[Federal Register: March 20, 2003 (Volume 68, Number 54)]
[Rules and Regulations]
[Page 13623-13626]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20mr03-6]
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DEPARTMENT OF THE TREASURY
Customs Service
19 CFR Parts 4, 113 and 178
[T.D. 03-14]
RIN 1515-AC58
Deferral of Duty on Large Yachts Imported for Sale
AGENCY: U.S. Customs Service, Department of the Treasury.
ACTION: Final rule.
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SUMMARY: This document adopts as a final rule, with some changes, a
proposed amendment to the Customs Regulations to set forth procedures
for the deferral of entry filing and duty collection on certain yachts
imported for sale at boat shows in the United States. The regulatory
amendments reflect a change in the law effected by section 2406 of the
Miscellaneous Trade and Technical Corrections Act of 1999.
EFFECTIVE DATE: April 21, 2003.
FOR FURTHER INFORMATION CONTACT:
Legal matters: Glen Vereb, Office of Regulations and Rulings (202-
572-8730).
Operational matters: Peter Flores, Office of Field Operations (202-
927-0333).
SUPPLEMENTARY INFORMATION:
Background
Section 2406(a) of the Miscellaneous Trade and Technical
Corrections Act of 1999 (the Act, Public Law 106-36, 113 Stat. 127)
amended the Tariff Act of 1930 by the addition of a new section 484b
(19 U.S.C. 1484b). Section 484b provides that an otherwise dutiable
``large yacht'' (defined in the section as ``a vessel that exceeds 79
feet in length, is used primarily for recreation or pleasure, and has
been previously sold by a manufacturer or dealer to a retail
consumer'') may be imported without the payment of duty if the yacht is
imported with the intention to offer for sale at a boat show in the
United States. The statute provides generally for the deferral of
payment of duty until the yacht is sold but specifies that the duty-
deferral period may not exceed 6 months.
In order to qualify for deferral of duty payment at the time of
importation of a large yacht, the statute provides that the importer of
record must: (1) Certify to Customs that the yacht is imported pursuant
to section 484b for sale at a boat show in the United States; and (2)
post a bond, having a duration of 6 months after the date of
importation, in an amount equal to twice the amount of duty on the
yacht that would otherwise be imposed under subheading 8903.91.00 or
8903.92.00 of the Harmonized Tariff Schedule of the United States
(HTSUS). The statute further provides that if the yacht is sold within
the 6-month period after importation, or if the yacht is neither sold
nor exported within the 6-month period after importation, entry must be
completed and duty must be deposited with Customs (with the duty
calculated at the applicable HTSUS rate based on the value of the yacht
at the time of importation) and the required bond will be returned to
the importer. The statute further provides that no extensions of the 6-
month bond period will be allowed, that any large yacht exported in
compliance with the 6-month bond period may not be reentered for
purposes of sale at a boat show in the United States (in order to
receive duty-deferral benefits) for a period of 3 months after that
exportation, and that the Secretary of the Treasury is authorized to
make rules and regulations as may be necessary to carry out the
provisions of the statute. Finally, under section 2406(b) of the Act,
the amendment made by section 2406(a) of the Act applies with respect
to any large yacht imported into the United States after July 10, 1999.
In order to reflect the terms of new section 484b, Customs on June
15, 2000, published a notice of proposed rulemaking in the Federal
Register (65 FR 37501) to amend the Customs Regulations by the addition
of a new Sec. 4.94a (19 CFR 4.94a). In addition, Customs proposed in
that document to amend Part 113 of the Customs Regulations (19 CFR Part
113), which sets forth provisions regarding Customs bonds, by the
addition of a new Sec. 113.75 and a new Appendix provision setting
forth the text of the bond required to be posted by the importer of
record under new section 484b.
The June 15, 2000, notice of proposed rulemaking invited the
submission of public comments on the proposed amendments, and the
public comment period closed on August 14, 2000. Two commenters
responded to that solicitation of comments. A discussion of their
comments follows.
Discussion of Comments
The two commenters made the same three points which centered on
[[Page 13624]]
paragraphs (a)(4) and (a)(5) of proposed Sec. 4.94a which set forth
two of the conditions that give rise to the bond obligation. Paragraph
(a)(4) provides that all subsequent transactions with Customs involving
the vessel in question, including any transaction referred to in
paragraphs (b) through (d) of Sec. 4.94a, must be carried out in the
same port of entry in which the certification was filed and the bond
was posted under Sec. 4.94a (paragraphs (b) through (d) concern,
respectively, exportation of the yacht within the 6-month bond period,
sale of the yacht within the 6-month bond period, and expiration of the
bond period). Paragraph (a)(5) provides that the vessel in question
will not be eligible for issuance of a cruising license under Sec.
4.94.
Comment: With regard to paragraph (a)(4), the commenters made the
point that in matters involving the sale of large yachts of the type
under consideration, there might often be protracted negotiations which
could continue for weeks or even months after the conclusion of the
actual boat show at which an offer of sale was made. They stated that
the final regulations should make provision for that type of
eventuality by specifically providing that negotiations are permitted
to continue with respect to any person who viewed a yacht at a boat
show, up to the expiration of the 6-month bond period.
Customs Response: Customs does not read either the statute or the
language of the proposed regulations as precluding the continuation or
conclusion of negotiations following a boat show so long as they do not
continue beyond the expiration date of the bond. The statute merely
provides that at the time of importation the importer of record must
certify to Customs that the vessel is imported for sale at a yacht show
and must post a bond of 6 months duration. Customs interprets the law
to provide that so long as the importation is in pursuance of showing
and offering a qualifying vessel for sale at a boat show, a 6-month
period is provided during which a sale must be completed. Customs in
this final rule document has added language to Sec. 4.94a(c) and (d)
to expressly refer to completion of the sale. A sale is completed when
title passes to the new owner. The alternatives to this are that either
the vessel must be exported or, once the bond expires, the entry
process must be completed.
On a related matter not raised in the comments, Customs notes that
whereas the prescribed bond period is 6 months and may not be extended,
the obligations imposed on the importer under the statute and the
regulatory text include actions (that is, advising Customs within 30
days if the yacht is exported or completing the entry within 15 days if
the yacht is sold or is neither sold nor exported within that 6-month
period) that may be completed after expiration of the bond period. In
order to ensure that there is an appropriate enforcement mechanism
under the bond covering all obligations under the statute, including
those that may lawfully be met after the bond period has expired, the
terms of the bond set forth in Appendix C to Part 113 have been
modified to include a reference to a claim for liquidated damages for a
failure to advise Customs of an exportation or to complete the entry
unless either of those actions is taken within the prescribed time
limits.
Comment: Also with regard to paragraph (a)(4), the commenters
stated that limited advertising should be allowed when a yacht is
imported under the subject program, and they suggested that notice may
be required that the vessel is ``not available for boarding'' during
the 6-month period of bond coverage except at a boat show.
Customs Response: The commenters appear to be arguing, at least in
part, against the first point they raised with respect to the
continuation of negotiations. Among the mentioned activities which
might ensue during after-show negotiations are sea trials during which
boarding surely would be required.
Again, Customs does not find either in the new law or in the
proposed regulations any limiting language which would preclude
advertising a yacht imported for the stated limited purposes.
Protection of the revenue is assured by virtue of the statutory bond
requirement. If Customs determines that the certification of the
importer of record is not honored in that the vessel was not in fact
imported for sale at a boat show (such as, upon investigation, there
being no evidence that the boat was shown and made available to
potential buyers at a boat show), in addition to possible penalty
action, a demand could be made against the bond. Customs finds no need
for additional regulatory language in this regard.
Comment: Finally, the commenters referred to the language of
paragraph (a)(5) and pointed out that boat shows take place in more
than one location and within the jurisdiction of different Customs
ports in South Florida. They noted that a typical boat show does not
last longer than two weeks and that the law does not restrict the
number of shows at which a vessel may be offered for sale during the 6-
month bond period. They further noted that the proposed regulation,
while making clear that the vessels in question may not obtain cruising
licenses, is silent with respect to whether those vessels may be
granted permits to proceed between ports in the United States. The
commenters urged Customs to add language to the regulations stating
that the vessels under consideration may obtain a ``permit to
proceed''.
Customs Response: The language relating to cruising licenses was
included in the proposed regulation because the terms of a cruising
license specifically prohibit a licensed vessel from being brought into
the United States for sale or charter to a resident of the United
States, or from being so offered during the pendency of the license. A
cruising license is a mere accommodation available to certain vessels
which exempts them from the necessity to enter and clear at U.S. ports.
Possession of a license is not necessary in order for a pleasure vessel
to travel between ports of the United States. It was not the intention
of Customs to suggest that a restriction would be imposed upon vessel
movement. It would merely be necessary that vessels covered by Sec.
4.94a would have to comply with the normal requirements regarding
vessel entry and clearance when traversing U.S. ports. In order to
clarify this issue, Customs in this final rule document has added the
words and must comply with the laws respecting vessel entry and
clearance when moving between ports of entry during the 6-month bond
period prescribed under this section at the end of paragraph (a)(5) of
Sec. 4.94a.
Conclusion
Accordingly, based on the comments received and the analysis of
those comments as set forth above, Customs believes that the proposed
regulatory amendments should be adopted as a final rule with the
changes discussed above, together with one editorial change, as set
forth below. This document also includes an appropriate update of the
list of information collection approvals contained in Sec. 178.2 of
the Customs Regulations (19 CFR 178.2).
Regulatory Flexibility Act and Executive Order 12866
Pursuant to the provisions of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.), it is certified that the amendments will not have
a significant economic impact on a substantial number of small
entities. The amendments directly reflect a statutory
[[Page 13625]]
provision that accords procedural and financial benefits to members of
the general public who import large yachts for purposes of sale.
Accordingly, the amendments are not subject to the regulatory analysis
or other requirements of 5 U.S.C. 603 and 604. Furthermore, this
document does not meet the criteria for a ``significant regulatory
action'' as specified in E.O. 12866.
Paperwork Reduction Act
The collection of information contained in this final rule has been
reviewed and approved by the Office of Management and Budget (OMB) in
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507)
under control number 1515-0223. An agency may not conduct or sponsor,
and a person is not required to respond to, a collection of information
unless the collection of information displays a valid control number
assigned by OMB.
The collection of information in this document is in Sec. 4.94a.
This information is required and will be used to effect the deferral of
duty collection on certain pleasure vessels, in order to ensure
enforcement of the Customs and related laws and the protection of the
revenue. The likely respondents are owners of large pleasure vessels.
The estimated average annual burden associated with this collection
of information is 1 hour per respondent or recordkeeper. Comments
concerning the accuracy of this burden estimate and suggestions for
reducing this burden should be directed to the U.S. Customs Service,
Information Services Group, Office of Finance, 1300 Pennsylvania
Avenue, NW., Washington, DC 20229, and to OMB, Attention: Desk Officer
for the Department of the Treasury, Office of Information and
Regulatory Affairs, Washington, DC 20503.
List of Subjects
19 CFR Part 4
Customs duties and inspection, Entry, Imports, Reporting and
recordkeeping requirements, Vessels, Yachts.
19 CFR Part 113
Bonds, Customs duties and inspection, Imports, Reporting and
recordkeeping requirements, Surety bonds, Vessels.
19 CFR Part 178
Administrative practice and procedure, Reporting and recordkeeping
requirements.
Amendments to the Regulations
Accordingly, for the reasons stated in the preamble, parts 4, 113
and 178, Customs Regulations (19 CFR Parts 4, 113 and 178), are amended
as set forth below.
PART 4--VESSELS IN FOREIGN AND DOMESTIC TRADES
1. The general authority citation for Part 4 continues to read, and
a specific authority citation for Sec. 4.94a is added to read, as
follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1431, 1433, 1434, 1624;
46 U.S.C. App. 3, 91.
* * * * *
Section 4.94a also issued under 19 U.S.C. 1484b;
* * * * *
2. A new Sec. 4.94a is added to read as follows:
Sec. 4.94a Large yachts imported for sale.
(a) General. An otherwise dutiable vessel used primarily for
recreation or pleasure and exceeding 79 feet in length that has been
previously sold by a manufacturer or dealer to a retail consumer and
that is imported with the intention to offer for sale at a boat show in
the United States may qualify at the time of importation for a deferral
of entry completion and deposit of duty. The following requirements and
conditions will apply in connection with a deferral of entry completion
and duty deposit under this section:
(1) The importer of record must certify to Customs in writing that
the vessel is being imported pursuant to 19 U.S.C. 1484b for sale at a
boat show in the United States;
(2) The certification referred to in paragraph (a)(1) of this
section must be accompanied by the posting of a single entry bond
containing the terms and conditions set forth in appendix C of part 113
of this chapter. The bond will have a duration of 6 months after the
date of importation of the vessel, and no extensions of the bond period
will be allowed;
(3) The filing of the certification and the posting of the bond in
accordance with this section will permit Customs to determine whether
the vessel may be released;
(4) All subsequent transactions with Customs involving the vessel
in question, including any transaction referred to in paragraphs (b)
through (d) of this section, must be carried out in the same port of
entry in which the certification was filed and the bond was posted
under this section; and
(5) The vessel in question will not be eligible for issuance of a
cruising license under Sec. 4.94 and must comply with the laws
respecting vessel entry and clearance when moving between ports of
entry during the 6-month bond period prescribed under this section.
(b) Exportation within 6-month period. If a vessel for which entry
completion and duty payment are deferred under paragraph (a) of this
section is not sold but is exported within the 6-month bond period
specified in paragraph (a)(2) of this section, the importer of record
must inform Customs in writing of that fact within 30 calendar days
after the date of exportation. The bond posted with Customs will be
returned to the importer of record and no entry completion and duty
payment will be required. The exported vessel will be precluded from
reentry under the terms of paragraph (a) of this section for a period
of 3 months after the date of exportation.
(c) Sale within 6-month period. If the sale of a vessel for which
entry completion and duty payment are deferred under paragraph (a) of
this section is completed within the 6-month bond period specified in
paragraph (a)(2) of this section, the importer of record within 15
calendar days after completion of the sale must complete the entry by
filing an Entry Summary (Customs Form 7501) and must deposit the
appropriate duty (calculated at the applicable rates provided for under
subheading 8903.91.00 or 8903.92.00 of the Harmonized Tariff Schedule
of the United States and based upon the value of the vessel at the time
of importation). Upon entry completion and deposit of duty under this
paragraph, the bond posted with Customs will be returned to the
importer of record.
(d) Expiration of bond period. If the 6-month bond period specified
in paragraph (a)(2) of this section expires without either the
completed sale or the exportation of a vessel for which entry
completion and duty payment are deferred under paragraph (a) of this
section, the importer of record within 15 calendar days after
expiration of that 6-month period must complete the entry by filing an
Entry Summary (Customs Form 7501) and must deposit the appropriate duty
(calculated at the applicable rates provided for under subheading
8903.91.00 or 8903.92.00 of the Harmonized Tariff Schedule of the
United States and based upon the value of the vessel at the time of
importation). Upon entry completion and deposit of duty under this
paragraph, the bond posted with Customs will be returned to the
importer of record, and a new bond on Customs Form 301, containing the
bond conditions set forth in Sec. 113.62 of this chapter, may be
required by the appropriate port director.
[[Page 13626]]
PART 113--CUSTOMS BONDS
1. The general authority citation for part 113 continues to read,
and a specific authority citation for Sec. 113.75 and Appendix C is
added to read, as follows:
Authority: 19 U.S.C. 66, 1623, 1624.
* * * * *
Section 113.75 and Appendix C also issued under 19 U.S.C. 1484b.
2. Part 113 is amended by adding a new Sec. 113.75 to read as
follows:
Sec. 113.75 Bond conditions for deferral of duty on large yachts
imported for sale at United States boat shows.
A bond for the deferral of entry completion and duty deposit
pursuant to 19 U.S.C. 1484b for a dutiable large yacht imported for
sale at a United States boat show must conform to the terms of appendix
C to this part. The bond must be filed in accordance with the
provisions set forth in Sec. 4.94a of this chapter.
3. Part 113 is amended by adding at the end a new appendix C to
read as follows:
Appendix C to Part 113--Bond for Deferral of Duty on Large Yachts
Imported for Sale at United States Boat Shows
Bond for Deferral of Duty on Large Yachts Imported for Sale at United
States Boat Shows
--------, as principal, and --------, as surety, are held and
firmly bound to the UNITED STATES OF AMERICA in the sum of --------
dollars ($--------), for the payment of which we bind ourselves, our
heirs, executors, administrators, successors, and assigns, jointly
and severally, firmly by these conditions.
Pursuant to the provisions of 19 U.S.C. 1484b, the principal has
imported at the port of -------- a dutiable large yacht (exceeding
79 feet in length, used primarily for recreation or pleasure, and
previously sold by a manufacturer or dealer to a consumer)
identified as -------- for sale at a boat show in the United States
with deferral of entry completion and duty deposit and has executed
this obligation as a condition precedent to that deferral.
A failure to inform Customs in writing of an exportation, or to
complete the required entry, within the 6-month bond period will
give rise to a claim for liquidated damages unless the principal
informs Customs of the exportation or completes the entry within the
time limits prescribed in 19 CFR 4.94a. If the principal fails to
comply with any condition of this obligation, which includes
compliance with any requirement or condition set forth in 19 U.S.C.
1484b or 19 CFR 4.94a, the principal and surety jointly and
severally agree to pay to Customs an amount of liquidated damages
equal to twice the amount of duty on the large yacht that would
otherwise be imposed under subheading 8903.91.00 or 8903.92.00 of
the Harmonized Tariff Schedule of the United States. For purposes of
this paragraph, the term duty includes any duties, taxes, fees and
charges imposed by law.
The principal will exonerate and hold harmless the United States
and its officers from or on account of any risk, loss, or expense of
any kind or description connected with or arising from the failure
to store and deliver the large yacht as required, as well as from
any loss or damage resulting from fraud or negligence on the part of
any officer, agent, or other person employed by the principal.
WITNESS our hands and seals this -------- day of --------
(month), -------- (Year).
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(Name) (Address)
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------------------------------ [SEAL]
(Principal)
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------------------------------ [SEAL]
(Name) (Address)
------------------------------ [SEAL]
(Surety)
Certificate as to Corporate Principal
I, ----------, certify that I am the* ---------- of the
corporation named as principal in the attached bond; that ----------
, who signed the bond on behalf of the principal, was then --------
-- of that corporation; that I know his signature, and his signature
to the bond is genuine; and that the bond was duly signed, sealed,
and attested for and in behalf of the corporation by authority to
its governing body.
------------------------------
(CORPORATE SEAL)
(To be used when no power of attorney has been filed with the port
director of customs.)
*May be executed by the secretary, assistant secretary, or other
officer of the corporation.
PART 178--APPROVAL OF INFORMATION COLLECTION REQUIREMENTS
1. The authority citation for Part 178 continues to read as
follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 1624; 44 U.S.C. 3501 et seq.
2. In Sec. 178.2, the table is amended by adding a new listing for
Sec. 4.94a in numerical order to read as follows:
Sec. 178.2 Listing of OMB control numbers.
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OMB control
19 CFR section Description No.
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Sec. 4.94................ Deferral of duty on large 1515-0223
yachts imported for sale.
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Robert C. Bonner,
Commissioner of Customs.
Approved: February 25, 2003.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 03-6759 Filed 3-19-03; 8:45 am]
BILLING CODE 4820-02-P