Application for further review of Protest No. 5201-96-100296; Offer to sell a yacht; U.S. Note 1 to Chapter 89, HTSUS; 19 CFR § 4.94

HQ 114270 December 4, 1998 VES-12-02-RR:IT:EC 114270 CC CATEGORY: Carriers Port Director U.S. Customs Service 6601 W. 25th Street Miami, FL 33102-5280 RE: Application for further review of Protest No. 5201-96-100296; Offer to sell a yacht; U.S. Note 1 to Chapter 89, HTSUS; 19 CFR § 4.94 Dear Sir: The above-referenced protest was forwarded to this office for further review. We have considered the facts and issues raised, and our decision follows. FACTS: The subject yacht, the INTREPID II, a British-registered pleasure vessel, entered U.S. waters on or about February 20, 1995. The protestant claims that the sole reason the yacht came to the United States was for repair work; therefore, entry pursuant to 19 U.S.C. § 1484 and the payment of applicable duties was not made. In April 1995, the yacht was seized because Customs had determined it was offered for sale in the U.S. by the protestant’s yacht broker prior to duty-paid entry being made. On June 13, 1995, a consumption entry was made on the yacht and duties were paid in the amount of $283,500. Liquidation occurred on February 2, 1996. A protest was filed on April 18, 1996, against liquidation of the entry and the payment of duty in the amount of $283,500, because, the protestant claims, the yacht was not offered for sale. We note that after the protest was filed, the protestant filed a drawback claim and received a remission of duties in the amount of $280,665. ISSUE: Whether the subject yacht was offered for sale in the U.S. and is therefore subject to consumption entry and the payment of duty. LAW AND ANALYSIS: Initially, we note that the protest was timely filed pursuant to 19 U.S.C. § 1514. Chapter 89 of the Harmonized Tariff Schedule of the United States (HTSUS) provides for ships, boats and floating structures. Additional U.S. Note 1 to that chapter states in part that if a vessel is brought into the Customs territory of the United States by a nonresident for his own use in pleasure cruising, it shall be admitted without formal Customs consumption entry or the payment of duty. See, also, 19 CFR § 148.45. Section 4.94 of the Customs Regulations (19 CFR § 4.94) contains additional information concerning the dutiability of vessels. Paragraph (d) of that section, concerning the form of cruising licenses, contains a warning on the dutiability of vessels, stating that a vessel that is sold or chartered to a resident, and upon which duty has not been paid and a consumption entry has not been filed, is subject to seizure or to a monetary claim equal to the value of the vessel. In addition, the offer to sell or charter to a resident would subject a vessel to duty. Paragraph (d) states in pertinent part, the following: Any offer to sell or charter (for example, a listing with yacht brokers or agents) is considered evidence that the vessel was brought in for sale or charter to a resident.... Consequently, any offer to sell to a resident would immediately subject a vessel to duty. In this case, the protestant claims that while abroad and prior to its arrival in the U.S., the subject vessel was for sale through the protestant’s agent, its yacht broker. The protestant claims that when the vessel arrived in the U.S. for repair, the yacht broker took the necessary steps to take the vessel off the market and give notice to the trade to that effect. The yacht broker was contacted by three individuals while the ship was in repair. The protestant claims that no offer for sale was made, and the reason the individuals were permitted to board the vessel was to view the repair work being done. In addition, the protestant claims that the yacht broker did not have the authority to offer the yacht for sale because its principal, the protestant, had instructed the agent to take the yacht off the market. The evidence of record includes a transcript of the conversation between one of the individuals who boarded the vessel, an undercover Customs agent, and the yacht broker. This evidence shows that an offer to sell the yacht was made by the yacht broker to the Customs agent. In addition, the protestant’s yacht broker had the apparent authority to have free access to the vessel and to act on behalf of its principal, the protestant, in offering the yacht for sale. Once the offer to sell was made, the yacht became subject to consumption entry and duty. Consequently, the protest is denied. HOLDING: The subject yacht was offered for sale in the U.S. and is therefore subject to consumption entry and the payment of duty. Accordingly, the protest is DENIED. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing the decision. Sixty days from the date of the decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, Jerry Laderberg Chief Entry Procedures and Carriers Branch