Gary L. Lonsinger and Nancy L. Lonsinger - Page 3

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               In late 1985, Gary L. Lonsinger (petitioner) began                     
          discussions with Pedro-Holland about the possibility of bringing            
          a line of vessels manufactured by Pedro-Holland to the United               
          States for resale.  These vessels had no performance history in             
          the United States.  Petitioner and his wife, Nancy L. Lonsinger             
          (petitioners), negotiated with Pedro-Holland for about a year,              
          and in 1986, ultimately reached an agreement whereby petitioners            
          would represent Pedro-Holland in the United States and would                
          bring the first boat into the United States for eventual sale.              
          The boat, called the "PEDRO", was built in Holland and delivered            
          to petitioners in the United States in July, 1987.                          
               Petitioners understood that one of the requirements of U.S.            
          Customs is that, if a foreign-built boat is imported, it cannot             
          be sold for a commercial use within the 12 succeeding months, and           
          if the boat is imported as a pleasure craft, then a substantial             
          import duty must be paid.  Consequently, it was agreed that the             
          PEDRO would be delivered "stripped" and would be outfitted by               
          petitioners in the United States, which would take a substantial            
          amount of time to complete.  When delivered to petitioners in the           
          United States, the boat had no electronics on it, and lacked an             
          oven, a refrigerator, generators, a washer-dryer, furniture,                
          drapes, and carpeting.                                                      








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