HQ 0110565 - Protest No. 30019-000913; Vessel Repair Entry No. 110- 0103681-0; Date of Arrival: May 30, 1988, Tacoma, Washington; MV SEALAND MARINER - United States International Trade Commision Rulings

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HQ 110565
July 25, 1990

VES-13-18-CO:R:P:C 110565 LLB

CATEGORY: CARRIER

Chief, Technical Branch
Pacific Region
300 North Los Angeles Street
Post Office Box 2071
Los Angeles, California 90053-3379

RE: Protest No. 30019-000913; Vessel Repair Entry No. 110- 0103681-0; Date of Arrival: May 30, 1988, Tacoma, Washington; MV SEALAND MARINER

Dear Sir:

Reference is made to your memorandum of September 11, 1989, which forwards the above-captioned protest from the assessment of vessel repair duties for our determination.

FACTS:

In May of 1988, the vessel incurred shipyard charges while in Japan. Upon consideration of an Application for Relief from the assessment of duties (decided in Headquarters on February 8, 1989) it was held that certain of the costs associated with a survey were not dutiable, but other costs associated with the survey, including those for the purchase of parts and for certain labor charges, were dutiable.

The protest presently under consideration concerns the decision to consider the cost of parts used during the survey to be dutiable. It is stated that the parts used were "ship's spares" which had previously been imported and entered as merchandise into the United States with duty paid under applicable tariff item numbers. The parts were then sent to the vessel (and, indeed, to other Sea-Land vessels as well), to be maintained as spares until such time as needed. Sea-Land believes it unfair to be charged vessel repair duties on the cost of materials for which duties have once been paid under merchandise consumption entries.

ISSUE:

Whether parts used in the course of conducting a non- dutiable survey are themselves dutiable, and whether their dutiability under the vessel repair statute is affected by the fact that they may have previously been the subject of a duty- paid merchandise entry.

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.

Between October 8, 1975, and May 10, 1989, the Customs position on the foreign installation of United States manufactured materials was guided by Treasury Decision 75-257 (T.D. 75-257). This decision holds as follows with regard to such materials:

1. The cost of U.S.-made materials purchased abroad by a vessel owner is dutiable under section 1466.

2. The cost of U.S.-made materials purchased in this country by a foreign shipyard (read, other than by owner) is dutiable under section 1466, even if purchased for a specific vessel.

3. The cost of U.S.-made materials purchased in this country by the vessel owner for foreign installation is not subject to duty under section 1466.

4. The cost of foreign labor used to install any material mentioned in the previously-listed items is dutiable. Labor is not dutiable when performed by the crew for the installation of any materials, foreign or U.S.-made, purchased anywhere (1466(a)), or by U.S. residents for the installation of U.S.-made materials only (1466(d)).

In a ruling published in the Customs Bulletin of May 10, 1989, Customs departed from T.D. 75-257 by applying the duty provisions of section 1466 to the cost of U.S.-made and purchased materials which are not installed by regular crew or U.S. resident labor. We are currently evaluating whether that matter should have been published for comment before full adoption. Nonetheless, reconsideration of that issue would not necessarily affect the duty status of foreign-made materials which were entered for consumption into the United States prior to exportation for eventual installation. The fact of entry for consumption does not convert the materials to products of the United States.

HOLDING:

Following thorough consideration of the evidence before us as well as the applicable precedents, it is our determination that the protest should be denied in full.

Sincerely,

Stuart P. Seidel

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