HQ 0111394 - Petition for Review on Anchorage Vessel Repair Entry No. C31-0004885-0, July 17, 1988; Vessel: ARCTIC TRAWLER, U.S. spare parts and owner-supplied spare parts; Customs and Trade Act of 1990; P.L. 101-382; 19 U.S.C. 1466(h). - United States International Trade Commision Rulings

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HQ 111394

August 12, 1991

VES-13-18-CO:R:IT:C 111394 BEW

CATEGORY: CARRIER

Chief, Technical Branch
Pacific Region
One World Trade Center
Long Beach, California 90831

RE: Petition for Review on Anchorage Vessel Repair Entry No. C31-0004885-0, July 17, 1988; Vessel: ARCTIC TRAWLER, U.S. spare parts and owner-supplied spare parts; Customs and Trade Act of 1990; P.L. 101-382; 19 U.S.C. 1466(h).

Dear Sir:

This is in reference to a petition for relief from duties filed by B.A.McKenzie & Co., Inc., on behalf of Arctic King, Ltd., on a partial denial of an application for relief for duties assessed on repairs made to the ARCTIC TRAWLER. The vessel arrived the port of Dutch Harbor, Alaska, on August 25, 1988. Duty was assessed upon the cost of the foreign shipyard operations pursuant to title 19, United States Code, section 1466 (19 U.S.C. 1466), under vessel repair entry No. C31-0004885-0.

FACTS:

In 1987, the vessel underwent a conversion from a catcher/processor fishing vessel to a Surimi factory trawler. In 1987, the owner sent the vessel to a Korean shipyard in order to have certain refinements made to the vessel. Major vessel components were upgraded and/or relocated in such a manner as to affect the operating efficiency of the vessel. Following the installation of necessary supplies, stores, equipment at Seattle, the vessel departed for the Bering Sea to commence operations. The vessel successfully operated in Alaskan waters as a Surimi factory trawler, but it developed that further modifications were required in order for the Surimi factory to produce the minimum contemplated production of 30 tons per day capacity. Taito Seiko Co., Ltd., arranged for or performed the shipyard conversion. The vessel arrived in Japan on May 21, 1988. The conversion work was completed July 7, 1988.

The petitioner's request for review centers on the costs relating to the owner supplied U.S. spare parts listed as follows:

I. Invoice No. Amount

Bergen Diesel, Inc. 5492 $1,792.36
Bergen Diesel, Inc. 5506 $6,176.92
Bergen Diesel, Inc. 5533 $16,093.90
Bergen Diesel, Inc. 5540 $796.59
Bergen Diesel, Inc. 5548 $16,659.80
Bergen Diesel, Inc. 5549 $1,252.86
Bergen Diesel, Inc. 5581 $6,947.63
Bergen Diesel, Inc. 5584 $296.10
Bergen Diesel, Inc. 5603 $875.05
Bergen Diesel, Inc. 8016 $15,843.18
Bergen Diesel, Inc. 489082 $29,818.00

II. Rasmussen Equipment
Co. Inc. 19311 $12,192
Anthony's Industrial
& Marine Services 4425 $3,137.20
Slattery Equipment Co.
Inc. 5427 $10,939.85
Slattery Equipment Co.
Inc. 5598 $3,500.00
Ballard Hardware and
Supply, Inc. 274383 $2,900.96
Ballard Hardware and
Supply, Inc. 274384 $200.83
Beckwith R2316 $5,597.35
Beckwith K22988 $5,260.50
CB Equipment Company 02003 $10,126.00
Hasco Island Supply Corp. 015119 $1,805.90 Flohr Metal Fabricators,
Inc. 12719 $131,360.00
King Bearing, Inc. 8979-04187 $12,464.68
King Bearing, Inc. 8979-04188 $3,287.57
King Bearing, Inc. 8979-04189 $562.70
King Bearing, Inc. 8979-04190 $1,142.18
Rodda Paint Co. 450639 $5,804.85
Northwest Instrument 70444 $30,200.00

In a decision dated May 17, 1990 (HQ 110208 BEW), we ruled that the applicant had submitted invoices for the subject articles which indicate purchase in the United States, however, there was no evidence submitted that addressed the articles' place of manufacture. We held that since no direct evidence of U.S. manufacture had been submitted, the amounts listed for the U.S. materials were dutiable.

The petitioner has submitted additional evidence to show that the subject materials were manufactured in the United States.

ISSUE:

1. Whether sufficient evidence is presented to establish that subject owner-supplied spare parts were manufactured in the U.S. which are free under the vessel repair statute (19 U.S.C. 1466(h)).

LAW AND ANALYSIS:

Title 19, United States Code, section 1466(a), provides in pertinent part for payment of duty in the amount of 50 percent ad valorem on the cost of foreign repairs to vessels documented under the laws of the United States to engage in the foreign or coastwise trade, or vessels intended to be employed in such trade.

The climate with regard to parts shipped abroad from the United States for foreign installation was transformed on August 20, 1990, when the President signed Public Law 101-382 which added a new subsection (h) to section 1466. While this provision applies by its terms only to foreign-made imported parts, there is ample reason to extend its effect to U.S.-made materials as well. To fail to do so would act to discourage the use of U.S.-made materials in effecting foreign repairs since continued linkage of remission provisions of subsection (d)(2) with the assessment provisions of subsection (a) of section 1466 would obligate operators to pay duty on such materials unless they were installed by crew or resident labor. If an article is claimed to be of U.S. manufacture, there must be proof of its origin in the form of a bill of sale or domestic invoice. If an article is claimed to have been previously entered for consumption, duty paid by the vessel operator, there must be proof of this fact in the form of a reference to the consumption entry number for that previous importation, as well as to the U.S. port of importation. If imported articles are purchased from third parties in the United States, a domestic bill of sale to the vessel operator must be presented.

The petitioner has submitted documentation certifying that the subject parts were manufactured in the United States or the duty has been paid under the Harmonized Tariff Schedule of the United States. Accordingly, the petition is granted.

HOLDING:

The evidence presented is sufficient to substantiate that the subject parts were manufactured in the United States, thus warranting remission pursuant to 19 U.S.C. 1466(h). The petition is granted.

Sincerely,

B. James Fritz

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