HQ 0111880 - Vessel Repair; Entry No. C18-0016818-4; S.S. ROVER V-72; U.S. Parts - United States International Trade Commision Rulings

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HQ 111880

February 7, 1992

VES-13-18-CO:R:IT:C 111880 GEV

CATEGORY: CARRIER

Deputy Assistant Regional Commissioner
Commercial Operations Division
423 Canal Street
New Orleans, Louisiana 70130-2341

RE: Vessel Repair; Entry No. C18-0016818-4; S.S. ROVER V-72; U.S. Parts

Dear Sir:

This is in response to your memorandum dated August 23, 1991, forwarding an application for relief from duties assessed under 19 U.S.C. 1466. You request our advice regarding the evidence required for remission under 19 U.S.C. 1466(h).

FACTS:

The S.S. ROVER is a U.S.-flag vessel owned by Central Gulf Lines, Inc. of New Orleans, Louisiana. The subject vessel underwent foreign shipyard work during the period of November, 1990 through April, 1991. Subsequent to the completion of the work the subject vessel arrived in the United States in Jacksonville, Florida, on May 6, 1991. A vessel repair entry was filed on May 9, 1991.

Pursuant to an extension of time, an application for relief was timely filed on August 6, 1991. The applicant has requested relief for various parts claimed to be purchased in the United States and installed foreign on the subject vessel. In support of this claim the applicant has submitted documentation including various U.S. vendors' invoices and/or air freight bills.

ISSUE:

Whether vessel parts purchased in the United States and shipped foreign for installation aboard a U.S.-flag vessel are exempted from duty pursuant to 19 U.S.C. 1466(h).

LAW AND ANALYSIS:

Title 19, United States Code, section 1466, 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 foreign or coastwise trade, or vessels intended to engage in such trade.

The Customs and Trade Act of 1990 (Pub. L. 101-382) which amends 19 U.S.C. 1466, exempts from duty under the statute, the cost of spare repair parts or materials which have been previously imported into the United States as commodities with applicable duty paid under the Harmonized Tariff Schedule of the United States (HTSUS). The amendment specifies that the owner or master must provide a certification that the materials were imported with the intent that they be installed on a cargo vessel documented for and engaged in the foreign or coasting trade.

The certification required by 19 U.S.C. 1466(h)(2) as to the vessel's documentation (foreign or coasting trades) and service, will be made by the master on the vessel repair entry (CF 226) at the time of arrival. The fact of payment of duty under the HTSUS for a particular part must be evidenced as follows. In cases in which the vessel operator or a related party has acted as the importer of foreign materials, or where materials were imported at the request of the vessel operator for later use by the operator, the vessel repair entry will identify the port of entry and the consumption entry number for each part installed on the ship which has not previously been entered on a CF 226. In cases in which the vessel operator has purchased imported materials from a third party in the United States, a bill of sale for the materials shall constitute sufficient proof of prior importation and HTSUS duty payment. This evidence of proof of importation and payment of duty must be presented to escape duty and any other applicable consequences.

In addition, we require certification on the CF 226 or an accompanying document by a person with direct knowledge of the fact that an article was imported for the purpose of either then- existing or intended future installation on a company's vessels. Ordinarily, the vessel's master would not have direct knowledge of that fact, and an agent may also be without such knowledge.

Customs has in the past linked this duty remission provision to the duty assessment provision in subsection (a) of the statute. In the face of argument to the contrary we have held that a two-part test must be met in order for remission of duty to be granted: first, that the article must be of U.S. manufacture; and, second, it must be installed by a U.S.-resident or regular vessel crew labor. The reason for this position is that (d)(2) refers to "such equipments or parts...", etc., without any other logical placement for the word "such" occurring in that subsection. We inferred that "such" articles must refer to those installed under subsection (a), absent any other reasonable predication. The new amendment puts this issue to rest; it is clear that as concerns foreign-made parts imported for consumption and then installed on U.S. vessels abroad, the labor required for their installation is separately dutiable. A part may now be considered exempt from vessel repair duty albeit the foreign cost labor is dutiable.

Uniform treatment will be accorded to parts sent from the United States for use in vessel repairs abroad, regardless of whether they are proven to be produced in the U.S., or have been proven to have been imported and entered for consumption with duty paid. In both cases, the cost of the materials is duty exempt and only the cost of foreign labor necessary to install them is subject to duty. Crew member or U.S.-resident labor continues to be free of duty when warranted.

The effective date of this amendment makes this section applicable to any entry made before the date of enactment of this Act that is not "finally liquidated" (i.e., for which a timely protest was filed or court action initiated) on the date of enactment of this Act, and any entry made--

(A) on or after the date of enactment of this Act, and
(B) on or before December 31, 1992.

Since the subject entry has not been "finally liquidated" as noted above, the new section 1466(h) is applicable to this entry as it relates to spare parts.

In regard to the documentation submitted for this particular application for relief, we note that the requisite certification discussed above is not included for any of the parts under consideration. In addition, although U.S. invoices have been submitted, there is no proof that any of the parts in question are of U.S. manufacture. Furthermore, we note that for some of the parts which the applicant contends are exempt from duty, there is no U.S. invoice but only an air freight bill. Accordingly, the evidence submitted is insufficient to grant relief under 19 U.S.C. 1466(h) for any of the parts under consideration.

HOLDING:

Vessel parts purchased in the United States and shipped foreign for installation aboard a U.S.-flag vessel are exempted from duty pursuant to 19 U.S.C. 1466(h), provided the requisite evidentiary documentation is submitted.

Accordingly, with respect to the application under consideration, relief should be granted for those items covered by a U.S. invoice if the required certification is submitted, or proof is submitted that the parts in question were manufactured in the United States. (see ruling 111205) However, in regard to those items for which no U.S. invoice was provided but merely documentation showing that the parts in question were shipped from the U.S. to the foreign shipyard, relief should be denied.

Sincerely,

B. James Fritz

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