HQ 115945 - Vessel Repair Entry No. C20-0058575-5; Protest No. 2002-03- 00051; TUG ATABOY; U.S.-resident labor and U.S. manufactured parts; 19 U.S.C. § 1466 - United States International Trade Commision Rulings

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HQ 115945

May 19, 2003

VES-13-18-RR:IT:EC 115945 CK

CATEGORY: CARRIER

Chief, Vessel Repair Unit
Bureau of Customs and Border Protection
423 Canal Street, Room 303
New Orleans, Louisiana 70130

RE: Vessel Repair Entry No. C20-0058575-5; Protest No. 2002-03- 00051; TUG ATABOY; U.S.-resident labor and U.S. manufactured parts; 19 U.S.C. § 1466

Dear Sir:

This is in response to your memorandum dated March 17, 2003 which forwarded for our review the above-referenced vessel repair protest. Our ruling on this matter is set forth below.

FACTS:

The TUG ATABOY is a U.S.-flag vessel, owned by Dana Marine Service, Inc. of Mobile, Alabama, and represented in this matter by Lott Ship Agency. Subsequent to the completion of foreign shipyard work, the vessel arrived at the Port of Mobile, Alabama on February 13, 2002. A vessel repair entry was timely filed on February 22, 2002.

An application for relief was not submitted with respect to this entry and the entry was liquidated on October 25, 2002. A protest, dated January 21, 2003, was timely filed seeking remission on the cost of repairs to the forward clutch and steering system which, the protestant avers, were performed by U.S.-resident labor and used U.S. manufactured and purchased parts.

Attached to the file are numerous domestic invoices; a Master’s statement; and log pages from the TUG ATABOY. Two of the invoices (dated January 11 and 18, 2002) are from Falk of Milwaukee, Wisconsin for sale of parts to Dana Marine Service, Inc. There are four invoices from Gulf Coast Air and Hydraulics, Inc. (dated January 6, 10, 24, and 25, 2002) to either Dana Marine Service, Inc. or Armstrong Electric Co. of Mobile, Alabama for parts. Additionally, there is a detailed invoice from Armstrong Electric Co. to Dana Marine Service, Inc. listing labor performed on behalf of the TUG ATABOY. The invoice lists telephonic advice given between January 23 to 25, 2002 by two named individuals, and it details a five-day trip, January 26 to 30, 2002, to Panama by an employee of Armstrong Electronic Co.

The log pages indicated that on January 14, 2002 the gears in the main engine began to fail. The log book pages show the gears failed and work was being performed that week to rehabilitate the engine. The log book for January 26, 2002 states that the above-referenced employee arrived to work on the “steering problem.”

ISSUE:

Whether evidence has been presented sufficient to prove the labor and parts for which the protestant 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..."

Section 1466(d)(2) provides, in pertinent part, as follows:

(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 added)

The Customs Regulations promulgated pursuant to 19 U.S.C. § 1466 are found at 19 CFR § 4.14. Section 4.14(h)(2)(ii), cited as the original basis for relief and specifically promulgated pursuant to § 1466(d)(2), 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.

In HQ 114122, dated October 21, 1997 we stated that it is the Bureau of Customs and Border Protection (CBP) position that requests for relief for U.S.-resident labor in conjunction with parts pursuant to § 1466(d)(2) must be denied absent evidence indicating U.S. manufacture of parts installed by such labor. Furthermore, in order to establish U.S. manufacture or production for purposes of this provision, CBP must receive a statement from the vendor or manufacturer to that effect. See, HQ 113445, dated May 22, 1995.

In this case, the labor involved in the repairs at issue is detailed in an invoice issued by Armstrong Electric Co. of Alabama to Dana Marine Service, Inc. the owner of the TUG ATABOY. The invoice at issue, dated February 8, 2002 is a domestic invoice reflecting five days of labor (January 26 to January 30, 2002) onboard the TUG ATABOY in Panama. In addition, the invoice details telephonic advice that was given to the vessel owner before the repairs were made in Panama, the dates of which are January 23, 24 and 25, 2002. The invoice gives a cost breakdown for the hours, days, and travel expenses involved in the repair work done on the TUG ATABOY performed by Armstrong Electronics.

Additionally, regarding domestic parts, there are two invoices (dated January 11 and 18, 2002) from Falk of Milwaukee, Wisconsin for sale of parts to Dana Marine Service, Inc. There are four invoices from Gulf Coast Air and Hydraulics, Inc. (dated January 6, 10, 24, and 25, 2002) to either Dana Marine Service, Inc. or Armstrong Electric Co. of Mobile, Alabama for parts. However, the record is devoid of any statement from the manufacturer or vendor of these parts as to their U.S. manufacture. Consequently, remission pursuant to § 1466(d)(2) is denied in this case in view of the fact that the two-pronged test of that provision concerning labor and parts has not been met.

HOLDING:

The evidence presented in this case is insufficient to prove the labor and parts for which the protestant seeks relief are non-dutiable under 19 U.S.C. § 1466.

Accordingly, the protest is denied.

Sincerely,

Glen E. Vereb

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