HQ 0112942 - Vessel Repair; 19 U.S.C. 1466; 19 U.S.C. 1466(d)(2); 19 U.S.C. 1466(h)(2); Entry No. C15-0019391-2; Application; S.S. ROVER, V-83 - United States International Trade Commision Rulings

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HQ 112942

November 29, 1993

VES-13-18-CO:R:IT:C 112942 GOB

CATEGORY: CARRIER

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

RE: Vessel Repair; 19 U.S.C. 1466; 19 U.S.C. 1466(d)(2); 19 U.S.C. 1466(h)(2); Entry No. C15-0019391-2; Application; S.S. ROVER, V-83

Dear Sir:

This is in response to your memorandum dated November 5, 1993, which forwarded the application for relief submitted by Central Gulf Lines, Inc. ("applicant") with respect to the above-referenced vessel repair entry.

FACTS:

The S.S. Rover (the "vessel") is a U.S.-flag vessel owned and operated by the applicant. Certain foreign shipyard work was performed on the vessel in Nordenham, Germany between November 30, 1992 and December 7, 1992. The vessel arrived at the port of Sunny Point, North Carolina on December 18, 1992. A vessel repair entry was filed on December 21, 1992.

Applicant's Claims

The applicant claims that duty on the cost of United States labor is remissible pursuant to 19 CFR 4.14(c)(3)(ii). It has submitted the names, dates of birth, social security numbers, and passport numbers of three United States technicians who boarded the vessel in Bermuda in order to perform boiler repairs while the vessel was en route to Germany. The technicians also performed repairs on the vessel while it was in Germany.

The applicant contends that the duty on certain consumables is remissible pursuant to 19 CFR 4.14(c)(3). The consumables are invoiced as "bwt conditioner and alkaline trmt liquid."

ISSUES:

Whether the subject items are subject to duty under 19 U.S.C. 1466. Whether, if the items are dutiable, the duty is subject to remission.

LAW AND ANALYSIS:

19 U.S.C. 1466(a) provides for the payment of duty at a rate 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 be employed in such trade.

Cost of United States labor

19 U.S.C. 1466(d) provides in part that:

(d) If the owner or master of such vessel furnishes good and sufficient evidence that -
...
(2) such equipments or parts thereof or repair parts or materials, were manufactured or produced in the United States, and the labor necessary to install such equipments or to make such repairs was performed by residents of the United States, or by members of the regular crew of such vessel; or
... then the Secretary of the Treasury is authorized to remit or refund such duties... (Emphasis supplied.)

19 CFR 4.14(c)(3)(ii) states that remission or refund of duty is authorized if good and sufficient evidence shows:

(ii) United States parts and equipment installed with American labor. The equipment, equipment parts, repair parts or materials used on the vessel were manufactured or produced in the United States and purchased by the owner of the vessel in the United States, and the labor necessary to install such equipment or to make such repairs was performed by residents of the United States or by members of the regular crew of the vessel. (Emphasis supplied.)

The above-quoted statute and regulation provide for the remission of duty in the case of U.S. equipment or parts and U.S. labor.

In Ruling 112728 dated October 8, 1993, we stated:

...it is Customs position that the cost of U.S.-resident labor is not subject to duty under 19 U.S.C. 1466 when no
equipments, parts, or materials are used in conjunction with the expertise of U.S. labor.

In Ruling 112728, the two-pronged test of 19 U.S.C. 1466(d)(2) was deemed to be satisfied because U.S. labor was used and there were no equipment, parts, or materials used.

The facts in the case at issue differ from the facts in Ruling 112728 in that the record indicates that equipment, parts, or materials were used in conjunction with the expertise of U.S. labor in the case at issue. In addition to the "consumables" which were mentioned supra and which will be discussed infra, the vessel repair entry reflects non-U.S. equipment, materials, or parts in the form of "10 meta flex gaskets for boiler manhole covers" and "measuring tape."

We find that the cost of the U.S. labor is dutiable pursuant to 19 U.S.C. 1466(a). Because the two-pronged test of 19 U.S.C. 1466(d)(2) is not satisfied, the duty on the cost of the U.S. labor is not remitted.

Other Materials

The other items for which the applicant has requested relief are invoiced as "bwt conditioner and alkaline trmt liquid."

19 U.S.C. 1466(h)(2), which applies to vessel repair entries filed between August 20, 1990 and December 31, 1992, provides that the duty imposed by 19 U.S.C. 1466(a) shall not apply to:
the cost of spare parts or materials (other than nets or nettings) which the owner or master of the vessel certifies are intended for use aboard a cargo vessel, documented under the laws of the United States and engaged in the foreign or coasting trade, for installation or use on such vessel, as needed, in the United States, at sea, or in a foreign country, but only if duty is paid under appropriate commodity classifications of the Harmonized Tariff Schedule of the United States upon first entry into the United States of each such spare part purchased in, or imported from, a foreign country.

Administratively, Customs has interpreted 19 U.S.C. 1466(h)(2) to apply to spare repair parts or materials that have been manufactured in the United States. In Ruling 112223 dated December 30, 1992, we stated:

The vessel repair statute exempts from duty spare repair parts or materials that have been manufactured in the United States or entered the United States duty-paid and are used aboard a cargo vessel engaged in foreign or coasting trade. 19 U.S.C. 1466(h). For purposes of this section, where a part is
purchased from a party unrelated to the vessel owner, a United States bill of sale constitutes sufficient evidence to demonstrate that the part was either manufactured in the United States or entered in the United States, duty-paid.

Inasmuch as the applicant has submitted invoices reflecting the sale of the subject merchandise to the applicant in the United States, we find that, pursuant to 19 U.S.C. 1466(h)(2), these items are not subject to duty.

HOLDING:

As detailed supra, the application is denied with respect to the cost of the U.S. labor and it is granted with respect to the bwt conditioner and the alkaline treatment liquid.

Sincerely,

Arthur P. Schifflin
Chief

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