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HQ 115963





September 5, 2003

VES-13-18:RR:IT:EC 115963 TLS

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. C53-0035041-6; MORMACSTAR; 19 U.S.C. §1466; Protest No. 5301-02-100456.

Dear Sir:

This is in response to your memorandum of March 24, 2003, forwarding an application for further review, filed by Marine Transport Lines, Inc. (formerly Mormac Marine Transport, Inc. (“Mormac”)), of a decision of your office assessing vessel repair duties pursuant to 19 U.S.C. §1466. You specifically seek our advice with respect to the merits of the protestant’s claims covering work listed in the invoice submitted. Our determination is set forth in this ruling.

FACTS:

Marine Transport Lines, Inc. (hereafter also referred to as MTL), operates the vessel MORMACSTAR. The vessel departed from Israel on February 5, 2000, after having repairs done. The vessel arrived in the United States at Houston, Texas on February 27, 2000. A vessel repair entry was timely filed. On February 27, 2000, MTL, as Mormac, filed an application for relief of the vessel repair duties assessed on the costs covered in the aforementioned entry. On June 3, 2002, your office issued a decision on the application. That decision denied the application for relief in its entirety and assessed vessel repair duties in the amount of $12,639.13. The entry was liquidated on October 11, 2002. In response to the denial of the application for relief, MTL timely filed a protest on December 26, 2002, which you have forwarded to us for review.

The protestant seeks relief from vessel repair duties associated with the costs of repairs done in Israel in February 2000, as noted above. Your office seeks our advice with respect to these costs, which are listed on Gal-Hen Ship Repairs Ltd. invoice number 960\C, dated February 4, 2000, a preliminary report from the American Bureau of Shipping (ABS Report), dated January 31, 2000, and Gal-Hen invoice number 0961, dated February 4, 2000.

ISSUE:

Whether the work in question for which the protestant seeks relief is subject to the United States Israel Free Trade Act of 1985 (USIFTA), as reflected in 19 CFR 4.14(a), and is therefore non-dutiable under 19 U.S.C. §1466.

LAW AND ANALYSIS:

Title 19, United States Code, section 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"

Under 19 CFR 4.14(a), it states that “[u]nder separate provisions of law, the cost of labor performed, and of parts and materials produced and purchased in Israel are not subject to duty under the vessel repair statute.” (Emphasis added.)

On December 21, 1988, the President of the United States issued Proclamation 5924 under the authority of section 4(a) of the USIFTA. Proclamation 5924 provides that vessel repair duties shall not be assessed on the cost of parts, equipment or materials for, or repairs to U.S. vessels if the subject expenditures are products of Israel or the work was performed in Israel. Customs interprets this to mean that the articles must be made in and installed on vessels in Israel. Articles imported from elsewhere do not qualify for the automatic duty exemption. The Proclamation states, in relevant part:

The duty provided for in section 466 of the Tariff Act of 1930 should not be imposed on equipments, or any part thereof, including boats, the foregoing which are products of Israel, or the expenses of repairs made in Israel upon U.S.-documented vessels...

The work performed is described on the Customs Form 226 “Record of Vessel/Aircraft Foreign Repair of Equipment Purchase” as follows:

Labor Performed
Crop and insert long bulkhead 35stbd to 3 center at frame 38/39; Repair of bottom long frame #17 in 35stbd at frame 36/37; Renew upper crossover pump room pipe section 8” to 4”; A.B.S. invoice;

Supply of Materials
Pipe “4 SC-80 4700mm with certificates quality document made in Ukraine. Steel plate 3000 x 600 x 12mm ST-52 with certificates quality document made in UK. (Emphasis added.)

The submitted documents contained within the subject entry and referenced above indicate that although the labor was performed in Israel, the materials used were made in either the Ukraine or the UK. As such, the materials would not qualify for duty-free treatment under the USIFTA. Thus, the materials in question are dutiable. The labor costs associated with the repairs done in this case, however, do qualify for duty-free treatment under 19 CFR 4.14(a).

HOLDING:

Following a thorough analysis of the facts as well as of the law and applicable precedents, we have determined that the protest for relief with respect to the items considered above should be granted in part and denied in part as specified in the Law and Analysis portion of this ruling.

Sincerely,

Glen E. Vereb
Chief

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