ENT 1
OT:RR:CTF:ER H213415 GGK
Leonard L. Rosenberg
Sandler, Travis & Rosenberg
1000 NW 57th Court
Suite 600
Miami, FL 33126-2022
RE: Ferretti Group of America, LLC: Request for Reconsideration of Headquarters Ruling Letter H175416 (January 6, 2012)
Dear Mr. Rosenberg:
This is in response to your March 26 and April 10, 2012 letters on behalf of your client, Ferretti Group of America, LLC (“Ferretti”). We will treat your March 26, 2012 letter as a request for this office to reconsider our decision in Headquarters Ruling Letter HQ H175416, dated January 6, 2012. In HQ H175416, we advised the Port of Providence that a previously imported duty-paid yacht, which is sailed from Miami, Florida to the Bahamas and subsequently transported back to the United States as cargo on a foreign-flagged vessel, is exported for purposes of 19 C.F.R. § 101.1 and must be reimported upon unlading in Newport, Rhode Island. Upon review, we have determined that the transaction described above does not constitute an exportation for such an imported duty-paid yacht. Therefore, for the reasons set forth below, we are revoking Headquarters Ruling Letter HQ H175416, dated January 6, 2012, and any treatment previously accorded by U.S. Customs and Border Protection (“CBP”) to substantially identical transactions.
Pursuant to section 625(c), Tariff Act of 1930 (19 U.S.C. § 1625(c)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. 103-182, 107 Stat. 2057, 2186 (1993), notice of the proposed revocation was published in the Customs Bulletin on June 4, 2014. No comments were received in response to the notice.
FACTS:
Ferretti imports Italian-made yachts into the United States. The yachts are imported as cargo, and do not arrive under their own power. Upon importation into the United States, a consumption entry is filed and duty is paid. The yachts are not imported pursuant to 19 C.F.R. § 4.94a and will not be documented until they are sold to retail buyers in the United States. Depending on sales and inventory needs, Ferretti moves the yachts between South Florida and Newport, Rhode Island. The yachts are not sailed from Florida to Newport because doing so would make them “used” and decrease their value. Instead, Ferretti sails the yachts from Florida to the Bahamas, on their own bottom, and obtains temporary cruising permits from Bahamian customs. The yachts are then placed on foreign-flagged vessels for transport to Newport, Rhode Island as cargo. To illustrate, a yacht may be shown at the Miami Boat Show. If the yacht does not sell in Miami, it is presented for sale in Rhode Island. In order to move the yacht from Miami to Rhode Island, the yacht is sailed to Freeport, Bahamas and laden as cargo onto a foreign-flagged cargo vessel. The vessel then carries the yacht to Rhode Island and unlades the yacht upon arrival at the port.
At issue in this reconsideration are three imported, duty-paid yachts. According to Ferretti, the yachts were initially entered for consumption at Port of Everglades under the following entry numbers: xxx-xxx7996-2, dated September 25, 2009; xxx-xxx9233-8, dated October 21, 2009; and xxx-xxx4271-1, dated January 30, 2010. At the time of entry, the yachts were classified under subheading 8903.92.0065, Harmonized Tariff Schedule of the United States (“HTSUS”), and duties paid accordingly. Based on affidavits submitted by Ferretti, the yachts sailed from Miami, Florida, on their own bottoms, and arrived at Freeport, Bahamas in May 2010. The affidavits state that upon arriving in the Bahamas, the Bahamian customs authority issued temporary cruising permits for the three yachts. Thereafter, the yachts were moored until laden onto a foreign-flagged vessel owned and operated by the carrier company, Dockwise Yacht Transport, LLC (“DYT”), for carriage to Newport, Rhode Island. Ferretti and DYT entered into the carriage contracts for transporting the yachts on April 16, 2010. Finally, Ferretti clarified that it does not clear the yachts upon their departure from U.S. waters; the yachts have no registry or documentation and no export information is filed with the Department of Commerce. Upon their arrival at Newport, Rhode Island, the Port of Providence required Ferretti to enter the three yachts as merchandise, on June 1, 2010, under entry numbers xxx-xxx3805-6, xxx-xxx3807-2 and xxx-xxx3806-4. Moreover, the Port of Providence directed Ferretti to enter the yachts under HTSUS subheading 8903.92.00, as yachts or pleasure vessels brought into the United States for sale. Ferretti complied and filed the three entries at issue in this reconsideration. CBP liquidated entry xxx-xxx3805-6 on March 11, 2011, and entries xxx-xxx3807-2 and xxx-xxx3806-4 on June 3, 2011.
After filing the entries, Ferretti, through counsel, submitted a binding ruling request, pursuant to 19 C.F.R. § 177.1, with this office on July 12, 2011. Subsequently, Ferretti filed Protest 0502-11-100075 (“importer protest”) with the Port of Providence on September 7, 2011, to contest all three entries and requested further review. In its attached memorandum in support of further review, Ferretti notes that it had filed a binding ruling request with Headquarters that was applicable to the entries under protest. A copy of the July 12, 2011, ruling request was attached to the Protest’s application for further review. Finally, on December 16, 2011, the surety for Ferretti’s entries filed Protest 0502-11-100086 (“surety protest”), which also challenged CBP’s duty assessment. The demand for payment against the surety’s bond was mailed on June 21, 2011. We note that the facts and arguments contained in the two protests and Ferretti’s July 12, 2011 binding ruling request are identical.
On January 6, 2012, we issued Headquarters Ruling Letter H175416, in response to Ferretti’s July 12, 2011 ruling request. Ferretti filed a request to reconsider the ruling on February 17, 2012. We denied the initial request for reconsideration on procedural grounds on March 15, 2012. Thereafter, on March 26, 2012, Ferretti submitted the letter currently before us, which we consider to be a request for reconsideration. To date, Ferretti’s protests remain suspended pending this reconsideration.
ISSUE:
Whether imported, duty-paid yachts sailing from Miami, Florida to the Bahamas are exported pursuant to 19 C.F.R. § 101.1 and, therefore, subject to reimportation upon unlading at Newport, Rhode Island.
Whether the movement of yachts violates U.S. coastwise laws.
LAW AND ANALYSIS:
1. Whether imported, duty-paid yachts sailing from Miami, Florida to the Bahamas are exported pursuant to 19 C.F.R. § 101.1 and, therefore, subject to reimportation upon unlading at Newport, Rhode Island.
Ferretti’s primary argument for reconsideration asserts that the previously imported, duty-paid yachts were not exported when they sailed to the Bahamas from Florida. Therefore, Ferretti believes that the yachts do not require reimportation upon their arrival in Rhode Island. Generally, imported duty-paid merchandise is subject to duty liability and entry only if the goods are first exported and then subsequently reimported into the Customs territory of the United States. See 19 C.F.R. § 141.2 (stating that “[d]utiable merchandise imported and afterwards exported…is liable to duty on every subsequent importation…”). To explain, only those goods that are imported into the customs territory of the United States are subject to duty. See HQ 114291 (May 7, 1998) (finding that in accordance with General Note 1 of the Harmonized Tariff Schedule of the United States, only those goods that are imported into the customs territory of the United States are subject to duty); see also General Note 1, HTSUS (stating that “[a]ll goods provided for in the HTSUS and imported into the customs territory of the United States from outside thereof…are subject to duty or exempt therefrom as prescribed in general notes 3 through 29, inclusive”). Moreover, CBP “entry requirements pertain only to merchandise which has been imported.” HQ 114291 (May 7, 1998); see also 19 C.F.R. § 141.4(a) (stating “[a]ll merchandise imported into the United States is required to be entered, unless specifically excepted”). If imported duty-paid goods are removed from the customs territory of the United States but not exported, however, then upon their return, no importation is required. See 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); HQ 225339 (January 10, 1995) (holding that U.S. origin and imported duty-paid oil spill equipment used outside of U.S. customs territory are not imported upon their return if no exportation occurred); see also Page & Jones v. United States, 26 C.C.P.A 124, 129 (1938) (citing Fairbanks Morse & Co. v. United States, 69 Treas. Dec. 319, and Van Camp Sea Food Co. (Inc.) v. United States, 56 Treas. Dec. 415) (noting that American engines returned from foreign jurisdictions were not imported because the goods were never exported). Consequently, absent an exportation event, duties are not applicable and entry is not required for imported duty-paid merchandise returned to the United States.
Imported duty-paid yachts, in particular, require an exportation before duties are owed upon reimportation. CBP has consistently stated the following in its rulings:
Duty on [a] vessel is collectable when it is first imported. The determination of whether or not a yacht is dutiable when it has previously been subject to Customs entry and payment of duty is dependent on 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 items 8903.91.00 or 8903.92.00, HTSUS.
HQ 111731 (February 19, 1992). Accord HQ 114301 (March 25, 1998); HQ 110970 (July 17, 1990); HQ 103386 (September 27, 1978); HQ 103359 (April 11, 1978). Based on all of the above, we will consider whether the sailing of the yachts at issue to the Bahamas for carriage back to the United States constitutes an exportation. If an exportation occurred, then the yachts must be reimported upon unlading in Newport, Rhode Island.
Exportation is defined in 19 C.F.R. § 101.1 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.” See also Swan and Finch Co. v. United States, 190 U.S. 143, 145 (1903) (explaining that “‘[a]s the legal notion of emigrating is a going abroad with an intention of not returning, so that of exportation is a severance of goods from the mass of things belonging to this country with an intention of uniting them to the mass of things belonging to some foreign country or other’”) (internal citations omitted). Based on this definition, an exportation is established by a two-pronged analysis: 1) that the goods were severed from the mass of things belonging to this country, and 2) that there was an intent to unite the goods to the mass of things belonging to some foreign country. The first prong is construed to mean 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) (citing to United States v. National Sugar Refining Co., 39 C.C.P.A. 96, 101 (1951)), aff’d, 666 F.2d 566 (C.C.P.A. 1981). In the case before us, the yachts physically sailed from the United States and arrived in the Bahamas, where Bahamian customs authorities issued temporary cruising permits for the yachts. Therefore, the evidence demonstrates that the yachts physically left the United States and the severance requirement for exportation is satisfied.
Less clear, however, is whether Ferretti intended to unite the yachts to the mass of things belonging to the Bahamas. Absent such intent, the yachts would not be exported even if severed from the mass of things belonging to the United States. Generally, the controlling factor in this analysis is the intention of the parties at the time of shipment. Nassau Distributing Co., Inc. v. United States, 29 Cust. Ct. 151, 153 (1952) (internal citations omitted). Thus, “so long as an immediate bona fide purpose to seek a foreign market coincides with a bona fide act of shipment later changes in either the intent or destination have no effect upon the original character of the act as an exportation.” Id. at 154 (quoting United States v. National Sugar Refining Co., 39 C.C.P.A. 96, 100 (1951)). Alternatively, a situation may arise where the intent to unite the goods with the mass of things belonging to a foreign country does not exist at the time of shipment but nevertheless results in an exportation due to subsequent events. Specifically, merchandise which, after its initial shipment, is intended to be or in fact is diverted into the commerce of an intermediate country, becomes an export of that intermediate country. Bethlehem Steel Corp. v. United States, 551 F. Supp. 1148, 1149 (Ct. Int’l Trade 1982) (citations omitted) (finding that imported, duty-paid merchandise moving between two U.S. ports by means of transshipment through Canada was exported because the merchandise was offered for sale in Canada). The contingency of diversion sufficient to negate the original intent at the time of shipment, however, must have a realistic basis in fact and not be mere conjecture. Id. (internal quotations omitted) (citing Hugo Stinnis Steel & Metals Co. v. United States, 80 Cust. Ct. 175, 192 (1978), aff’d, 599 F.2d 1037 (1979)). To summarize, in order to unite goods to the mass of things belonging to another country for purposes of exportation, there must be an intended bona fide purpose to seek a foreign market or an actual diversion of the merchandise into the commerce of an intermediate country.
In Ferretti’s case, the question presented is not whether the requisite intent existed at the time of shipment or developed after. Rather, the question is whether the intended act qualifies 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, sufficient to unite the goods with the mass of things belonging to some foreign country. To illustrate what acts are sufficient to unite merchandise with the mass of things belonging to a foreign country for purposes of exportation, and what acts are insufficient, it is useful to compare case scenarios involving exportation of merchandise to foreign warehouses. In D. & B. Import Corp. v. United States, 5 Cust. Ct. 108, 109 (1940), Cuban rum was sold and shipped to a buyer in Bermuda. The rum was stored in a bonded warehouse and never withdrawn for consumption in Bermuda. Id. Subsequently, the rum was sold and shipped to a buyer in the United States. Id. The Customs Court determined that the rum became an export of Bermuda because “merchandise in a bonded warehouse in a foreign country must be considered as having entered the commerce of that country when it could have been withdrawn at any time for consumption there.” Id. at 118. Similarly, in HQ 214285 (July 22, 1982), a company shipped unsold watches manufactured in the United States to a bonded warehouse in Canada for storage pending actual sale to different markets in the western hemisphere, including the United States. CBP determined that the transaction qualified as an exportation because the company’s immediate bona fide purpose for sending the watches to storage in Canada was not to return them to the United States, but rather to seek foreign markets for the eventual sale of the goods. Id. Finally, in HQ 223701 (May 28, 1992), CBP determined that imported duty-paid tablets shipped to Canada for packaging qualified as an exportation even when the packaged tablets returned to the United States. In finding that an exportation occurred, CBP noted that the merchandise was shipped abroad for use in a legitimate commercial purpose independent of securing a benefit accruing to the imported merchandise, i.e. drawback. HQ 223701. See also 19 C.F.R. § 101.1 (stating under the definition of Exportation: “The shipment of merchandise abroad with the intention of returning it to the United States with a design to circumvent provisions of restriction or limitation in the tariff laws or to secure a benefit accruing to imported merchandise is not an exportation”).
The case scenarios 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 an intermediate 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. Cf. 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 (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. Compare HQ 111731 (February 19, 1992) (stating that “[m]erely removing a yacht from U.S. territorial waters on a temporary foreign pleasure cruise with the intent to return it to the United States thereafter would not constitute an exportation”), and HQ 225339 (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), with 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 wreaked American vessel was exported because a firm in Canada purchased the engine to make repairs before returning it to the United States), and HQ 229644 (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).
With regard to the yachts at issue in this case, there is no indication that the yachts underwent any manufacturing process, manipulation or repair in the Bahamas. Neither did Ferretti sell or attempt to sell the yachts to buyers in the Bahamas or to foreign buyers from the Bahamas. Rather, upon arriving in Freeport, the yachts were moored under the authority of Bahamian temporary cruising permits until laden onto the transport vessel for return to the United States. Moreover, it is notable that Ferretti contracted to transport the yachts back to the United States in April 2010, which is before they sailed for the Bahamas in May 2010. This fact supports Ferretti’s assertion that it always intended to return the yachts to the United States. Based on the above, the only act at issue is Ferretti’s engagement of transportation services to carry the yachts from the Bahamas back to the United States. Such transportation of goods, we find, does not introduce the merchandise into the foreign country for consumption, sale or use. Without an intended or actual introduction of the yachts into the Bahamas for consumption, sale or use, the yachts are not united to the mass of things belonging to the Bahamas. Therefore, the yachts are not exported when they sailed to the Bahamas for carriage back to the United States and upon their return, are not reimported or subject to entry as merchandise. Please note that in order to support the determination that an exportation did not occur, Ferretti must demonstrate to the satisfaction of the Port of Providence that the yachts returning to the customs territory of the United States at Newport, Rhode Island are the same imported, duty-paid yachts that departed Florida for the Bahamas. See HQ 225339 (January 10, 1995) (holding that in order to confirm that an exportation did not take place, documentation will be required to verify exactly which equipment and supplies left the customs territory of the United States and that this is the same equipment and supplies returned to the United States).
2. Whether the movement of yachts violates U.S. coastwise laws.
In addition to the exportation issue, we would like to clarify that the factual scenario presented in this case does not violate U.S. coastwise laws. Generally, the coastwise laws prohibit the transportation of merchandise, between points in the United States embraced within the coastwise laws, in any vessel other than a vessel built in, documented under the laws of, and owned by citizens of the United States. Such a vessel, after it has obtained a coastwise endorsement from the U.S. Coast Guard, is said to be “coastwise qualified.” The coastwise laws generally apply to points in the territorial sea, which is defined as the belt, three nautical miles wide, seaward of the territorial sea baseline, and to points located in internal waters, landward of the territorial sea baseline.
The coastwise law applicable to the transportation of merchandise is the Jones Act, 46 U.S.C. § 55102, (recodified pursuant to P.L. 109-304, October 6, 2006), which provides:
(a) Definition. In this section, the term “merchandise” includes--
(1) merchandise owned by the United States Government, a State, or a subdivision of a State; and
(2) valueless material.
(b) Requirements. Except as otherwise provided in this chapter or chapter 121 of this title [46 U.S.C. §§ 55101 et seq. or 12101 et seq.], a vessel may not provide any part of the transportation of merchandise by water, or by land and water, between points in the United States to which the coastwise laws apply, either directly or via a foreign port, unless the vessel--
(1) is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade; and
(2) has been issued a certificate of documentation with a coastwise endorsement under chapter 121 [46 U.S.C. §§ 12101 et seq.] or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement…
CBP regulations at 19 C.F.R. § 4.80 promulgated pursuant to the aforementioned statute, provide, in pertinent part:
19 C.F.R. § 4.80 Vessels entitled to engage in coastwise trade.
(a) No vessel shall transport, either directly or by way of a foreign port, any passenger or merchandise between points in the United States embraced within the coastwise laws, including points within a harbor, or merchandise for any part of the transportation between such points, unless it is:
(1) Owned by a citizen and is so documented under the laws of the United States as to permit it to engage in the coastwise trade;
(2) Owned by a citizen, is exempt from documentation, and is entitled to or, except for its tonnage, would be entitled to be documented with a coastwise endorsement.
(3) Owned by a partnership or association in which at least a 75 percent interest is owned by such a citizen, is exempt from documentation and is entitled to or, except for its tonnage, or citizenship of its owner, or both, would be entitled to be documented for the coastwise trade. The term “citizen” for vessel documentation purposes, whether for an individual, partnership, or corporation owner, is defined in 46 C.F.R. 67.3…
As we stated in CSD 85-9, dated November 21, 1984, a vessel transported on another vessel is merchandise for purposes of 46 U.S.C. 883, the predecessor statute to 46 U.S.C. § 55102. Therefore, the subject yachts are “merchandise” as contemplated by 46 U.S.C. § 55102 for that portion of their journey from the Bahamas to Newport, Rhode Island. However, the yachts sailed under their own power from Miami to the Bahamas. Accordingly, they do not qualify as “merchandise” for the purposes 46 U.S.C. § 55102 for that portion of their journey between Florida and the Bahamas.
In HQ 110280 (Aug. 24, 1989), CBP addressed the applicability of coastwise law pertaining to the transportation of merchandise, then 46 U.S.C. App. 883, since recodified as 46 U.S.C. § 55102, to the transportation of yachts from Florida to the West Coast of the United States. In that matter, the yachts were to be loaded as on-deck cargo on a non-coastwise-qualified vessel in Florida and transported to Vancouver, Canada. At Vancouver, the yacht owners were to take delivery and the yachts would proceed under their own power to their respective home ports in California and Washington. We held that the proposed transportation did not violate the coastwise merchandise statute. CBP reasoned that because the transported vessel was not considered to have been “transported” between coastwise points, it was transported only from a coastwise point to a non-coastwise point and proceeded under its own power for the remainder of the movement.
Similarly, in the present matter, the yachts proceeded under their own power from a coastwise point (Miami, Florida) to a non-coastwise point (the Bahamas). There, they were laden onto a non-coastwise-qualified vessel for transportation from a non-coastwise point (the Bahamas) to a coastwise point (Newport, Rhode Island). Accordingly, the transportation of the subject yachts as described in this case, did not violate 46 U.S.C. § 55102.
HOLDING:
After reviewing the reconsideration request, we find that imported duty-paid yachts sailed from the United States to the Bahamas, for the sole purpose of being transported back to the United States on a commercial vessel, are not exported pursuant to 19 C.F.R. § 101.1. Headquarters Ruling Letter H175416, dated January 6, 2012, is hereby revoked.
In accordance with 19 U.S.C. § 1625(c), this ruling will become effective 60 days after publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division