Question
February 25, 2005
VIA EMAIL AND U.S. MAIL
Mr. Michael Verne -
Premerger Notification Office
Federal Trade Commission
600 Pennsylvania Avenue N.W. Room H-303
Washington, D.C. 20580
Re: Moveable Assets and Sales in or into the United States
Dear Mike:
Thisis to confirm the conversations that we had on February 15 and 16, and that(redacted) had with you on February 23, 2005, regarding the determination of moveableassets as located in the United States and of revenues as being sales in orinto the United States.
CompanyA, a non-U.S. entity, owns several ships, which generate revenue by carryingcargo for A's customers. Company A also charters the services of ships owned bythird parties, and resells those services to A's own customers. A's ships areregistered outside the U.S. and have as home ports locations outside the UnitedStates, in addition to being owned by a non-U.S. entity. The ships do stop at U.S. ports.
Youinformed me that, as to A's ships, because they are foreign owned, foreignflagged, and based in foreign home ports, they are not assets located in the U.S. even though they stop at U.S.ports. With respect to the revenues generated by the shipping services providedby A's ships, those revenues are considered to be sales in or into the U.S. ifthey are paid by a U.S. located entity or if the cargo being shipped in theships originated in the United States.
Withrespect to the revenues from A's charter services that it sells to itscustomers on ships owned by third parties, the crucial factor is the locationof A's customer for those charter services. A's location as the charterer, andthe origin and destination of the cargo, are not relevant in this context.Therefore, if the payer is not located in the U.S., then the revenues paid bythat payer are not sales in or into the United States for A. In particular, if thepayer is a non-U.S. entity that may have a location in the U.S. that may havehandled the logistics of payment for A's charter services, and A cannot readilydetermine whether payments by that payer were made directly from outside tileU.S. or from the U.S. location of that payer, those revenues would not beconsidered sales in or into the United States.
Pleaseconfirm the accuracy of this summary of our conversations, or let me know ifthere should be revisions in the analysis. Thank you very much.