DRA-4 CO:R:C:E 223076 CB
Regional Commissioner
U.S. Customs Service
Pacific Region
One World Trade Center
Long Beach, CA 90831-0700
RE: Application for further review of Protest No. 3201-91-
100017; 19 U.S.C. 1313(j)(1); "use" of pleasure craft being
offered for sale
Dear Sir:
The above-referenced protest was forwarded to this office
for further review. We have considered the points raised and our
decision follows.
FACTS:
Protestant owns a pleasure yacht which arrived in Honolulu,
Hawaii on or about January 18, 1990. A formal entry was filed on
or about June 15, 1990 and liquidated on December 14, 1990.
Customs duties in the amount of $18,263.03 were assessed and
paid.
According to protestant, the vessel was brought to Hawaii to
offer it for sale to potential Japanese buyers. During the time
the vessel was berthed in Honolulu the owner placed
advertisements in certain periodicals and contacted certain
persons inviting proposals for the purchase of the vessel.
Protestant states that throughout the yacht's berthing it was
essentially confined to its slip. Other than on the occasions
discussed below, the yacht was not physically moved from its
berth except as was necessary for its maintenance.
Presumably, on one occasion the vessel was taken for a
demonstration sail in Honolulu harbor with prospective buyers
aboard. Protestant states that the sail was of limited duration
and scope. On another occasion the vessel was featured on a
television program. The filming was done during a cruise in
Honolulu harbor. During the course of the program it was stated
that the yacht was for sale. While in Hawaii, the yacht was
manned by a captain and two crew members. Members of the crew
remained on board at all times for purposes of operation,
maintenance and security.
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Protestant asserts that, other than the crew, there were no
other persons using the vessel as a primary residence.
Apparently, protestant made one seven day visit to the vessel
while it was in Hawaii. On or about August 16, 1990, protestant
made application for drawback. The yacht departed from Honolulu
on or about August 30, 1990 and has not since re-entered the
customs territory of the United States. On or about December 14,
1990, Customs issued a "liquidation notice" denying drawback on
the basis that the vessel was considered "used" when it was
sailed and televised for airing on a local television show.
ISSUE:
Whether a vessel imported for the purpose of being offered
for sale remains eligible for same condition drawback if, in
conjunction with the sale, the vessel is utilized for promotional
purposes?
LAW AND ANALYSIS:
Section 313(j), Tariff Act of 1930, as amended (19
U.S.C. 1313(j)), provides for a refund of duty if a duty-paid
article is exported in the same condition as when imported,
within three years from date of importation, and was not used in
the United States. The statute provides that the performing of
incidental operations does not constitute a use for drawback
purposes. Incidental operations include, but are not limited to,
testing, cleaning, repacking, and inspecting.
The Customs Service administration of the same-condition
drawback law is governed by 19 CFR 191.141. That regulation
provides that the performing of incidental operations (such as
testing and inspecting) on the imported item, not amounting to a
manufacture or production, shall not be treated as a use of the
merchandise. The prevailing interpretation of "use" of an
article under both 19 U.S.C. 1313(j) and 19 CFR 191.141 is that
an article is used when it is employed for the purpose for which
it was manufactured and intended. See, e.g., C.S.D. 81-222 and
C.S.D. 82-135. Articles that have been changed in condition due
to deterioration, accidental destruction or damage are also
usually ineligible for same-condition drawback under 19
U.S.C. 1313(j). See, e.g., C.S.D. 83-23 and C.S.D. 83-26.
In the instant case, members of the crew remained on board
the yacht at all times and the yacht was the location for the
filming of a television show. Drawback has been denied because
it is the district office's position that the filming of the
television show constitutes a use. The Customs Service has
previously held that a captain of a yacht being offered for sale,
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who remains aboard the yacht, using its living quarters as an
incidence to his duties of operation, does not render the yacht
ineligible for same condition drawback under 19 U.S.C. 1313(j).
See C.S.D. 83-17. We see no reason to reach a different
conclusion with respect to the subject protest. Regarding the
filming of the television show, after reviewing the supporting
evidence, it is Headquarters' position that the filming does not
constitute a use as contemplated by the statute and regulations.
In C.S.D. 83-17 it was concluded that offering merchandise for
sale does not negate the provisions of 1313(j), nor does
demonstration connected with such offers render the merchandise
ineligible for drawback unless the merchandise becomes
significantly deteriorated. In the instant case, the sale of the
yacht was advertised during the television show and protestant
was not paid for the use of the yacht. Additionally, there is no
allegation that the yacht had become significantly deteriorated.
Therefore, we see no basis for the denial of drawback.
HOLDING:
The fact that a yacht is filmed in a short documentary, in
which it is offered for sale and there is no payment for the
documentary, does not constitute a "use" as contemplated by 19
U.S.C. 1313(j) and the applicable regulations. Therefore, you
should approve this protest in full. A copy of this decision
should be attached to the CF 19 Notice of Action to satisfy the
notice requirement of section 174.30(a), Customs Regulations.
Sincerely,
John A. Durant, Director
Commercial Rulings Division