[Federal Register Volume 68, Number 54 (Thursday, March 20, 2003)]
[Rules and Regulations]
[Pages 13623-13626]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6759]


=======================================================================
-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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).

-----------------------------------------------------------------------
    (Name) (Address)
-----------------------------------------------------------------------
------------------------------ [SEAL]
    (Principal)
-----------------------------------------------------------------------
------------------------------ [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.

------------------------------------------------------------------------
                                                             OMB control
       19 CFR section                  Description               No.
------------------------------------------------------------------------
 
                                * * * * *
Sec.   4.94................  Deferral of duty on large         1515-0223
                              yachts imported for sale.
 
                                * * * * *
------------------------------------------------------------------------


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