HQ 0112859 - Protest No. 1801-92-100003; Vessel Repair Entry No. C18- 0013095-2; Government-owned Vessels; Maritime Administration; MARAD; Undocumented Vessels; S/S COMET - United States International Trade Commision Rulings

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HQ 112859

September 20, 1993

VES-13-18-CO:R:IT:C 112859 GEV

CATEGORY: CARRIER

Deputy Assistant Regional Commissioner
Commercial Operations c/o Regional Commissioner
New Orleans, Louisiana 70130-2341

RE: Protest No. 1801-92-100003; Vessel Repair Entry No. C18- 0013095-2; Government-owned Vessels; Maritime Administration; MARAD; Undocumented Vessels; S/S COMET

Dear Sir:

This is in response to your memorandum dated August 12, 1993, forwarding for our review and ruling the above-referenced protest on the assessment of vessel repair duties.

FACTS:

The record reflects that the subject vessel, the S/S COMET, arrived at the port of Jacksonville, Florida, on January 30, 1991. Vessel repair entry no. C18-0013095-2, was filed on the same day as arrival. The entry indicates that the vessel is owned by the United States of America, Department of Transportation, Maritime Administration (MARAD), and had repairs performed in Dubai, U.A.E. during the period of December 24, 1990 - January 7, 1991. The record also shows that the vessel is a vessel of the Ready Reserve Fleet (RRF) that was not documented by the United States Coast Guard when the aforementioned repairs were performed; the vessel was operated by a private operator at the time of entry.

ISSUE:

Whether undocumented MARAD RRF vessels are intended to engage in the foreign or coasting trade, thereby subjecting such vessels to the application of vessel repair duties under 19 U.S.C. 1466.

LAW AND ANALYSIS:

Title 19, United States Code, 1466, provides in pertinent part for payment of duty in the amount of fifty 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 the foreign or coastwise trade. The Customs Regulations apply this provision to government-owned or chartered vessels "if documented with a registry, coastwise trade, or Great Lakes trade endorsement, or if undocumented, intended to engage in foreign, coastwise, or Great Lakes trade." 19 C.F.R. 4.14(a)(2)(ii) (1992) (emphasis added).

To conclude that the repairs made to the undocumented S/S COMET are subject to duty, we must first determine whether the vessel was intended to engage in the foreign or coastwise trade. Foreign Trade is defined as the "[c]ommercial interchange of commodities between countries; export and import trade." Black's Law Dictionary 583 (5th Ed. 1979). Further, trade connotes buying and selling for profit. American Heritage Dictionary of the English Language 1284 (2d Ed. 1985). The Customs Service has held that government-owned, but privately operated vessels engaged exclusively in the carriage of government cargo are not engaged in the foreign or coasting trade within the meaning of 19 U.S.C. 1466. C.I.E. 202/48, dated June 4, 1948. Moreover, undocumented government vessels that are not intended to engage in the foreign or coasting trade are not required to file a vessel repair entry. Id.; C.I.E. 2335/66, dated November 30, 1966.

Whether an undocumented vessel is intended to engage in trade must be established through the submission of evidence on the use of the vessel. MARAD has submitted documents to demonstrate that its RRF ships are not permitted to engage in commercial trade. While such ships are activated, the ships are under operational control of the Military Sealift Command (MSC). The vessel masters must respond to "all directives and instructions received from COMSC (the Navy's Sealift Type Commander) and cognizant Navy OPCON authorities," for MSC point-to-point cargo operations. MARAD Operations Manual, 2.4.1.1. Further, no ship or ships of the RRF are permitted to carry or to store non-defense related cargo without Department of Defense concurrence. Memorandum of Understanding between the Department of Defense and the Department of Transportation [MOU], Art. 7. The MOU specifically states that activated RRF ships shall not compete with, substitute for, or displace privately-owned United States-flag vessels. Id.

Based on these authorities, we find that undocumented MARAD RRF vessels that have been activated under MSC control do not carry commercial cargo and are therefore not intended to engage in the foreign or coasting trade. Such vessels are therefore not subject to vessel repair duties under 19 U.S.C. 1466. The S/S COMET, being an active undocumented RRF ship at the time the foreign repairs now under consideration were performed, is not subject to duty under 19 U.S.C. 1466. The protest is therefore granted.

This determination applies only to undocumented vessels owned by MARAD. Documented vessels that are owned or operated by MARAD continue to be subject to vessel repair duties under 19 U.S.C. 1466.

HOLDING:

Undocumented MARAD RRF vessels that have been activated under the control of the MSC do not carry commercial cargo and are therefore not intended to engage in the foreign or coasting trade. Such vessels are therefore not subject to the provisions of 19 U.S.C. 1466. The foreign repairs in question, performed on the S/S COMET which was an undocumented RRF ship at the time the repairs were performed, are not subject to duty under 19 U.S.C. 1466. The protest is therefore granted.

Sincerely,

Arthur P. Schifflin

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