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HQ 116498

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June 28, 2005

VES-3-18-RR:IT:EC 116498 IDL

CATEGORY: CARRIER

Chief, Vessel Repair Unit
U.S. Customs and Border Protection
423 Canal Street
New Orleans, LA 70130

RE: 19 U.S.C. § 1466; Vessel Repair Entry C20-0058614-2; Protest No. 2002-03-100096; MV MANOA

Dear Sir:

This is in response to your memorandum of May 4, 2005, forwarding for our review the protest filed by Matson Navigation Company, Inc. (“protestant”) with respect to Vessel Repair Entry C20-0058614-2. Our ruling on this matter is set forth below.

FACTS:

The M/V MANOA, a U.S.-flagged vessel owned by the protestant,

The CF 226 reflects that Matson Navigation Company, Inc. is the owner of the vessel. The supplemental submission states that Matson Navigation Company, Inc. is the operator of the vessel. incurred foreign shipyard costs. The vessel arrived in the port of Terminal Island, California on April 22, 2002. A vessel repair entry was timely filed. The determination of duty occurred on November 8, 2002.

The ensuing protest, received on February 3, 2003, pertained to duty charged on all repair items used by the regular crew of the vessel during the voyage. The VRU did not finalize the protest, as well as other similar Matson protests and vessel repair entries involving spare parts used by the vessel’s crew, pending the passage of the “Miscellaneous Trade and Technical Corrections Act of 2004” (Public Law No. 108-429).

ISSUE:

Whether the costs for which the protestant seeks relief are dutiable under 19 U.S.C. § 1466.

LAW AND ANALYSIS:

Initially, we note that the information in the file indicates that the protest, with application for further review, was timely filed under the statutory and regulatory provisions for protests. 19 U.S.C. 1514(c)(3) and 19 CFR 174.12(e).

Title 19, United States Code, § 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 . . . “

We further note that counsel for the protestant filed a supplemental submission dated April 29, 2005 with the VRU, pursuant to section 1554 of the “Miscellaneous Trade and Technical Corrections Act of 2004.” Section 1554 of the Miscellaneous Trade and Technical Corrections Act of 2004, signed by the President on December 3, 2004, amended the vessel repair statute by adding the following exemption to § 1466(a) found in 19 U.S.C. § 1466(h):

(4) the cost of equipment, repair parts, and materials that are installed on a vessel documented under the laws of the United States and engaged in the foreign or coasting trade, if the installation is done by members of the regular crew of such vessel while the vessel is on the high seas.

Declaration and entry shall not be required with respect to the installation, equipment, parts, and materials described in paragraph (4).

This newly-enacted legislation further provides for a retroactive effective date for that equipment, repair parts, and materials installed on or after April 25, 2001.

As noted above, the subject protest was received by the VRU on February 3, 2003 and counsel for the protestant filed a supplemental submission dated April 29, 2005 with respect to the following four groups of items:

(i) TR Nos. 210, 215, 216, 231, 232, 233, 234, 239, 244, 252, 253, 286, 288, 310, 316, 323 and 324;
(ii) TR Nos. 212, 213, 214, 238, 249, and 317; (iii) TR No. 217; and
(iv) TR Nos. 221, 241, 250, 254, 260, 308, and 326.

The protestant seeks relief pursuant to 19 U.S.C. § 1466(h)(2), which 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.

At the outset, however, we note that the invoices for the first group of items listed above are dated after the date of arrival of the vessel. An invoice dated after the date of arrival of a vessel is not probative evidence with respect to a claim that an item listed thereon is eligible for an exemption from any provision of section 1466 with regard to the subject voyage. In addition, the protestant failed to submit an invoice or other documentation with regard to the second group of items listed above. Accordingly, the protestant’s claim for relief under section 1466(h)(2) with respect to all of the items listed in the first and second groups above is unsubstantiated, and all such items are dutiable.

With regard to the item listed in the third group of items, above, the protestant submitted an invoice from a foreign manufacturer covering “oil filters.” The protestant describes these oil filters as “parts” for a compressor, but failed to submit any evidence demonstrating that it entered and paid duties on this foreign manufactured item. Furthermore, oil filters are considered “equipment” rather than parts or materials, and are not eligible for relief under section 1466(h)(2). HQ 111654 (December 24, 1991). As such, this item is dutiable.

With regard to the final group of items listed above, the protestant submitted invoices and an “inventory adjustment” log, which indicates the specific quantity of certain items consumed during the voyage in question. Any quantity of parts consumed during the voyage in question and invoiced by a U.S. manufacturer is non-dutiable under section 1466(h)(2). Any quantity of parts consumed but not covered by the appropriate invoices are dutiable.

HOLDING:

Accordingly, the costs for which the protestant seeks relief are dutiable or non-dutiable under 19 U.S.C. § 1466 consistent with the analysis above. The protest should be DENIED-IN-PART and GRANTED-IN-PART.

In accordance with the Protest/Petition Processing Handbook (CIS HB, January [2002, pp. 18 and 21), you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished
prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

Glen E. Vereb
Chief

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