HQ 0110644 - Vessel Repair Entry No. C53-0012147-8, June 12, 1989; Date of Arrival: June 5, 1989; Port of Arrival: Houston, Texas; Vessel: M/V PRIDE OF TEXAS, Voyage No. 38 - United States International Trade Commision Rulings

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HQ 110644

July 13, 1990

VES-13-18-CO:R:P:C 110644 BEW

CATEGORY: CARRIER

Deputy Assistant Regional Commissioner
Commercial Operations Division
ATTN: Vessel Repair Liquidation Unit
New Orleans, Louisiana 70130

RE: Vessel Repair Entry No. C53-0012147-8, June 12, 1989; Date of Arrival: June 5, 1989; Port of Arrival: Houston, Texas; Vessel: M/V PRIDE OF TEXAS, Voyage No. 38

Dear Sir:

This is in reference to an application for relief from duties filed by Seahawk Management, Inc., in relation to the above referenced vessel repair entry dated June 12, 1989. We have reviewed the entire record, and render the following advice.

FACTS:

The record shows that the shipyard work in question was performed on the subject vessel at sea in Gibraltar and Egypt, during the period May 4 through May 29, 1989.

The subject vessel arrived in the United States at the port of Houston, Texas, on June 5, 1989.

The entire vessel repair entry involves a potential duty of $10,385. You have requested our advice concerning two (2) items.

We will refer to the work using the item numbers and invoice descriptions shown on the attachments and invoices submitted with your memorandum.

The applicant claims that relief for the subject items should be granted because the items should be classified as nondutiable items covered under title 19, United States Code, section 1466(a) and sections 4.14(a) and 4.14(c) of the Customs Regulations.

The applicant claims that the repairs or equipment purchases described in the documents were necessitated by a casualty, i.e., damage caused by manufacturer's negligence wherein the port main engine left bank cam idler gear bracket dropped, which in turn, caused gear train damage and rendered the engine inoperable. It claims that the vessel was compelled, because of damage, to make repairs and to purchase such equipment to secure the safety and seaworthiness of the vessel to enable it to reach its port of destination.

ISSUE:

Whether the foreign work performed on the subject vessel is dutiable under 19 U.S.C. 1466.

LAW AND ANALYSIS:

Title 19, United States Code, section 1466, provides in pertinent part for payment of an ad valorem duty of 50 percent of the cost of foreign repairs to a vessel documented under the laws of the United States to engage in the foreign or coastwise trade.

Section 1466(d)(2), provides that the Secretary of the Treasury is authorized to remit or refund such vessel repair duties if the owner or master provides good and sufficient evidence that the repair parts or materials were manufactured or produced in the United States and the labor necessary to make these repairs was performed by residents of the United States, or by members of the regular crew of the vessel (emphasis added).

Section 1466 (d)(1) provides that the Secretary of the Treasury is authorized to remit or refund such duties if the owner or master of the vessel submits good and sufficient evidence that the vessel was compelled by stress of weather or other casualty to put into such foreign port to make repairs to secure the safety and seaworthiness of the vessel to enable her to reach her port of destination.

The term "casualty", as it is used in the vessel repair statute (19 U.S.C. 1466), has been interpreted by the Customs Court as something which, like stress of weather, comes from unexpected force or violence, such as from a fire, explosion, or collision (see Dollar Steamship Lines, v. United States, 5 Cust. Ct. 28-29, C.D. 362 (1940)).

A clear requirement of the statute is that the vessel be compelled by such a casualty to seek foreign shipyard service to secure the safety and seaworthiness of the vessel and to enable her to safely reach her port of destination.

The file contains copies of the contemporaneously prepared Master's report and the vessel's log concerning the damage and repair. These documents amount to reports on the presence of damage, but provide insufficient evidence as to how the damage occurred. Absent clear proof of an identifiable event resulting in damage, such damage is assumed to have resulted from ordinary wear and tear. The documentation submitted sustains a finding of wear and tear, but is insufficient to support a finding of a casualty as provided in section 1466(d)(1). Accordingly, the cost incurred for the subject repairs is dutiable.

We now come to the dutiability under section 1466 of equipments, parts, repair material, etc., which have been alleged to have been manufactured and purchased in the United States for installation abroad on the subject U.S.-documented vessels. Customs, by memorandum dated April 19, 1989, published in the United States Customs Bulletin and Decisions, Vol. 23, No. 19, dated May 10, 1989, held that the use of foreign labor to install U.S. parts subjects both the parts and the labor to duty. The implementation of Customs policy as set forth in the May 10, 1989, Customs Bulletin should have been preceded by the publication of a notice in the Federal Register soliciting comments from interested parties. Accordingly, until such time as said notice is published, Customs will uphold its position as delineated in T.D. 75-257, which held that where equipment, parts, repair materials, etc., which have been manufactured and purchased in the United States are installed abroad on U.S.-documented vessels by other than U.S. residents or regular crew, the labor alone is dutiable.

In our adherence to the policy set forth in T.D. 75-257, however, it has come to our attention that affidavits have been submitted which misrepresent the place of manufacture of the article in question. Inasmuch as we have come to learn of this misrepresentation, it is our policy to require evidence beyond an affidavit from an interested party to establish U.S. manufacture and U.S. purchase. Therefore, we require direct evidence of U.S. manufacture as well as U.S. purchase for remission to be granted.

In the application under consideration, the petitioner has submitted invoices for the contested articles which indicate purchase in the United States, however, there is no evidence submitted that addresses the articles' place of manufacture. Since no direct evidence of U.S. manufacture has been submitted, we find the amounts listed for U.S. materials to be dutiable.

Sincerely,

B. James Fritz

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