HQ 113652 - Vessel Repair Entry No. C14-0025498-8; GREEN ISLAND; V-8; Parts; - United States International Trade Commision Rulings

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HQ 113652

January 3, 1997

VES-13-18-RR:IT:EC 113652 GEV

CATEGORY: CARRIER

Chief, Vessel Repair Liquidation Unit
U.S. Customs Service
423 Canal Street
New Orleans, Louisiana 70130

RE: Vessel Repair Entry No. C14-0025498-8; GREEN ISLAND; V-8; Parts;
T.D. 75-257; 19 U.S.C. ? 1466(h)(2)

Dear Sir:

This is in response to your memorandum dated August 29, 1996, forwarding a petition for review of your decision denying an application for relief from duties assessed pursuant to 19 U.S.C. ? 1466. Our findings are set forth below.

FACTS:

The GREEN ISLAND is a U.S.-flag vessel owned and operated by Waterman Steamship Corporation of New Orleans, Louisiana. During the voyage in question, various spare parts were purchased foreign and placed on board. The petitioner states that these parts were purchased in the United States from domestic vendors and then shipped overseas. The vessel subsequently returned to the United States arriving at Newport News, Virginia, on October 18, 1993. A vessel repair entry was timely filed.

An application for relief, dated December 17, 1993, was also timely filed. The application provided that the "...basis for claiming relief...is that U.S. parts are remissable under Section 4.14(c)(3)(ii) of the Customs Regulations." By letter dated July 22, 1996, from the Chief, New Orleans Vessel Repair Liquidation Unit (VRLU), to Waterman Steamship Corporation, the application for relief was denied with respect to Item nos. 2, 5 and 7 in view of the fact that the evidence submitted was insufficient to establish that the parts in question were manufactured in the United States. A petition for review of the decision of the VRLU was timely filed by letter dated August 6, 1996. The petitioner "...maintains that a vendor invoice is sufficient proof of
origin when the purchase involves spare parts supplied by domestic third party vendors." Consequently, the petitioner has resubmitted what are contended to be copies of the requisite invoices from domestic vendors.

ISSUE:

Whether evidence has been presented sufficient to prove that the parts for which the petitioner seeks relief are non-dutiable under 19 U.S.C. ? 1466.

LAW AND ANALYSIS:

Title 19, United States Code, ? 1466(a) (19 U.S.C. ? 1466(a)), provides in pertinent part for the payment of an ad valorem duty of 50 percent of the cost of "...equipments, or any part thereof, including boats, purchased for, or the repair parts or materials to be used, or the expenses of repairs made in a foreign country upon a vessel documented under the laws of the United States..."

The Customs Regulations promulgated pursuant to 19 U.S.C. ? 1466 are found at 19 CFR ? 4.14. Section 4.14(c)(3)(ii), cited as the original basis for relief, provides, in pertinent part, that U.S.-manufactured parts purchased by the vessel owner in the United States and installed with U.S. labor or by members of the vessel's regular crew are subject to remission. (See also 19

Further in regard to Customs administration of duty assessment issues (prior to August 20, 1990) under 19 U.S.C. ? 1466 regarding alleged U.S.-manufactured parts, the provisions of Treasury Decision (T.D.) 75-257 are controlling. That decision provides that when materials of U.S.-manufacture are purchased by the vessel owner in the United States for installation abroad by foreign labor, the labor cost alone is subject to duty under 19 U.S.C. ? 1466. When those same materials are purchased by the owner overseas or purchased in the United States by parties other than the owner, the cost of the materials themselves (even though of U.S.-manufacture) was also subject to vessel repair duty. With respect to claims for relief under T.D. 75-257, it is Customs policy to require direct evidence of U.S. manufacture (e.g., and affidavit by the manufacturer) as well as U.S. purchase (e.g., bill of sale or domestic invoice) for relief to be granted. (Customs ruling letter 111272, dated November 2, 1990)

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 19 U.S.C. ? 1466. While this provision applied by its terms only to foreign-made imported parts, there was 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 1466(d)(2) with the assessment provisions of subsection (a) of ? 1466 would obligate operators to pay duty on such materials unless they were installed by crew or resident labor. Consequently, Customs so
extended the duty-free treatment of subsection (h) to U.S.-manufactured parts. (See, e.g., Customs ruling letter 110980, dated April 16, 1991)

We note, however, that the entry in this case was made subsequent to the expiration date of subsection (h) (i.e., December 31, 1992). Although subsection (h) was subsequently reenacted (see Public Law 103-465), the implementing legislation contained no provision regarding retroactive treatment for the subject entry. Consequently, the provisions of T.D. 75-257 control with respect to the petitioner's claims.

In regard to the three items in question, we note the following. The evidence submitted with respect to Item 2 includes various shipping documentation, Federal Communications Commission (FCC) Form 740, warranty documentation, and a warehouse order form indicating that the article was made in Japan. This documentation is insufficient to warrant relief under T.D. 75-257. Accordingly, Item 2 is dutiable.

The evidence submitted with respect to Item 5 also includes shipping documentation, a memorandum dated August 27, 1993, from Waterman Steamship Corporation to Customs, and a letter dated August 6, 1996, from Waterman Steamship Corporation to Customs. This documentation is also insufficient to warrant relief under T.D. 75-257. Accordingly, Item 5 is dutiable.

Finally, the evidence submitted with respect to Item 7 consists of various shipping documentation, a "profroma" [sic] invoice of Waterman Steamship Corporation, a memorandum dated August 27, 1993, from Waterman Steamship Corporation to Customs, and a letter dated August 6, 1996, from Waterman Steamship Corporation to Customs. As with Items 2 and 5 discussed above, this documentation is insufficient to warrant relief under T.D. 75-257. Accordingly, Item 7 is dutiable.

HOLDING:

Evidence has been presented insufficient to prove that the parts for which the petitioner seeks relief are non-dutiable under 19 U.S.C. ? 1466. Accordingly, the petition is denied in its entirety.

Sincerely,

Jerry Laderberg

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