OT:RR:CTF:VS H329103 AMW
Center Director
Automotive and Aerospace CEE
U.S. Customs and Border Protection
985 Michigan Ave, Suite 510
Detroit, MI 48226
Attn: Julian Falla, Customs Entry Office, Automotive and Aerospace CEE
RE: Application for Further Review of Protest No. 520321100337; C&H Yachts, LLC; Entry
and Valuation of M/V LOON
Dear Center Director:
This is in response to an Application for Further Review (“AFR”) of Protest Number
520321100337, timely filed on behalf of C&H Yachts, LLC (“C&H” or “Protestant”),
concerning the entry and payment of duties of a motor yacht, the M/V LOON.
FACTS:
The following facts are taken from the case file forwarded to Regulations and Rulings on
May 8, 2023, 1 as well as from a follow-up submission provided to this office on April 19, 2024.
The yacht in question, the M/V ZEAL formerly the M/V LOON (“the LOON”), bears hull
identification number CNV00017C797. The LOON was manufactured by Christensen
Shipyards in Vancouver, Washington, in July 1997. On May 19, 2002, the LOON was reflagged
to the Cayman Islands. In 2009, the yacht was purchased by Christensen Abbracci, LLC
(“Abbracci”), a company incorporated in Florida. On September 21, 2012, the LOON was
reflagged to the United States.
On January 5, 2018, the sole owner of Abbracci executed an affidavit stating that the
LOON was never exported from the United States during their period of ownership.
Subsequently, C&H executed an agreement to purchase the LOON and two Yamaha jetskis from
Abbracci on January 10, 2018. At the time of sale, C&H paid Florida sales tax on the LOON.
1
Email, RE: H329103, dated (Sep. 12, 2023); see also C&H Yachts Protest w Supp Docs 2021_0803.pdf.
On March 14, 2018, the LOON was reflagged to Jamaica. ABS records from 2021 indicated the
vessel’s homeport was listed as Montego Bay, Jamaica. In addition, open-source data viewed by
CBP indicates the vessel underwent a “top to bottom 19-month refit that finished in 2017”
(before the vessel was reflagged to Jamaica) as well as additional upgrades in 2018-2019,
including refits of several cabins and upgrades to the vessel’s mechanical systems, interior,
bridge, entertainment and Wi-Fi systems, galley, and deck. 2
On September 4, 2020, C&H engaged a customs broker for the purposes of importing the
LOON. On September 18, 2020, C&H entered the LOON under subheading 9801.00.10,
Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for duty-free
treatment for, “Products of the United States when returned after having been exported, or any
other products when returned within 3 years after having been exported, without having been
advanced in value or improved in condition by any process of manufacture or other means while
abroad: Articles provided for in chapter 89.” The port of lading was listed as St. Thomas, U.S.
Virgin Islands, and the port of unlading was listed as Fort Lauderdale, Florida. On November
10, 2020, C&H executed a contract selling the LOON to S&E Travel Yacht LLC in exchange for
$8,200,000. No state sales tax was paid on the LOON during this transaction. The customs
broker engaged by C&H failed to file a timely response to a November 19, 2020, U.S. Customs
and Border Protection (“CBP”) request for information. Consequently, the entry of the LOON
was liquidated on February 5, 2021. CBP liquidated the yacht under subheading 8903.91.00,
HTSUS, which provides for a duty rate of 1.5% ad valorem and .3474% MPF.
On August 3, 2021, C&H filed a protest arguing as a threshold matter that it was not
required to file entry of merchandise for the LOON because the LOON was never exported from
the customs territory of the United States. C&H alleges that although the LOON frequently
departed the United States, C&H never intended to unite the LOON with the mass of things
belonging to another country. In addition, C&H asserts that, if importation and entry were
required, the LOON should have been entered duty free under subheading 9801.00.10. Finally,
should the vessel be ineligible for subheading 9801.00.10, HTSUS, treatment, C&H disputes the
valuation of the LOON at $20,000,000, stating that this amount is the result of a clerical error
and the vessel should be valued pursuant to the deductive value method.
ISSUES:
1. Was C&H required to make entry for the LOON?
2. Was the LOON entitled to duty-free treatment under subheading 9801.00.10, HTSUS?
3. What is the proper method of valuation of the LOON?
2
See Denison Yachts entry for M/V LOON, available at https://www.denisonyachtsales.com/yacht-listings/Loon-
155-Christensen-Motor-Yacht-1997-Nassau/7656880.
2
LAW AND ANALYSIS:
We note that the subject matter is protestable under 19 U.S.C. § 1514(a)(5) as a decision
relating to the liquidation or reliquidation of an entry. The protest was timely filed, within 180
days of liquidation for the entry. See Miscellaneous Trade and Technical Corrections Act of
2004, Pub. L. 108-429, § 2103(2)(B)(ii)-(iii) (codified as amended at 19 U.S.C. § 1514(c)(3)
(2006)). Further review of this protest is properly accorded to the importer pursuant to 19 CFR §
174.24(b) because the issues protested involve questions of law or fact, which have not been
ruled upon.
1. Whether Entry Was Required
First, we consider whether C&H was required to make entry for the LOON. 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 its
first importation. If it has been exported, it is again dutiable as an importation under subheadings
8903.91.00 or 8903.92.00, HTSUS. See, e.g., HQ H213415, dated July 8, 2014; HQ 111731,
dated February 19, 1992; HQ 114301, dated March 25, 1998; HQ 110970, dated July 17, 1990;
HQ 103386, dated September 27, 1978; and HQ 103359, dated April 11, 1978. 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); HQ 114301, dated March 25, 1998, citing F.W. Meyers &
Co., Inc. v. United States, 29 Cust. Ct. 202, C.D. 1468 (1952).
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, dated 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. United States, 43 CCPA 85, 89; see also David B.
Roberts v. United States, 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, dated February 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, dated January 22, 2013.
3
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 United States. See, e.g., HQ H213415,
dated July 8, 2014; HQ 114276, dated March 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 United States. There, CBP reasoned that the vessel had 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, dated 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, dated
December 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, dated February 19, 1992; HQ 225339, dated January 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, dated December 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); United States v. Coastwise Steamship & Barge Co., 9 Ct. Cust. 216,
217-18 (1919) (finding that a marine steam engine manufactured in the United States and
4
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 matter, C&H paid Florida sales tax on the U.S.-flagged LOON when it
purchased the LOON on January 10, 2018. However, C&H reflagged the LOON to Jamaica
shortly thereafter and ABS listed the LOON’s homeport as Montego Bay, Jamaica. When C&H
sold the LOON to S&E Travel Yacht LLC on November 10, 2020, no Florida sales tax (or that
of any other U.S. state) was paid on the LOON. In the absence of further factual information
regarding the activities of the LOON between January 2018 and September 2020, the evidence
on the record supports a finding the LOON was exported from the United States during this time
period and that C&H was required to file entry.
2. Whether the Vessel is Eligible for Classification Under Subheading 9801.00.10, HTSUS
Second, we consider whether the LOON was eligible for duty-free treatment pursuant to
subheading 9801.00.10, HTSUS. Section 904(b) of the Trade Facilitation and Trade
Enforcement Act of 2015 (Pub. L. 114-125, February 24, 2016) amended subheading
9801.00.10, HTSUS, to include any products which are returned within three years after having
been exported. Specifically, this subheading now provides for: “Products of the United States
when returned after having been exported, or any other products when returned within 3 years
after having been exported, without having been advanced in value or improved in condition by
any process of manufacture or other means while abroad.”
Section 10.1, Customs Regulations (19 CFR § 10.1), sets forth the documentary
requirements for entry under subheading 9801.00.10, HTSUS. CBP has not yet amended the
regulations to implement the change to subheading 9801.00.10, HTSUS. Nonetheless, while
portions of the regulations are no longer pertinent, some portions of 19 CFR § 10.1 remain valid.
For example, 19 CFR § 10.1(a)(1) requires the foreign shipper to declare the following
information with respect to articles in a shipment valued over $2,500: the port of exportation, the
date of exportation, the quantity, the description of the merchandise, the value of the
merchandise, the date of the declaration, and whether the articles were advanced in value or
improved in condition by any process of manufacture or other means. Further, per 19 CFR §
10.1(b), the port director may require such other documentation or evidence as may be necessary
to substantiate the claim for duty-free treatment, including a U.S. export invoice, bill of lading,
or airway bill evidencing the exportation of the articles from the United States and/or the reason
for the exportation of the articles.
Section 10.1(a)(2), Customs Regulations (19 CFR § 10.1(a)(2)), requires the owner,
importer, consignee, or agent having knowledge of the facts regarding the claim for free entry to
declare that the foreign shipper’s statement is true; that the articles were not manufactured or
produced in the United States under subheading 9813.00.05, HTSUS; and that the articles were
exported without benefit of drawback. Therefore, provided the party re-importing the goods is
an “owner, importer, consignee, or agent having knowledge of the facts regarding the claim for
free entry” as required by 19 CFR § 10.1(a)(2), such party may re-import the goods under
subheading 9801.00.10, HTSUS.
5
As a threshold matter, subheading 9801.00.10 provides duty-free treatment to those
“[p]roducts of the United States when returned after having been exported, or any other products
when returned within 3 years after having been exported, without having been advanced in value or
improved in condition by any process of manufacture or other means while abroad.” Here, the
vessel was exported when it was reflagged to Jamaica in March 2018 and returned to the United
States in 2020, being entered in September 2020 and sold in November 2020. As such, the vessel
was returned to the United States within three years of export.
Next, we examine whether sufficient evidence has been provided to demonstrate the vessel
was not advanced in value or improved in condition while abroad. Initially, C&H failed to respond
to multiple CBP Forms 28 and 29 in which the agency requested information whether the vessel
was advanced in value outside the United States. In addition, in its initial protest submission C&H
failed to provide supporting documentation, for example, a Declaration by the Foreign Shipper or
Declaration by the Owner, Importer, or Consignee. See 19 CFR 10.1(a). These requirements in the
regulations still must be met. However, on April 19, 2024, C&H provided information
demonstrating the repair and upgrades performed on the vessel occurred in the United States.
Specifically, C&H provided eight invoices, ranging from May 2018 through November 2019,
related to repair and overhaul work performed on the vessel by various U.S.-based vendors. These
invoices generally correspond with the dates and nature of the 2018-2019 upgrades that CBP found
during an open-source search for the vessel. For example, the invoices describe the overhaul of
various cabins on board the vessel (e.g., modifications to the captain’s cabin and a “conversion of
the 3rd cabin”), installation of a stabilizer system, upgrades to the vessel’s media system, and
electrical repairs (e.g., to the vessel’s starboard generator). Furthermore, C&H provided a statement
from a Florida yacht building and repair facility demonstrating the company paid various storage,
waste removal and other fees for the vessel beginning in January 2018 and concluding in January
2020. Finally, C&H submitted a signed statement from the vessel’s captain stating that the vessel
“was returned to the United States after exportation without having been advanced in value or
improved in condition….” As a result, C&H has provided sufficient information demonstrating that
the vessel was not advanced in value or improved in condition by any process of manufacture or
other means while abroad.
Based on the foregoing, C&H has provided sufficient information demonstrating the vessel
was not advanced in value while outside the United States. As a result, the vessel is eligible for
duty-free treatment under subheading 9801.00.10, HTSUS.
3. What is the Proper Valuation of the Vessel?
Third, and finally, we consider the proper method of valuation for the LOON. The Entry
Form submitted by C&H’s customs broker lists the value of the vessel as $20,000,000. As a
result, in liquidating the subject entry, CBP assessed duty on this value. In the instant protest,
C&H now contends that the $20,000,000 amount is the result of a clerical error and that the
proper valuation of the imported yacht is $7,700,000, which it asserts is the net sales price as
determined by the deductive value method of valuation.
As a preliminary matter, we note that the valuation of $20,000,000 reported on the
relevant entry form appears to be incorrect. This amount is not reflected in the relevant sales
6
documents, and C&H has provided a statement from its customs broker affirming that this value
was provided as the result of a clerical error. C&H’s broker states that it did not find or correct
the error because it believed no duty would be due on the entry of the LOON.
As a result, we turn to the applicable method of valuation for this transaction. The
preferred method of appraising merchandise imported into the United States is the transaction
value as set forth in section 402(b) of the Tariff Act of 1930, as amended by the Trade
Agreements Act of 1979 (“TAA”), codified at 19 U.S.C. § 1401a. The transaction value of
imported merchandise is the “price actually paid or payable for the merchandise when sold for
exportation to the United States” plus amounts for five enumerated statutory additions. See 19
U.S.C. § 1401a(b). For imported merchandise to be appraised under the transaction value
method, it must be the subject of a bona fide sale between a buyer and seller, and it must be a
sale for exportation to the United States. The U.S. Court of Appeals for the Federal Circuit has
defined a “sale” as a “transfer of title from one party to another for consideration.” See VWP of
America, Inc. v. United States, 175 F.3d 1327 (Fed. Cir. 1999) citing J.L. Wood v. United States,
62 C.C.P.A. 25, 33, C.A.D. 1139, 505 F.2d 1400, 1406 (1974)). When imported merchandise
cannot be appraised on the basis of transaction value, it is appraised in accordance with the
remaining methods of valuation, applied in sequential order. 19 U.S.C. § 1401a(a)(1). The
alternative bases of appraisement, in order of precedence, are: the transaction value of identical
or similar merchandise (19 U.S.C. § 1401a(c)); the deductive value (19 U.S.C. § 1401a(d)); the
computed value (19 U.S.C. § 1401aI); and the “fallback” method (19 U.S.C. § 1401a(f)).
Before C&H imported the LOON and filed entry on September 18, 2020, it was not the
subject of a sale (the previous sale was when C&H purchased the yacht from Abbracci in
January 2018). As such, transaction value is not available as a method of valuation because no
sale for exportation exists.
The next available method of valuation, the transaction value of identical or similar
merchandise is based on sales, at the same commercial level and in substantially the same
quantity, of merchandise exported to the United States at or about the same time as that being
appraised. See 19 U.S.C. § 14I(c). There is no information of any such sales. As a result, it is
not possible to appraise the LOON on this basis.
The next available method of valuation is the deductive method. Under the deductive
value method, merchandise is appraised on the basis of the price at which it is sold in the United
States in its condition as imported and in the greatest aggregate quantity either at or about the
time of importation, or before the close of the 90th day after the date of importation. 19 U.S.C. §
1401a(d)(2)(A)(i)-(ii). This price is subject to certain enumerated deductions, which includes
“any commission usually paid or agreed to be paid….” 19 U.S.C. 1401a(d)(3). In the instant
case, the LOON was entered on September 18, 2020, and was sold on November 11, 2020, to
S&E Travel Yach LLC. As such, the sale of the LOON occurred within the 90-day requirement
pursuant to 19 U.S.C. § 1401a(d)(2)(A)(i)-(ii). Furthermore, C&H proposes to deduct the
commission reflected on the sales documentation (i.e., a $500,000 “broker’s commission”).
Such a commission may be deducted from the value as outlined under 19 U.S.C. 1401a(d)(3).
Based on the foregoing, we find that the proper method of valuation for the LOON to be
7
the deductive value, which includes the November 2020 sales price, $8,200,000, less the broker’s
commission of $500,000.
HOLDING:
This protest should be DENIED in part and GRANTED in part. Specifically, we
determine: (1) C&H was properly required to enter the LOON; (2) that the LOON was eligible
for duty-free treatment pursuant to subheading 9801.00.10, HTSUS; and (3) that the liquidated
valuation of $20,000,000 was the result of a clerical error and that the entry should be
reliquidated based on the deductive value methodology. Protest No. 520321100337 is referred
back to your Center for appropriate action.
You are instructed to notify the importer, through the importer’s counsel, of this decision
no later than 60 days from the date of this decision. Any reliquidation of the entry or entries in
accordance with the decision must be accomplished prior to this notification. Sixty days from
the date of the decision, the Office of Trade, Regulations and Rulings will make the decision
available to CBP personnel and the public on the Customs Rulings Online Search System
(CROSS) at https://rulings.cbp.gov/, or other methods of public distribution.
Sincerely,
For Yuliya A. Gulis, Director
Commercial and Trade Facilitation Division
8