• HQ 230037
• Nov 04, 2003

• Type : Protest • HTSUS :
•  Related:   721896; 112035; 223076; 227739   

DRA-4 RR:CR:DR
230037RDC

Port Director
Bureau of Customs and Border Protection
610 S. Canal St.
Chicago, IL 60606
Att: Ms. Sylvia Pfeffer

RE: Application for Further Review of Protest number 3901-03-100726; 19 U.S.C. § 1313(j)(1); unused merchandise drawback; yacht; evidence of non-use.

Dear Port Director:

On June 25, 2003, Protest number 3901-03-100726 was forwarded to this office for further review. We have also received the Protestant’s additional submission dated October 27, 2003, but received in this office on October 24, 2003. This submission and the evidenced attached thereto was supplied as the result of the request by this office during a telephone conference with representatives of the Protestant’s customs broker on September 2, 2003. We have considered the evidence provided and the points raised by your office and the Protestant. Our decision follows.

FACTS:

The Protestant, Eclipse Marine, Ltd. (“EML”), of Grand Cayman, Cayman Islands, protests the denial of drawback claim number WY7-xxxxx41-9. According to the provided CF 7501, Entry Summary, dated April 20, 2000, EML is the importer of record of merchandise described as a “sailing yacht” named the Eclipse. EML entered this yacht on April 20, 2000, through the port of Port Everglades, Florida, under subheading 8903.91, HTSUS, (Harmonized Tariff Schedule of the United States), paying duty of 1.5 percent of the yacht’s stated value of three million dollars. The ultimate consignee is Howard S. Reeder, Inc. of Miami, Florida. The exporting country is listed as the Virgin Islands and the country of origin is New Zealand. The exportation date is March 2, 2000. On March 6, 2000, the port of Port Everglades, Florida, issued a “license to Cruise in the Waters of the U.S.” for a yacht described as the Eclipse. As evidenced by a copy of this license the yacht was described as owned by Eclipse Marine Ltd. of Georgetown, Cayman Island, with a British Registry.

Attached to the CF 7501 is a document labeled “Value Summary” issued by Alloy Yachts International Limited of Auckland, New Zealand and dated April 14, 2000. This summary states that the Eclipse has a total value of three million dollars. Also attached to the CF 7501 is a marine survey of the Eclipse issued to Camper & Nicholsons (in Palm Beach) by Patton Marine, Inc. (of Miami, Florida) and dated March 29, 2002. The survey states on page 1: “at your request, this undersigned independent marine surveyor has inspected the 1991, 106 alloy cutter named ‘Esprit.’ Afloat at . . . Ft. Lauderdale, Florida. Date: March 28, 2000.” Page 20 of the survey states: “it is the opinion of this undersigned independent marine surveyor that the present day market value of ‘Eclipse’ is approximately $3,000,000.00, with a replacement value today of approximately $6,000,000.00.”

According to the Certificate of British Registry, dated April 28, 1993, the Eclipse is owned by Kandia Limited in the British Virgin Islands. On this Registry the information is typed onto a form. In the box labeled “name of the ship” is typed “Esprit.” This is crossed out and “Eclipse” is hand written in its place. The registration number is 721896. A photocopy of the reverse side of the Certificate of British Registry shows that on may 30, 1995, the Eclipse was sold to EML. Also included is a bill of sale evidencing that the yacht named Esprit was sold by Kandia Ltd. to EML. on May 20, 1996.

Also included is a document labeled “Exemption Affidavit for Boat Delivered for Sale to a Registered Dealer in Florida” is executed on April 24, 2000. The name of the broker / dealer is Camper & Nicholson, USA, Inc. of Palm Beach, Florida. The Eclipse is said to be owned by EML and moored at 206 Royal Palm Drive. The signature line calls for the signature of the dealer or broker, but the actual signature is illegible.

A CF 1300, Vessel Entrance or Clearance Statement, dated September 23, 2000, provides that the Eclipse, registration number 721896, cleared Newport, Rhode Island, on September 23, 2000, and was destined for Bermuda, Panama and New Zealand. The owner and the operator are both stated as Kandia Limited of the British Virgin Islands. Also included is a document labeled “Central Agency Listing” issued by Camper & Nicholsons USA, Inc. This document states, “The Central Listing Agreement defines the terms and conditions whereby the undersigned sales management firm, hereafter called Broker, agrees to manage the sale of the Vessel Eclipse.” The asking price is states as $5,150,000. The signature of the owner and the date are illegible, no address for the owner is stated.

A letter dated September 27, 2000, from Jonathan D. Wishart, “Master S/V Eclipse,” to the U.S. Customs Service states, among other things, that the “Eclipse was imported into the U.S. and duty paid on the 4/20/00 for the sole purpose of her sale.” The letter further states that the Eclipse was first berthed at 206 Royal Palm Drive and then Pier 66 Marina, both in Ft. Lauderdale, Florida. The letter also states that the Eclipse left Ft. Lauderdale on August 3, 2000, and arrived in Nantucket, Massachusetts on August 8, 2000, “for a Superyacht Regatta,” and that this action was undertaken on advice of the broker in furtherance of sale. We note that according to the Boattalk News, dated August 4, 2000, the “Nantucket Bucket Race” took place on August 11th to August 13th of 2000. Wishart’s letter further states that the Eclipse left Nantucket on August 17, 2000, made an overnight stop in Martha’s Vineyard and arrived in Jamestown, Rhode Island, on August 18, 2000, where the Eclipse remained except for a four-day period. During these four days it is stated that the Eclipse was in Portsmouth, Rhode Island for a “bottom paint job.”

According to an unlabeled document that appears to be a Bermuda Customs Form, on October 6, 2000, the Eclipse arrived in Bermuda from Newport, at 17:00 hours. A letter dated November 6, 2000, from Camper & Nicholsons International, to Howard S. Reeder, Inc., states that the “Eclipse has subsequently been removed from the market. She is heading back to Australia and New Zealand for a refit.” A letter from the New Zealand Customs Service, dated December 18, 2000, states that “the S/V Eclipse arrived at the Port of Auckland, New Zealand at approximately 12:00 hours on Friday the 15th of December 2000.”

On January 24, 2001, EML filed drawback entry number WY7-xxxxx41-9 claiming drawback per 19 U.S.C. § 1313(j)(1) on the exportation of the Eclipse. By letter dated January 17, 2001, and attached to the drawback claim EML stated: the yacht Eclipse cleared into the United States on March 6, 2000. . . . . On August 3, 2000, the Eclipse was moved to a boat show in Nantucket, Massachusetts and on August 18, 2000, moved to Jamestown Rhode Island, where it remained except for a four day maintenance . . . . On September 23, 2000, the Eclipse cleared customs for New Zealand.” The stated purpose of the yacht’s entry into the U.S. was “for the purpose of offering the yacht for sale.”

On May 24, 2001, the EML, through its customs broker, forwarded a copy of the Eclipse’s Captain’s log to Customs in response to Customs’ request. This log shows the following: that on August 3, 2000, the Eclipse left Ft. Lauderdale for Nantucket; no stops were recorded as made until arrival in Nantucket on August 8, 2000. No further movement is recorded until August 17 when the log reflects that the Eclipse cleared Nantucket’s harbor entrance for Martha’s vineyard. On August 18, the log states that the Eclipse cleared Martha’s vineyard and arrived in Jamestown on the same day. No further entries are made. We note that the log consists of four unnumbered pages and that there is no space left between entries. Also included is a credit card receipt for payment of dockage fees for the Eclipse at the Nantucket Boat Basin from August 11 through August 14, 2000.

On July 18, 2002, Customs by letter requested additional documents and information with regard to the drawback claim at issue: Captain’s log for the entire period of April 14, 2000, through September 23, 2000; Captain’s log listing all passengers and crew; dockage records; maintenance records; cruising permits; and certificate of registry or other documentation showing arrival in New Zealand.

By letter dated August 7, 2002, EML responded to Customs request, enclosed a copy of the Captain’s log and stated, “this log is a running log and as is the norm only shows when the yacht moves.” By letter dated August 13, 2002, Customs requested additional documentation with regard to the protested drawback claim and advised EML’s representative that “the captain’s log submitted is not the complete log. I unable to determine the usage of this boat without the entire log.” On November 25, 2002, EML responded by letter stating: “Please refer to the letter from the master of the S/V Eclipse, Jonathan D. Wishart dated September 27, 2000, . . . . There is no log available at this time to document the movement between the two private residence [sic] the Eclipse was berthed [at] while in West Palm Beach, Florida. With that, Master Jonathan D. Wishart provides this evidence as the foremost authority of the movement of the S/V Eclipse as it was his duty as master of the vessel to execute these movements. In addition to this testimony, the log was provided, documents the dates the S/V Eclipse moved to Nantucket, MA and then to Jamestown, RI before leaving the US abound for the ultimate destination of New Zealand. The log has been provided in its entirety prior to departing the US. Captain’s logs are more accurately a running log as opposed to a daily log.”

A letter dated January 15, 2003, from Camper & Nicholsons and addressed to Customs states that the Eclipse participated in the “Nantucket Bucket Race” as method to market the yacht to those in a position to buy it. This letter also states that “no acceptable offers were obtained” and thus, the yacht’s owner in Australia “decided to do a major refit in lieu of selling Eclipse.”

On January 24, 2001, the Chicago drawback office issued a CF 29, Notice of Action, advising EML that this drawback claim was denied in full. Specifically, the CF 29 advised in part that: “according to the Nantucket harbor master, the Eclipse participated as a contestant in the Nantucket Bucket Race in August of 2000.” According to ACS, the protested drawback entry was liquidated on January 24, 2003, with zero drawback paid. On April 23, 2003, Eclipse Marine filed the instant Protest number 3901-03-100726, which states that “the Eclipse participation in the Nantucket Bucket Race did not constitute a prohibited use as contemplated by 19 U.S.C. § 1313(j) as this participation was for the sole purpose of sales and marketing efforts.”

We note that EML advised that it was unable to provide additional evidence to support its assertions and states in this regard: “while we have every reason to believe the documentation can be produced to meet your satisfaction, it can not be produced by the final deadline for this response.”

ISSUE:

Whether the above described sailing vessel was “used” within the meaning of 19 U.S.C. § 1313(j)(1) while in the U.S. rendering it ineligible for drawback upon export?

LAW AND ANALYSIS:

Initially, we note that this Protest was timely filed under the statutory and regulatory provisions for protests (see 19 U.S.C. § 1514 and 19 C.F.R. Part 174). The drawback claim was liquidated without drawback on January 24, 3003; EML filed the instant Protest on April 23, 2003, hence within the 90 day period (19 CFR § 174.12(e)). We also note that the refusal to pay a claim for drawback is a protestable issue (see 19 U.S.C. § 1514(a)(6)). Finally, it is the opinion of the Port that this Protest warrants further review because it meets the criteria of §174.25 and “involves questions of law or fact that have not been ruled upon by the Commissioner of Customs or his designee” per 19 C.F.R. § 174.24(b). This office does not disagree.

EML has claimed drawback per 19 U.S.C. § 1313(j)(1), unused merchandise drawback. The Chicago drawback office denied the claim because the Protestant did not demonstrate that the Eclipse was not “used” within the meaning of § 1313(j)(1) while in the U.S. Section 1313(j)(1) provides in pertinent part:

(j)(1) If imported merchandise, on which was paid any duty, tax, or fee imposed under Federal law because of its importation-- (A) is, before the close of the 3-year period beginning on the date of importation-- (i) exported, or (ii) destroyed under customs supervision; and (B) is not used within the United States before such exportation or destruction; then upon such exportation or destruction 99 percent of the amount of each duty, tax, or fee so paid shall be refunded as drawback.

(19 U.S.C. § 1313(j)(1) (emphasis added)).

Section 1313(j)(1) provides therefore for a refund of duty if: a duty-paid article is exported, within three years from the date of importation and such article was not used in the United States. The statute provides that the performing of incidental operations does not constitute a use for drawback purposes. EML stated in its letter of January 17, 2001, that “the yacht Eclipse cleared into the United States on March 6, 2000.” This date is corroborated by the cruising license. The provided CF 1300 shows that on September 23, 2000, the Eclipse cleared Newport, headed for Bermuda. Therefore, in addition to the other required elements, the vessel Eclipse must not have been “used” within the meaning of § 1313(j) during the time it was in the U.S., i.e., from March 6, 2000, to, at least, September 23, 2000.

In C.S.D. 81-222 and C.S.D. 82-135, we stated that an article is used within the meaning of 19 U.S.C. § 1313(j) when it is employed for the purpose for which it was manufactured and intended. In C.S.D. 82-100 (March 26, 1982) we stated that offering an imported article for sale does not negate the benefits of the same condition drawback law, i.e., is not considered a use within the meaning of § 1313(j)(1). With regard to the importation of a yacht offered for sale in the U.S. and subsequently exported, we have held that "use" of the yacht is limited to showing it to potential buyers (HRL 112035, May 20, 1992).

In C.S.D. 83-17 (November 30, 1982) we held that “the fact that a captain of a yacht being offered for sale remains aboard the boat, using its living quarters as an incidence to his duties of operation, upkeep, and guardianship of the boat, does not render the boat ineligible for same condition drawback.” In HRL 223076 (May 27, 1991) we held that filming for a television program does not constitute a use of a yacht offered for sale, as contemplated by the statute and regulations. In that case a yacht was brought to Hawaii to offer it for sale. While the vessel was in Hawaii it was featured on a television program during which it was stated that the yacht was for sale. The filming for this program took place during a cruise in Honolulu Harbor. We decided that such filming – because it was advertising - was not a use within the meaning of § 1313(j). There is some support for the proposition that the yacht’s participation in the Nantucket Bucket Race, because it could be considered advertising is akin to the filming for a television program that we found was not a use of a yacht offered for sale (HRL 223076, May 27, 1991). However, because little evidence of the circumstances of the yacht’s time in Nantucket was provided, we cannot come to this conclusion.

In HQ 227739, (March 8, 1999), an information letter, we addressed the issue of whether the sailing of a yacht to the territorial waters of the Bahamas from the United States territorial waters for the purpose of engaging in “pleasure cruises,” where the prospective buyers are taken on board for demonstration sails is a use. In that scenario only the crew transported the boat to the territorial waters of the Bahamas, and prior to leaving the territorial waters of the Bahamas for return to the U.S., all passengers were removed from the yacht. In HQ 227739 we determined that it was,

this sailing from the territorial waters of the United States to the territorial waters of the Bahamas that we find to be a “use” within the meaning of 19 U.S.C. 1313(j). The yacht, manned by the crew, is put to the exact use for which a yacht is built. The trip to the Bahamas, sailing from the United States, is a transportation, the purpose of a yacht, and therefore, a “use” as intended in 19 U.S.C. 1313 (j).

The distinction between our determination in HQ 227739 and our holding in HRL 223076 is that in HRL 223076 the subject yacht was already in Hawaii – it had been bought there to offer it for sale – where it was filmed. In HRL 223076 it was the transportation of the yacht to the place where it could be demonstrated that was found to be a use.

EML contends that the yacht’s listing agent advised the crew to move the Eclipse to Nantucket “to participate in marketing demonstration, the Nantucket Bucket Race. That in [and] of itself is not a prohibited use, . . . . The movement of the yacht by the crew to that venue was necessary for the purposes of sales and marketing and was considered incidental to that effort." We do not agree and find that the sailing of the Eclipse from Ft. Lauderdale, Florida to Nantucket, Massachusetts was a prohibited use within the meaning of § 1313(j)(1). Per our decision in HQ 227739, the Eclipse, manned by the crew, was put to the exact use for which a yacht is built. The trip to Nantucket, sailing from Ft. Lauderdale, is a transportation, the purpose of a yacht, and therefore, a “use” as intended in 19 U.S.C. § 1313(j). In HQ 112035, an information letter, with regard to the availability of drawback on the exportation of a British registered sailing yacht offered for sale in the U.S., we stated that, “‘use’” of the yacht is limited to showing it to potential buyers, . . . .

Additionally, even if we were not to consider the 5-day voyage to Nantucket a prohibited use, EML has not substantiated its claim that the yacht was not used during the rest of the time it was in the U.S. The Protestant states that the Eclipse was in the U.S. from March 6, 2000, to September 23, 2000. The supplied captain’s log, described in EML’s August 7, 2002, letter as a “a running log and as is the norm only shows when the yacht moves” is incomplete at best. And according to the September 27, 2000, letter from the master of the S/V Eclipse, Jonathan D. Wishart, “the log has been provided in its entirety prior to departing the U.S.” This log records the movement from August 3, 2000, until arrival in Nantucket on August 8, 2000. The next movement is on August 17 and reflects that the Eclipse left Nantucket for Martha’s vineyard, then on August 18, the Eclipse left Martha’s vineyard and arrived in Jamestown on the same day. No further movement is recorded.

Consequently, since no movement is recorded prior to the sailing for Nantucket, including no entry for the yacht’s arrival in Ft. Lauderdale, according to the captain’s log the yacht remained moored at 206 Royal Palm Drive (as stated on the “Exemption Affidavit for Boat Delivered for Sale to a Registered Dealer in Florida,” executed on April 24, 2000) until heading for Nantucket on August 3. However, according to the captain’s September 27 letter, sometime prior to sailing for Nantucket, the Eclispe left its moorings 206 Royal Palm Drive and relocated to the Pier 66 Marina in Ft. Lauderdale. This movement is not recorded.

Further, the yacht’s participation in the Nantucket Bucket Race on August 11 to August 13 is not reflected in the log. Regarding this omission, EML states: “the explanation of this omission is that it is an error. It is customary and typical that each movement of a vessel be recorded in the captain’s running log. The omission of the Eclipse[’s] movement to participate in the regatta was an error of omission by the captain and crew of the Eclipse.” In addition, according to the log, the Eclipse arrived in Nantucket on August 8 and departed on August 17. However, EML was only able to supply evidence of payment of dockage fees for the Eclipse at the Nantucket Boat Basin from August 11 through August 14, 2000.

Moreover, according to the September 27, 2000, letter from the master of the S/V Eclipse, Jonathan D. Wishart, the Eclipse was moved for a four-day period from Jamestown to Portsmouth, Rhode Island during which it received a “bottom paint job.” This running of the vessel is not recorded in the captain’s log. In addition there is no entry in the log for the movement of the yacht leaving Jamestown destined for Bermuda. Finally, in its November 25, 2002, letter EML’s broker states that, “there is no log available at this time to document the movement between the two private residence [sic] the Eclipse was berthed [at] while in West Palm Beach, Florida.” The captain’s log does not show that the Eclipse was ever berthed in West Palm Beach. By way of explanation the Protestant states, “the only explanation for this error is that the location of the listing broker, . . . is located [sic] in West Palm Beach, Florida, rather than the physical location of the Eclipse” as stated in the letter. Further, we note that no affidavit from the broker’s employee who signed this letter regarding the circumstances surrounding the error was offered.

Without corroborating evidence, the supplied captain’s log, due to the numerous errors and omissions, is wholly inadequate to substantiate the claimant’s contention that the yacht was not used while in the U.S. The supplied evidence shows clearly that the yacht’s movements were not faithfully recorded in the captain’s log, therefore the log is of very limited use to demonstrate the Eclipse’s movements. Nor did EML offer sufficient other evidence to support its claim of non-use or to support the inconsistencies in the evidence provided.

HOLDING: The Protestant has not demonstrated that the yacht Eclipse was not used while in the United States and is therefore not entitled to drawback per 19 U.S.C. § 1313(j)(1) based upon the exportation of the above described sailing vessel.

Therefore the Protest should be DENIED IN FULL. 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 Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with this 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.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

Myles Harmon, Director
Commercial Rulings Division