VES-4-01-CO:R:IT:C 111495 GEV
Mark J. Buhler, Esq.
Holland & Knight
800 North Magnolia Avenue
P.O. Box 1526
Orlando, Florida 32802
RE: Foreign-flag Yacht; Foreign Corporate Ownership;
Importation; Cruising license; HTSUSA; 46 U.S.C. App. 104
Dear Mr. Buhler:
This is in response to your letter dated January 31, 1991
(your ref: file no. 33776-1) requesting a clarification of our
ruling letter 111434, dated January 3, 1991, regarding whether
your client's foreign-flag yacht would be exempt from duty if and
when it should visit the United States.
FACTS:
Mi Gaea Limited is a company incorporated in the Island of
Jersey, Channel Islands, the majority of the stockholders of
which are United States residents. This corporation proposes to
temporarily enter its British-flag yacht, the MI GAEA, into the
United States as part of a long shakedown cruise that would
involve a voyage from Antibes, France, to South Florida, then on
to the West Indies, and returning to Antibes several months
later.
The Dutch-built vessel, completed in the spring of 1990, was
built primarily for European service. It would remain in Florida
for up to three or four months during which time it would be
scheduled to have the first major inspection and servicing of
its U.S.-built Caterpillar engines. Additionally, the builder of
the vessel has a representative in Florida who could be helpful
in resolving problems that may arise as a result of the ocean
crossing, and there is a shipyard in South Florida that can
perform warranty work on behalf of the builder. In addition to
having repairs made and maintenance and warranty work done in
Florida, the vessel's beneficial owners would like to be able to
do some pleasure cruising in Florida. The owners would like to
be able to have the vessel in Florida for up to three or four
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months, including both repair time and pleasure cruising. After
this time the vessel would depart for the West Indies to continue
the shakedown cruise and would eventually return to its permanent
berth at Antibes, France.
ISSUE:
Whether a foreign-flag yacht owned by a foreign corporation
the majority of the stockholders of which are United States
residents, may, while on a shakedown cruise beginning and ending
in France, temporarily enter the United States for a period of
three or four months for the purpose of obtaining repairs and
pleasure cruising 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:
According to Additional U.S. Note 1, Harmonized Tariff
Schedule of the United States Annotated (HTSUSA), vessels brought
into the Customs territory of the United States by nonresidents
thereof for their own use in pleasure cruising shall be admitted
without formal Customs consumption entry or payment of duty.
As long as a yacht or pleasure boat is brought into the
United States by a nonresident and is not offered for sale or
charter to a U.S. resident, it is not dutiable. It is
permissible to sell or charter such a vessel to a non-resident.
If, however, the yacht is offered for sale or lease to a resident
of the United States, a consumption entry must be filed and the
applicable duty paid under Chapter 89, subheadings 8903.91.00 or
8903.92.00, HTSUSA, at a rate of 1.5 percent ad valorem.
In applying the above HTSUSA subheadings to corporate owners
of pleasure vessels, we have 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 "owned by a
resident of the United States," for purposes of paragraph 370,
Tariff Act of 1930, as amended (the predecessor of Items 696.05
and 696.10, TSUS, which are the predecessors of HTSUSA 8903.91.00
and 8903.92.00) (see Treasury Decision 54680(14)).
Further 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,
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.
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It should be noted that the above presumption can be
rebutted by satisfactory evidence that the yacht owner did not
intend to bring the yacht into the United States permanently. In
Astral Corp. v. United States, 72 Cust. Ct. 245, C.D. 4546
(1974), the court held that a yacht which came to the United
States during the course of a shakedown cruise and received
repairs while in the United States was not imported, within the
meaning of General Headnote 1, TSUS (predecessor to General Note
1, HTSUSA) because it was not brought "permanently" into the
United States. (see also T.D. 75-134)
The evidence which the court in the Astral case discussed
concerning the issue of whether or not the yacht was brought
"permanently" into the United States consisted, in part, of the
following:
(1) Testimony that the yacht was on a shakedown cruise and
the owner never intended that it brought into the
United States permanently;
(2) Evidence of the repairs completed on the yacht while it
was in the United States and testimony that those
repairs could only have been completed in the United
States;
(3) Testimony by the owner that he planned to move his
interests to Europe and was buying a home there;
(4) Evidence of features in the yacht's design which were
incorporated for use in the Mediterranean; and
(5) The fact that the yacht's shakedown cruise did
terminate in the Mediterranean where, at the time the
case was tried, the yacht was being readied for
chartering.
In regard to the facts under consideration, the MI GAEA is
owned by a foreign corporation whose stockholders are
predominantly, though not entirely, United States residents. As
such, the vessel is not considered to be "owned by a resident of
the United States" pursuant to T.D. 54680(14), for purposes of
the HTSUSA. Accordingly, since under the proposal the subject
vessel would be considered to be brought into the Customs
territory of the United States by nonresidents for their own
pleasure cruising and temporary repairs, it would not be
considered an importation and therefore could be admitted without
filing a formal consumption entry and payment of duty.
Assuming, arguendo, the corporate stock in question was
wholly owned by one or more United States residents, it appears
that despite this United States resident ownership and the
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consequent presumption of permanent use in the United States as
established in Estate of Lev H. Prichard v. United States,
supra., the circumstances of this proposal appear sufficient to
rebut this presumption as discussed in Astral, supra.
Specifically, the subject yacht is to be on a shakedown cruise
originating from its home berth at Port Vauban, Antibes, France,
and it is the expressed intent of the owners that it return to,
and be permanently based at, said berth. Furthermore, it is
stated that the yacht was designed for European service and that
its U.S.-built Caterpillar engines could be easily serviced at a
shipyard in South Florida. In addition, the vessel builder's
representative located in Florida could address any problems that
may have arisen during the shakedown cruise. Consequently, the
subject vessel would not be considered to be brought
"permanently" into the United States.
In addition to the above, we reiterate that section 4.94,
Customs Regulations (19 CFR 4.94) concerns the issuance of
cruising licenses which exempt foreign yachts from formal entry
and clearance procedures (e.g., filing manifests, obtaining
permits to proceed and exemptions from the payment of tonnage tax
and entry and clearance fees) at United States ports. The
determining factor as to whether a vessel is eligible for a
cruising license is the documentation of the vessel, not the
residency of its owner. Section 4.94 was promulgated pursuant to
title 46, United States Code Appendix, section 104 (46 U.S.C.
App. 104) which authorizes the issuance of cruising licenses to
pleasure vessels of countries which extend reciprocal privileges
to United States vessels. Great Britain is on the list of
countries appearing in section 4.94(b) whose yachts may be issued
cruising licenses. The length of the cruising license is usually
dependent upon the description of the vessel's cruise within
United States waters; however, pursuant to section 4.94(c) in the
discretion of the customs district director it may remain in
force for a period of up to one year from the date of its
issuance.
HOLDING:
A foreign-flag yacht owned by a foreign corporation the
majority of the stockholders of which are United States
residents, may, while on a shakedown cruise beginning and ending
in France, temporarily enter the United States for a period of
three or four months for the purpose of obtaining repairs and
pleasure cruising without being considered an importation which
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would result in the assessment of duty under the Harmonized
Tariff Schedule of the United States Annotated.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch