OT:RR:CTF:EPDR H308215 ECG
Cris Wenthur
Wenthur Law Group, LLP
4121 Napier Street
San Diego, CA 92110
RE: Importation and dutiability of a yacht; exportation; 19 C.F.R. § 101.1; reimportation; 19
C.F.R. § 141.2.
Dear Mr. Wenthur:
This letter is in response to your ruling request of January 20, 2020, on behalf of Ithaka
Charter, LLC, concerning potential duty liability on a yacht that was previously entered and
duty-paid. Specifically, you inquire whether the yacht would become dutiable again if sailed out
of the United States for cruising purposes and returned to the United States. Our decision is set
forth below.
FACTS:
The vessel in question is a 63’ Nordhavn that was built by South Coast Marine Yacht
Bldg, Ltd. in Xaimen, China in 2012. On February 8, 2013, it was imported into the United
States by Pacific Asian Enterprises Inc. (“PAE”). The yacht was formally entered for
consumption and all duties, taxes, and fees owed were paid by PAE. On May 30, 2013, the
importer sold the yacht to Ithaka Charter, LLC (f/k/a Ithaka Journey, LLC) (“owner”), a U.S.
company whose sole member is a U.S. citizen. The yacht was initially registered in the United
States but, as of September 3, 2013, it has been registered in the Cayman Islands. The owner
made this registration change because they were advised that a Cayman Islands registration was
better for their personal security. The yacht has never been to the Cayman Islands and has not
been imported into the Cayman Islands.
The yacht is an expedition trawler and is designed to travel very long distances at
relatively slow speeds. The owner acquired the yacht for expedition pleasure cruising. The yacht
owner states that they intended to take a long-term expedition cruise to South America upon
purchasing the yacht, but at no point had any intent to sever the vessel from the mass of things
belonging to the United States with the intention of uniting them to the mass of things belonging
to any other foreign country. Rather, the owner states they only intended to go for the adventure
cruise to South America and continue adventure cruising after the yacht finished this initial major
voyage, but at all times intended to return to the United States. The yacht had the following
cruising history as of the date of the ruling request:
May 3, 2013-September 15, 2013: California, United States
September 15, 2013-January 24, 2014: Mexico
January 24, 2014-April 30, 2014: Costa Rica
April 30, 2014-February 1, 2015: Panama
February 1, 2015-February 28, 2015: Columbia
February 28, 2015-March 31, 2015: Ecuador
March 31, 2015-May 15, 2015: Peru
May 15, 2015-April 1, 2016: Chile, Patagonia, Falkland Islands, South Georgia Island
April 1, 2016-November 1, 2016: Costa Rica
November 1, 2016-June 1, 2018: California, United States
June 1, 2018-January 20, 2020: Washington, United States and Canada
According to this cruising history, the yacht was located outside the territorial waters of
the United States for just over three years - from approximately September 15, 2013, to
November 1, 2016. During this three year period, the yacht did not remain in any one foreign
country for over a year. Since November 1, 2016, the yacht has remained in the United States.
The owner now desires to sell the yacht in the United States to another U.S. citizen.
ISSUE:
Whether the yacht was exported when sailed out of the United States for expedition
pleasure cruising, and is dutiable upon its return to the United States.
LAW AND ANALYSIS:
The determination as to whether a yacht is dutiable when it has previously been subject to
entry and payment of duty depends upon whether it has been exported from the United States
after its first importation. Generally, “[d]utiable merchandise imported and afterwards exported,
even though duty thereon may have been paid on the first importation, is liable to duty on every
subsequent importation into the Customs territory.” See 19 C.F.R. § 141.2. However, if imported
duty-paid goods are taken out of the Customs territory of the United States but not exported, then
there is no importation upon their return to the Customs territory. See Headquarters Ruling Letter
(“HQ”) H213415 (July 8, 2014) (“absent an exportation event, duties are not applicable and
entry is not required for imported duty-paid merchandise returned to the United States”); HQ
114291 (May 7, 1998) (finding that “[i]f an article leaves the United States but is not deemed to
be exported, then there is no importation upon its return to the United States).
Exportation, as defined in 19 C.F.R. § 101.1, requires a “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.” Based on this definition, deciding whether an “exportation”
has occurred is a two-step analysis, requiring assessment of whether: 1) the goods were severed
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from the mass of things belonging to this country; and 2) there was an intent to unite the goods to
the mass of things belonging to some foreign country. See HQ H213415. Both of these elements
must be satisfied in order for merchandise to be exported - severance and intent must coincide to
constitute an act of exportation. See generally Moore Dry Goods Co. v. United States, 11 Ct.
Cust. App. 449 (1923).
The first element, severance, requires the goods to physically leave the United States. The
severance of goods from the mass of things belonging to the country of exportation requires
evidence that the “that the goods in question have been physically carried out of the country of
exportation.” National Sugar Refining Co. v. United States, 488 F. Supp. 907, 908 (Cust. Ct.
1980). Here, it is not disputed that the yacht has been removed from the United States for
expedition pleasure cruising. However, removal from the United States is not of itself sufficient
to establish exportation. Absent intent to unite yachts with the mass of things belonging to a
foreign country, “yachts would not be exported even if severed from the mass of things
belonging to the United States.” HQ H213415.
With respect to an imported and duty-paid yacht, CBP has consistently held that simply
taking a vessel outside the territorial waters of the United States for a temporary foreign pleasure
cruise with the intent to return the vessel to the United States does constitute an exportation
despite the vessel’s physical removal from the United States. See Customs Service Decision 79-
85 (Sept. 27, 1978); HQ 112035 (May 20, 1992); HQ H213415. Additionally, the country of
registration for a yacht temporarily removed from the United States is not determinative of
exportation, but a factor to be considered among others. For example, in HQ 114301, dated
March 18, 1998, a vessel had been previously imported and entered for consumption into the
United States, and registered in the United States, but was subsequently registered in Canada.
The change in country of registration was only one factor among others that did not preclude
CBP from deciding the vessel was not exported when it sailed from the United States to the
Bahamas on annual holiday cruises. Similarly, in the current case, even though the yacht is
registered in the Cayman Islands, this fact does not of itself establish that an exportation has
occurred when it was removed from the United States when sailed to foreign countries on
expedition pleasure cruises.
The second element, “intention of uniting . . . to the mass of things belonging to some
foreign country,” requires a “bona fide purpose to seek a foreign market or an actual diversion of
the merchandise into the commerce of an intermediate country.” 19 C.F.R. § 101.1; HQ H213415
(quoting Nassau Distributing Co., Inc. v. United States, 29 Cust. Ct. 151, 154 (1952) (internal
citations omitted)). This element of exportation requires evidence that merchandise was intended
to be, or actually, entered into the foreign country for consumption, sale or use. HQ H213415.
The intent of the parties at the time of shipment abroad is the controlling factor in determining
whether the shipment is an exportation. See HQ 114301 (citing F.W. Meyers & Co., Inc. v. United
States, 29 Cust. Ct. 202, 203 (1952)). In the context of yachts, CBP has consistently held that
absent evidence of seeking a foreign market and/or an actual diversion of the merchandise into
the commerce of another country, exportation does not occur if a yacht is sailed into foreign
countries temporarily with an intent of returning to the United States. See HQ H213415; HQ
111731 (Feb. 19, 1992). Looking again to HQ 114301, in that case although the vessel in
question was registered in Canada it had never been sailed to Canada, and the vessel had
remained berthed in the United States since its importation and entry when not used for annual
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holiday cruises to the Bahamas. CBP concluded that the totality of the circumstances evidenced
no intent to unite the yacht with the mass of things belonging to Canada, such that the yacht was
never exported from the United States.
CBP has thus previously specifically considered both elements of exportation, severance
and intent, in relation to yachts departing the United States for foreign countries on a pleasure
cruise. To further illustrate, in HQ H319559, dated September 1, 2021, CBP considered whether
a yacht that was imported and duty-paid, then sold to Australian citizens, would be dutiable if
returned to the United States for sale after multiple extended sails to Canada and Mexico on
cruising permits. After sailing to a foreign country, the Australian owners “regularly sailed back
to United States waters for various lengths of time.” The yacht was being sailed in Mexico when
the start of the COVID-19 pandemic prevented the owners from returning to the United States,
specifically to Alaska and the Pacific Northwest, as had been their intention. CBP concluded that
yacht had not been exported because the owners had consistently returned the yacht to the United
States since its importation and duty payment, and “there [wa]s no evidence on the record that
the owners attempted to sell, repair, or otherwise enter the yacht into foreign commerce while
abroad.” In circumstances where an imported and duty-paid yacht has not been exported, CBP
has clarified that “future transfers of ownership of a vessel that take place while it remains within
the United States do not affect its duty-paid status.” HQ 110970 (July 17, 1990).
In the present case, the temporary removal of the yacht from the United States does not
coincide with any intent to unite the yacht with the mass of things belonging to a foreign country
by seeking a foreign market or through entry for consumption, sale, or use in a foreign country.
Akin to the yachts at issue in HQ 114301 and HQ 319559, this yacht has only departed the
United States for pleasure cruises, and has been consistently returned to the United States since
its importation. Like the yacht at issue in HQ 114301, which was registered in Canada but had
never been sailed to Canada, here the yacht is registered in the Cayman Islands but has never
been sailed to the Cayman Islands. The yacht’s registration in a foreign country is thus not
indicative of any intent to unite the yacht with the mass of things belonging to the Cayman
Islands. In considering the totality of the circumstances, we thus find that the second element for
exportation has not been satisfied – consequently, the subject vessel has not been exported from
the United States within the meaning of 19 C.F.R. § 101.1. As no exportation has occurred, the
vessel is not subject to duty upon its return to the United States because it is not re-imported. See
19 C.F.R. § 141.2. Further, the sale of the yacht to another U.S. citizen does not affect the yacht’s
imported and duty-paid status. HQ 110970.
HOLDING:
Based on the above, we find that the yacht was not exported when sailed out of the
United States for expedition pleasure cruising, and is not dutiable upon its return to the United
States.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the
assumption that all of the information furnished in connection with the ruling request and
incorporated in the ruing letter, either directly, by reference, or by implication, is accurate and
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complete in every material respect.” If any fact in the transaction varies from the facts stipulated
to herein, this decision shall not be binding on CBP, as provided for in 19 C.F.R. § 177.9(b).
Sincerely,
Kristina Frolova, Chief
Entry Process & Duty Refunds Branch
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