); HQ 103359 (April 11, 1978). Customs and Border Protection (CBP) regulations define “exportation” as “a severance of goods from the mass of things belonging to this country with the intention of uniting them to the mass of things belonging to some foreign country.” 19 CFR 101.1. It has been long-established that the intention of the parties at the time of shipment abroad is the controlling factor in determining whether or not the shipment is an exportation. See, e.g., HQ H096657 (Jan. 18, 2012), citing Moore Dry Goods Co. v. United States, 11 Ct. Cust. App. 449, T.D. 39531 (1923); CBP Ruling HQ 114301 (Mar. 25, 1998), citing F.W. Meyers & Co., Inc. v. United States, 29 Cust. Ct. 202, C.D. 1468 (1952).
Based on the facts presented, we note that there is no evidence that the vessel has entered Australia, despite being documented under Australian law. A yacht’s country of documentation is not in and of itself determinative as to whether an importation has occurred, but rather, is one of any number of factors to be considered in determining whether the person bringing it into the United States did so with the intent that it remain in this country permanently. See American Customs Brokerage Co., Inc., A/C Astral Corp. v. United States, 72 Cust. Ct. 245, 254, C.D. 4556, citing Estate of Lev H. Prichard v. United States, 43 CCPA 85, 87-88; see also HQ 223889 (July 8, 1998). The same rationale applies when speaking in terms of whether an exportation has in fact taken place (i.e., country of documentation is but one of any number of factors to be considered and not per se the controlling factor). See Estate of Lev H. Prichard v. U.S., 43 CCPA 85, 89; see also David B. Roberts v. U.S., 17 CCPA 215, 217.
With respect to an imported, duty-paid, U.S.-flagged yacht, CBP has held that “[m]erely removing a yacht from U.S. territorial waters on a temporary foreign pleasure cruise with the intent to return the yacht to the United States would not constitute an exportation.” See HQ 114931, supra, citing C.S.D. 79-85 (Sept. 27, 1978). See also HQ 111731 (Feb. 19, 1992). We have also determined that the temporary removal of a similarly-situated foreign-flagged vessel from the United States does not in and of itself constitute an exportation. See HQ 114301; HQ H233278 (Jan. 22, 2013).
In determining whether a yacht has been exported or temporarily removed from U.S. waters, prior CBP rulings have focused on the duration of the time spent outside of U.S. waters and whether the yacht owners intend to return to the U.S. See, e.g., HQ H213415 (July 8, 2014); HQ 114276 (Mar. 10, 1998). Furthermore, in HQ H233278, CBP examined a yacht that had been built in Taiwan in 2007 and imported into the United States that same year. All import duties were paid on the yacht, which was initially sold to a U.S. citizen and granted a Coast Guard endorsement. Australian citizens purchased the vessel three years later and, as foreign citizens, had to remove the endorsement. The Australians took delivery of the vessel outside territorial waters, but the vessel remained in the United States for repairs for six weeks after the sale. Once the repairs were completed, the vessel was taken to Mexico to comply with California tax exemptions, and a Shipper’s Export Declaration (SED) was filed for the vessel. The vessel remained in Mexico for 60 days before returning to the United States. The Australian owners obtained a cruising license for the vessel upon its return to the United States, and the vessel had been in the United States ever since. When the Australian owners decided to sell the vessel in the United States, CBP found that the vessel had not been exported from the U.S. There, CBP reasoned that the vessel has never entered Australia and no Australian duty was ever paid on it. Despite the filing of the SED, CBP noted that the vessel had remained in the United States with the exception of about 60 days in Mexico. Given the totality of the circumstances, CBP found that no exportation had taken place.
The rulings discussed above identify a unifying theme for acts that qualify as a bona fide purpose to seek a foreign market and/or an actual diversion of the merchandise into the commerce of another country. Specifically, if the intended or actual act introduces the merchandise into the foreign country for consumption, sale or use, then there is a sufficient uniting of the goods with the mass of things belonging to the foreign country to qualify as an exportation. See HQ H213415, citing HQ 224402 (May 27, 1993) (noting that the terms “export” and “exportation” embodies the idea of introducing merchandise into a foreign country for sale, consumption or use).
This is true even if the uniting is temporary and the goods are ultimately returned to the United States. Moreover, the term “use,” in the context of exportation, typically involves using the merchandise by means of manufacture, manipulation, or repair. See HQ 225549 (Dec. 7, 1994) (holding that shipping merchandise to a foreign country with an intention of using that merchandise, as by manufacture, manipulation, or repair, is strong evidence of an intent to unite the merchandise to the mass of things belonging to the foreign country). In comparison, acts that do not involve introducing the merchandise into the foreign country for consumption, sale or use have not qualified as a bona fide purpose to seek a foreign market and/or an actual diversion of the merchandise into the commerce of an intermediate country. See, e.g., HQ 111731 (Feb. 19, 1992); HQ 225339 (Jan. 10, 1995) (noting that oil spill equipment owned and operated by a non-profit organization to recover spilled oil in U.S. territorial waters is not exported because no evidence existed that the equipment entered the commerce of any foreign countries or sought a foreign market); HQ 229644 (Dec. 17, 2002) (holding that needles and sutures shipped to a foreign country and returned to the United States qualified as an exportation because while abroad, the needles and sutures were assembled and processed into one unit); U.S. v. Coastwise Steamship & Barge Co., 9 Ct. Cust. 216, 217-18 (1919) (finding that a marine steam engine manufactured in the United States and salvaged from a wrecked American vessel was exported because a firm in Canada purchased the engine to make repairs before returning it to the United States).
In the present case, we note that the vessel in question was previously imported into the United States and documented under the laws of this country. Although its current owners are Australian citizens who had the vessel documented under the laws of Australia, the vessel has never entered Australia. To the contrary, the owners have lived aboard the vessel since purchasing it and continuously returned to American waters even when cruising in Canadian waters. The Covid-19 pandemic prevented them from returning to American waters once they had entered Mexican waters to cruise, but the record shows they had intended to return to the Pacific northwest before the pandemic hit. In addition, there is no evidence on the record that the owners attempted to sell, repair, or otherwise enter the yacht into foreign commerce while abroad. To the contrary, they returned to the United States to sell the yacht to an American citizen. Given the totality of these circumstances, we find that the subject vessel has not been exported from the United States within the meaning of 19 C.F.R. 101.1.
HOLDING:
Under the facts of this case, the above-described foreign-built vessel would not be considered to have been exported and would not be subject to duty upon its sale within the United States to a U.S. citizen.
Sincerely,
W. Richmond Beevers
Chief,
Cargo Security, Carriers and Restricted Merchandise Branch
Office of International Trade, Regulations & Rulings
U.S. Customs and Border Protection