WAR-5/
CON-13-CO:R:C:E 225098 CB
Director
Regulatory Audit Division
U.S. Customs Service
909 S.E. 1st Avenue
Room 632
Miami, FL 33131
RE: Request for Internal Advice - Authority to Withdraw
Bonded Warehouse Merchandise Duty Free for Transfer
to Cruise Ship Gift Shops
Dear Madam:
This is in response to your request for internal advice (your
file AUD-1-O:R RKR) dated November 23, 1993, regarding withdrawals
of merchandise from bonded warehouses for transfer to cruise ship
gift shops.
FACTS:
The company in question maintains a class 2 bonded warehouse
from which it withdraws and transfers bonded merchandise to gift
shops on various cruise ships. During the cruises, the vessels may
visit foreign ports or may be "voyages to nowhere" - departing and
returning to the same port without any intermediate stops at other
domestic or foreign ports.
ISSUE:
Whether merchandise may be withdrawn from a bonded warehouse
for transfer to cruise ship gift shops under the duty- and tax-
free exemptions in 19 CFR 10.59 - 10.65 and 144.35?
LAW AND ANALYSIS:
Under the present statutes, Customs Regulations, and
directives, there are three options available to a cruise line or
airline:
1. Section 309, Tariff Act of 1930, as amended (19 U.S.C.
1309 (a)), in pertinent part, provides that supplies for vessels
or aircraft registered in the United States and supplies or
equipment for vessels or aircraft registered in any foreign country
may be withdrawn duty free. Treasury Decision (T.D.) 49815(4)
defined the term vessel supplies and equipment as used in 1309.
These definitions of supplies and equipment have likewise been
applied by Customs to aircraft supplies and equipment. (ORR Ruling
EV 235N dated January 12, 1955, and July 12, 1960). Articles which
fall under the definition of supplies and equipment are "deemed"
exported when laden on a qualifying flight or voyage. T.D.
49815(4) defined "supplies" as including those articles commonly
known as "sea stores". The term "equipment" includes portable
articles necessary and appropriate for the navigation, operation
and maintenance of the vessel and for the comfort and safety of the
persons on board. Merchandise carried on board a vessel for sale
to passengers or crew is considered to be ship's stores pursuant
to the Convention on Facilitation of International Maritime
Traffic, 18 U.S.T. 411, TIAS 6251, which the United States ratified
on March 17, 1967, and implemented in the Customs Regulations by
Treasury Decision 71-169, 5 Cust. Bull. 314 (1971). Therefore,
this merchandise would not qualify for withdrawal under 19 U.S.C.
1309.
2. Customs Directive (C.D.) 3280-08, issued on May 9, 1991,
sets forth appropriate Customs procedures for the treatment of
articles which may be sold aboard aircraft during international
flights for exportation by passengers. Customs has allowed
airlines to import this "international travel merchandise" for
retention at a facility at the airport for a period not to exceed
one year. This merchandise is not considered aircraft supplies.
3. Duty-free shops operated at port. Orders for the
merchandise must be taken at the port in compliance with 19 U.S.C.
1555(b)(2); and, the goods must be distributed on the vessel when
it is on the high seas in compliance with 19 U.S.C. 1555(b)(3)(A)
(to provide reasonable assurance that the merchandise will be
exported from the Customs territory). Passengers on a "cruise to
nowhere" are not able to purchase duty-free merchandise because a
"cruise to nowhere" does not stop at any foreign ports and, thus,
the merchandise would not be considered exported.
Therefore, the answer to your question is: (1) merchandise
cannot be withdrawn from a bonded warehouse and laden on a "cruise
to nowhere" under the duty and tax-free exemptions in 19 CFR
144.35 and 10.59 - 10.65; and (2) ship's stores do not qualify
as vessel supplies nor equipment under 19 U.S.C. 1309; therefore,
merchandise sold aboard cruise ship shops is not eligible for
withdrawal under 19 CFR 10.59 - 10.65 and 144.35.
HOLDING:
Bonded merchandise may not be withdrawn from a bonded
warehouse for transfer to cruise ship gift shops under the duty and
tax-free exemptions found in 19 CFR 10.59 - 10.65 and 144.35.
The Office of Regulations and Rulings will take steps to make
this decision available to Customs personnel via the Customs
Rulings Module in ACS and to the public via the Diskette
Subscription Service, Lexis, Freedom of Information Act and other
public access channels within 60 days from the date of this
decision.
Sincerely,
John Durant, Director
Commercial Rulings Division