VES-13-18-CO:R:IT:C 111065 LLB
Chief, Technical Branch
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90731
RE: Vessel repair; Petition for review; U.S.-made parts and
materials; Vessel repair entry no. C31-0005009-6; Vessel
MOBIL ARCTIC
Dear Sir:
Reference is made to your memorandum of May 21, 1990, which
forwards for our consideration the Petition for Review submitted
by counsel on behalf of Mobil Oil Corporation in regard to the
above-captioned vessel repair entry. The submission appeals the
Customs Headquarters opinion rendered on December 26, 1989,
concerning an Application for Relief from vessel repair duties
(Ruling Letter 110566).
FACTS:
The MOBIL ARCTIC is a U.S.-flag vessel owned by Mobil Oil
Corporation ("Mobil") of New York, N.Y. The subject vessel had
shipyard work performed on her by Sembawang Shipyard in Singapore
during the period of July 21, 1988, through August 30, 1988.
Subsequent to the completion of this work the subject vessel
arrived in the United States at Valdez, Alaska on September 17,
1988.
A vessel repair entry was filed on the date of arrival. By
letter dated October 26, 1988, counsel for Mobil requested an
extension of time to submit further cost evidence and an
application for relief. In a letter from the Chief, Liquidation
Branch, dated November 1, 1988, an extension was granted until
December 16, 1988. An application dated December 15, 1988, was
subsequently submitted with cost evidence of the work completed.
ISSUE:
Whether the work performed on the subject vessel for which
the applicant seeks relief is dutiable under 19 U.S.C. 1466.
LAW AND ANALYSIS:
Title 19, United States Code, section 1466, provides in
pertinent part for payment of duty in the amount of 50 percent ad
valorem on the cost of foreign repairs to vessels documented
under the laws of the United States to engage in the foreign or
coastwise trade, or vessels intended to engage in such trade.
In the previous ruling it was proven to the satisfaction of
the Customs Service that the items covered by all nine of the
invoices presently under consideration were manufactured and
purchased in the United States. Relief was denied for these
items because they were installed with the use of foreign labor.
Customs administration of duty assessment issues under
section 1466 regarding U.S.-made materials purchased in the U.S.
had for some time been guided by the terms of Treasury Decision
75-257 (T.D. 75-257). That decision provides that when materials
of U.S.-manufacture are purchased by the vessel owner in the U.S.
for installation abroad by foreign labor, the labor cost alone is
subject to duty under section 1466. When those same materials
are purchased by the owner overseas or purchased in the U.S. 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.
The climate with regard to spare 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 section 1466. While this
provision applies by its terms only to foreign-made imported
parts, there is 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 (d)(2)
with the assessment provisions of subsection (a) of section 1466
would obligate operators to pay duty on such materials unless
they were installed by crew or resident labor. If an article is
claimed to be of U.S. manufacture, there must be proof of its
origin in the form of a bill of sale or domestic invoice. If an
article is claimed to have been previously entered for
consumption, duty paid by the vessel operator, there must be
proof of this fact in the form of a reference to the consumption
entry number for that previous importation, as well as to the
U.S. port of importation. If imported articles are purchased
from third parties in the United States, a domestic bill of sale
to the vessel operator must be presented. Further, with regard
to imported articles, there must be presented a certification
from the owner or master that the vessel at issue is a cargo
vessel and that the imported articles were purchased for
installation aboard the company's vessels.
If the elements stated above are proven to the satisfaction
of Customs, the cost of foreign labor utilized for installation
of U.S.-made or previously imported articles will be subject to
duty under section 1466 in matters concerning repairs, and only
the cost of qualifying materials used in repairs will be free of
duty. Modifications will of course continue to be treated as
duty-free, both materials and labor.
Given the amendments to the vessel repair statute during the
pendency of this matter, and the taking into consideration the
extension of the benefits of the new law to U.S.-made materials
by the Customs Service, we have determined that this Petition for
Review should be granted.
HOLDING:
Following a thorough review of the facts as presented as
well as an analysis of the applicable law and precedents, we have
determined to grant the Petition for Review submitted in this
matter in its entirety.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch