VES-13-18-CO:R:IT:C 112378 MLR
Deputy Assistant Regional Commissioner
Classification and Value Division
ATTN: Regional Vessel Repair Liquidation Unit
New York, New York 10048-0945
RE: Vessel Repair; 19 U.S.C. 1466; Protest No. 1001-92-102980;
Vessel Repair Entry No. C04-0009301-6; S/S LOUISIANA
V-001/West
Dear Sir:
This letter is in response to your memorandum of July 9,
1992, forwarding for our consideration the above-referenced
protest filed by Dyer, Ellis, Joseph & Mills, on behalf of
Ahrenkiel Ship Management (U.S.) Inc., and Lachmar, the operator
and owner, respectively, of the S/S LOUISIANA.
FACTS:
The record reflects that the subject vessel, the S/S
LOUISIANA, arrived at Boston, Massachusetts, on December 18,
1989. Vessel repair entry number C04-0009301-6 was filed on
December 21, 1989, indicating work performed on the vessel in
Marseille, France. The application for relief, the subject of
Customs Ruling 111363, was granted and denied in part. The
applicants waived their right to petition for review and
requested immediate liquidation. The entry was liquidated on
January 31, 1992, for duty in the amount of $873,841.00.
A protest was timely filed on April 28, 1992. The
protestant claims that many of the items found dutiable in the
entry of the LOUISIANA were found either non-dutiable by the New
Orleans Vessel Repair Liquidation Unit on a sister ship, the LAKE
CHARLES, or have been considered non-dutiable by Headquarters in
a protest filed by Ahrenkiel against the liquidation of the LAKE
CHARLES entry. The protestant states that only two items in the
application for relief of the LAKE CHARLES (the subject of
Customs Ruling 111143), the rudder upgrading and tailshaft
survey, were found dutiable. Customs Headquarters also denied
those items at the protest level (Customs Ruling 111971). The
protestant states that virtually identical work was performed on
both vessels. Photographs of the modification are included, and
we are invited to view the LOUISIANA.
We are asked to review the dutiability of numerous items.
ISSUE:
Whether the foreign shipyard operations performed aboard the
subject vessel are subject to duty pursuant to 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 foreign or
coastwise trade, or vessels intended to engage in such trade.
For the sake of clarity, we address the items in the same
order as they were discussed in the application for relief.
COST SEGREGATION: Items A.273, and G.1
The application for relief denied these items because the
charges alleged to be non-dutiable appeared to relate to both
non-dutiable and dutiable operations. The Customs Service has
held that when the cost of various items are not segregated or
separately shown, but are lumped together, duty will be assessed
on the entire cost even though certain items may be non-dutiable.
See C.I.E. 565/55, C.I.E. 1325/58, and C.D. 1836. Upon examining
item A.273, it appears that the staging cost in the amount of
FFrs11,000 is properly segregated; accordingly, this cost is non-
dutiable.
Item G.1 relates to painting and travel expenses of the
Ahrenkiel cleaning and painting gang. A separate letter listing
the cost of travel expenses in the amount of $4,752 was included
with the application for relief; therefore, it appears that this
non-dutiable cost was properly segregated from the dutiable
painting cost.
INVOICE DESCRIPTION: Items A.177, A.212, and A.241
The application for relief held that these items did not
provide a sufficient description of the operations conducted.
Item A.177 relates to the cleaning of the forward deeptank,
allegedly not conducted in preparation of repairs. Customs has
long held the cost of cleaning is not dutiable unless it is
performed as part of, in preparation for, or in conjunction with
dutiable repairs or is an integral part of the overall
maintenance of the vessel; see C.I.E.s 18/48, 125/48, 910/59,
820/60, 51/61, 429/61, 569/62, 698/62; C.D. 2514; T.D.s 45001 and
49531. With regard to item A.177, a thorough review of the
invoice reveals no repairs were made to the forward deeptank;
accordingly, we find this item non-dutiable.
Item A.212 states "planning for gas trials" in the amount of
FFrs37,100. Protestant alleges this was required by the U.S.
Coast Guard and American Bureau of Shipping (ABS) and in support
of general shipyard work conducted. Furthermore, protestant
alleges that the description is adequate since the New Orleans
Vessel Repair Liquidation Unit approved remission of this item
when performed on the LAKE CHARLES. First, we are not bound by
the determinations made by the New Orleans Vessel Repair
Liquidation Unit. Second, looking at the LAKE CHARLES item, the
description is the same; however, the cost is only FFrs18,850.
No explanation is given why the same work (as per the invoice
description), conducted by the same shipyard cost twice the
amount for the LOUISIANA. Third, upon reviewing the Coast Guard
and ABS documents, we find that gas trials were required and
items A.213 and A.214 relate to those surveys, but the protestant
still has not explained what the "planning" involved;
accordingly, we find this item dutiable.
Item A.241 relates to the installation of a battery back-up
system which is alleged to be a non-dutiable modification. The
protestant has now provided a photograph of the item to
supplement the invoice description; consequently, we find that
the installation constitutes a non-dutiable modification (see
discussion below relating to modifications).
INSPECTIONS: Numerous Items between A.114 and A.277; ABS
Invoices MS 7513-S, MS 7514-S and MS 7515-S
The protestant seeks remission for the inspection costs of
numerous items. The application for relief denied these items
because the evidence did not: (1) identify the particular items
surveyed, (2) relate the examination of those items to a
particular survey, (3) demonstrate that the particular survey
identified as a "required survey" was within the meaning of
C.S.D. 79-277 (see discussion below), and (4) segregate the costs
of opening and closing from other operations performed to permit
relief to be granted in accordance with C.S.D. 79-277.
In another application for relief submitted for
LOUISIANA entry no. C20-0012281-5 (the subject of Customs
Ruling 111545), inspection costs attributable both to repairs
and to a reactivation survey were discussed. As in that
instance, the record here shows that some of the items inspected
involved repairs. Customs has held that inspections not
resulting in repairs are not dutiable. Customs Ruling
110395; see American Viking Corp. v. United States, 37 Cust. Ct.
237, 247, C.D. 1830 (1956). Where periodic surveys are
undertaken to meet the specific requirements of, for example, a
classification society or insurance carrier, the cost of the
surveys is not dutiable even when dutiable repairs are effected
as a result thereof. C.S.D. 79-277; Customs Ruling 110368.
With increasing frequency, C.S.D. 79-277 has been utilized
by vessel owners seeking relief not only from charges appearing
on an ABS or U.S. Coast Guard invoice (the actual cost of the
inspection), but also as a rationale for granting non-dutiability
to a host of inspection-related charges appearing on a shipyard
invoice. In light of this continuing trend, we offer the
following clarification.
C.S.D. 79-277 discussed the dutiability of certain charges
incurred while the vessel underwent biennial U.S. Coast Guard
and ABS surveys. That case involved the following charges:
ITEM 29
(a) Crane open for inspection.
(b) Crane removed and taken to shop. Crane hob and
hydraulic unit dismantled and cleaned.
(c) Hydraulic unit checked for defects, OK.
Sundry jointings of a vessel's spare
renewed.
(d) Parts for job repaired or renewed.
(e) Parts reassembled, taken back aboard ship
and installed and tested.
In conjunction with the items listed above, we held that a
survey undertaken to meet the specific requirements of a
governmental entity, classification society, or insurance carrier
is not dutiable even when dutiable repairs are effected as a
result of the survey. We also held that where an inspection or
survey is conducted merely to ascertain the extent of damages
sustained or whether repairs are deemed necessary, the costs are
dutiable as part of the repairs which are accomplished. C.I.E.
429/61; C.S.D. 79-2, 13 Cust. B. & Dec. 993 (1979); C.S.D. 79-
277, 13 Cust. B. & Dec. 1395, 1396 (1979).
It is important to note that only the cost of opening the
crane was exempted from duty by reason of the specific
requirements of the U.S. Coast Guard and the ABS. The
dismantling and cleaning of the crane hob and hydraulic unit was
held dutiable as a necessary prelude to repairs. Moreover, the
testing of the hydraulic unit for defects was also found dutiable
as a survey conducted to ascertain whether repairs were
necessary. Although the invoice indicated that the hydraulic
unit was "OK," certain related parts and jointings were either
repaired or renewed. Therefore, the cost of the testing was
dutiable.
We emphasize that the holding exempts from duty only the
cost of a required scheduled inspection by a qualifying entity
(such as the U.S. Coast Guard or the American Bureau of
Shipping). In the liquidation process, Customs should go beyond
the mere labels of "continuous" or "ongoing" before deciding
whether a part of an ongoing maintenance and repair program
labelled "continuous" or "ongoing" is dutiable.
Moreover, we note that C.S.D. 79-277 does not exempt repair
work done by a shipyard in preparation of a required survey from
duty. Nor does it exempt from duty the cost of any testing by
the shipyard to check the effectiveness of repairs found to be
necessary by reason of the required survey.
Turning to the case before us, as in Customs Ruling 111545,
we find the protestant's claim that certain "required" inspection
costs are non-dutiable to be problematic. The simple fact that
some classification society is involved in a survey does not
render all inspection costs non-dutiable. The mere labeling of
work "inspection" is ambiguous, for some of the documentation
provided does not demonstrate whether the cost for the inspection
was, for example, to ascertain the extent of the known
deterioration of the part, which is dutiable, or whether the cost
of the inspection was exclusively related to examination by the
classification society. All repairs involve some form of
inspection.
Upon examining ABS Reports submitted with this protest, we
agree with the protestant that the following items constitute
non-dutiable operations relating to required ABS surveys:
A.114 - Anchors & Chains
A.115 - Chain Lockers
A.120 - Opening & Closing of Ballast Water Tanks by Bottom
Plugs
A.131 - Seawater Valves & Overboard Discharge Valves (only
segregated amount in the amount of FFrs144,760 for survey is non-
dutiable)
A.136 - Condensers for Tg. (only segregated cost in the
amount of FFrs12,250 for opening and closing is non-dutiable)
A.140 - Aux. Turbines (only segregated cost in the amount of
FFrs620 for surveying couplings is non-dutiable)
A.170 - Bow Thruster (only segregated cost for electrical
checking in the amount of FFrs8,250 is non-dutiable)
A.172 - Megger Test of Electric Motor {although ABS report
MS 8250-G refers to a "continuous machinery survey", we find that
various electrical apparatus were tested as part of a periodic
survey rather than to determine the effectiveness of repairs
(i.e., "all electrical motor insulation resistance were megger
test[ed]" and found satisfactory)}.
A.180 - Main Turbine Coolers (only segregated inspection
cost in the amount of FFrs6,480 is non-dutiable)
A.210 - Cargo Tanks (although ABS Report MS 8250-G relates
that this item was part of a "continuous hull survey", it appears
that this survey was solely conducted as part of a periodic
survey rather than to determine the effectiveness of repairs)
A.213 - Gas Trials
A.214 - Gas Trials
A.242 - Ballast Valves
A.245 - General Alarm (only segregated cost in the amount of
1,380 for checking batteries is non-dutiable)
A.277 - Main Gas Valve
ABS Invoice MS 7514-S - ABS survey for drydocking,
tailshaft, liquified gas, inert gas system, intermediate,
continuous hull, continuous machinery, continuous LNG surveys and
gas trials.
ABS invoice 7515-S - ABS survey for modification of rudder
carrier bearing, starboard high suction sea chest piping and
valve fittings and garbage incinerator installation.
As to item A.128, the protestant alleges that it refers to
the shipyard's cost of preparing for a required ABS tailshaft
survey. Protestant claims that although Customs Ruling 111971
(the protest decision for the LAKE CHARLES), held that the
tailshaft work on the LAKE CHARLES was dutiable in that the
invoice revealed repairs as evidenced by "cleaned, rebuilt
cracks" and "cleaned and reconditioned treading section" (the
same description provided for the LOUISIANA), item A.128 should
be non-dutiable. Protestant states that repairs were not
conducted, and the record includes a memo from ABS in Marseille,
France, stating that tailshaft surveys on the LOUISIANA and LAKE
CHARLES were conducted and that "no repairs were carried out and
no wear and tear were (sic) noted." This same memo was included
with the LAKE CHARLES protest. It is probably true that the ABS
survey found no repairs or wear and tear; however, as discussed
above, C.S.D. 79-277 does not exempt repair work done by a
shipyard in preparation of a required survey from duty. Item
A.128 is split into three parts: (1) access work, (2) in shop,
and (3) propeller nut work. The access work appears to be non-
dutiable; however, the "in shop" work appears to be dutiable
repairs done in preparation of the ABS survey as determined in
Customs Ruling 111971. Since no segregation of costs is
provided, the entire amount is dutiable.
Item A.174 indicates two ballast pumps were opened for
inspection and boxed up with new gaskets. Protestant states no
repairs were made; however, we find this item to be dutiable
because, although it may have been required as part of a required
ABS survey, the ABS Report MS 8250-G states that pumps (including
the No.1 and No. 2 ballast pumps) were "overhauled...and recorded
defective parts renewed"; accordingly, looking beyond the
"continuous survey" label we find that the survey conducted was
more in the nature of checking the effectiveness of repairs.
While the survey may have been part of a required periodic
survey, it was conducted at this time for the owner's
convenience. Furthermore, item A.179 indicates two auxiliary
circulating pumps were opened for inspection and boxed up with
new gaskets; protestant states no repairs were made. ABS report
MS 8250-G indicates otherwise; accordingly, this item for the
same reasons as item A.174 is dutiable.
Item A.176 refers to a pressure test of the heating coils
which was conducted as part of the "commencement of continuous
survey" (ABS Report 8250-G). Protestant claims that this item
should be non-dutiable since it was an ABS requirement and the
repairs to the heating coils have been segregated in item A.257.
Although a continuous or special periodical survey may be
required, it is conducted at the owner's convenience; therefore,
we find that item A.176 was incurred to check the effectiveness
of repairs shown in item A.257, especially since the description
in A.257 does not include any testing. Accordingly, related item
A.175 for gas-freeing is dutiable as well.
Item A.225 states: "all other relief Valves on cargo system
and void spaces to be overhauled." The valves were sent to the
shop, cleaned, seats were skimmed-up, ground and tested. This
appears to be a repair item and the tests are more in the nature
of checking the effectiveness of repairs; accordingly, this item
is dutiable except for the segregated transportation cost in the
amount of FFrs5,100.
ABS Invoice MS 7513-S - Annual ABS Load Line Inspection.
Although the applicant was informed that the ABS reports are
required, the record includes all reports except ABS Report MS
8249 for the Annual Load Line Inspection; accordingly, this item
is dutiable.
MODIFICATIONS:
The application for relief denied numerous items as non-
dutiable modifications since insufficient evidence was submitted.
In its application of the vessel repair statute, Customs has
held that modifications/alterations/additions to the hull and
fittings of a vessel are not subject to vessel repair duties.
Over the course of years, the identification of modification
processes has evolved from judicial and administrative precedent.
In considering whether an operation has resulted in a
modification which is not subject to duty, the following elements
may be considered.
1. Whether there is a permanent incorporation into the hull or
superstructure of a vessel {see United States v. Admiral Oriental
Line et al., T.D. 44359 (1930)}, either in a structural sense or
as demonstrated by the means of attachment so as to be indicative
of the intent to be permanently incorporated. This element
should not be given undue weight in view of the fact that vessel
components must be welded or otherwise "permanently attached" to
the ship as a result of constant pitching and rolling. In
addition, some items, the cost of which is clearly dutiable,
interact with other vessel components resulting in the need,
possibly for that purpose alone, for a fixed and stable
juxtaposition of vessel parts. It follows that a "permanent
attachment" takes place that does not necessarily involve a
modification to the hull and fittings.
2. Whether in all likelihood, an item under consideration would
remain aboard a vessel during an extended layup.
3. Whether, if not a first time installation, an item under
consideration replaces a current part, fitting or structure which
is not in good working order.
4. Whether an item under consideration provides an improvement
or enhancement in operation or efficiency of the vessel.
We agree with the protestant that the following items are
non-dutiable modifications:
A.122 - Installation of a new General Dynamics high suction
sea chest with associated valves and piping, including staging,
disconnection and modification of existing sections, fabrication
of associated piping and transportation of materials. A
photograph is included in the protest, and ABS report MS 8255
confirms the work conducted. Related items A.171 (claim for
remission of sea chest berth trial cost), B.10 (claim for
remission of sea chest transportation expenses), and E.3 (claim
for remission of sea chest purchase price) are also non-dutiable.
A.153 - Replacement of gas nozzles to increase gas velocity
and improve furnace combustion.
A.168 - Garbage Incinerator. A photograph is included in
the record and the ABS report MS 8255 confirm this as a non-
dutiable modification.
A.220 - Supply additional holding down bolts on manhole
covers. A photograph is included in this application to confirm
this as a non-dutiable modification.
A.229 - Move Fairlead. A photograph is included in the
protest confirming a modification to the hull and fittings.
A.230 - Replace spring arrangement for hatch covers with
counterweight arrangement. A photograph is included to confirm
the modification to the fittings.
A.231 - Installation of deflector plates in gangways for
draining purposes. A photograph is included in the protest
confirming a permanent addition to the hull.
A.232 - Installation of deck cleats. A photograph is
included confirming the permanent addition to the hull.
A.233 - Addition of chamber (compartment) for welding gas
cylinders in steering gear room affixed to existing bulkhead. A
photograph is included to confirm the permanent addition to the
hull.
A.234 - Fabrication and installation of water wash-down
system for bridge windows. A photograph confirms the permanent
addition to the hull.
A.244 - Installation of ventilators in console. A
photograph confirms the permanent addition to the fittings.
A.264 - Installation additional start/stop switches for fuel
oil transfer system. A photograph confirms this modification.
A.270 - Installation air ducts for main circulation air
supply pumps. A photograph confirms the permanent addition to
the hull.
A.276 - Fabrication and installation of compressor room
catwalk. A photograph confirms the permanent addition to the
hull.
A.284 - Installation of watertight door in bridge strut for
storage of line throwing equipment. A photograph confirms the
permanent addition to the hull.
A.285 - Fabrication and installation of paint storage racks
on forward bulkhead of paint locker with attendant modifications
of hull and fittings. A photograph confirms the permanent
addition to the hull.
A.287 - Installation of floor covering (carpeting and tile).
The costs for the sofas and armchairs are dutiable.
A.289 - Modification of sprinkler system to improve
drainage, including cutting pipe and installing flange.
A.291 - Installation of pollution containment bins for day
tank overflow vent and crankcase vent of inert gas tank,
including stop valves. A photograph confirms the permanent
addition to the hull.
A.292 - Fabrication and installation of separate steam trap
for heating coil system.
A.298 - Installation of padeye on stack platform for
lowering items into hatch.
A.302 - Addition of steel plate protection dams welded to
hull.
A.306 - Modification of radar mast to be hingeable. A
photograph confirms the permanent addition to the hull and
fittings.
As to item A.154, it indicates that the burner register on
the boilers was adjusted for better airduct sealing between the
active and non-active burners. This appears to be more in the
nature of a repair. No other evidence is provided to show it is
a modification; accordingly, this item is dutiable.
A.165 - Rudder Carrier, Rudder Stock, Rudder Pintle.
Protestant states that the work involving the rudder stock,
pintle and other rudder parts was not in the nature of a repair.
Instead, it was necessitated by the installation of the new
rudder carrier bearings. The installation of the bearings
required removal of the bushing and other adjustments to the
stock, pintle and other parts. None of this work, it is alleged,
would have been done if the rudder had not been upgraded with he
anti-friction bearing.
Customs Ruling 111971 considered this item for the LAKE
CHARLES. It was held that the "crux of the work to the rudder
was a modification," but denied the protest on the basis that
some "repairs" were made and the repairs costs were not
segregated from the modification work. The protestant states
that in light of Customs' ruling on the LAKE CHARLES protest and
without conceding the non-dutiability of item A.165, it has
requested Compagnie Marseillaise de Reparations to provide such
segregation for the LOUISIANA, as a basis for finding that
portion of the work related to the modification non-dutiable.
We have thoroughly reviewed the record and find no further
segregation other than three costs in the amount of FFrs576,000,
FFrs172,000, and FFrs45,000 which was not sufficient in Customs
Ruling 111971. Therefore, if the protestant can provide further
segregated cost amounts before reliquidation, the costs for the
modification aspects may be non-dutiable.
Item A.297 states that a 40 x 40 wire mesh screen was
installed in the fuel oil vent for the number 1 & 2 fuel oil
tanks. No other evidence is presented to show that this is a
non-dutiable modification; however, the record does reflect that
repairs were conducted in the fuel oil tanks (see A.257).
Furthermore, the fact alone that this was an ABS requirement,
does not render this item non-dutiable; accordingly, this item is
dutiable.
SUPPLIES FURNISHED FROM FOREIGN ENTITIES: Items B.1.b and B.1.f
on Establissements Tilley, S.A., Invoices 533/100907 and
537/100921
It is claimed that these invoices represent consumable
supplies. The application for relief denied these invoices
because no evidence was presented to show that each article was
not used for repairs performed by foreign labor pursuant to
C.I.E. 196/69. C.I.E. 196/60 held that consumable supplies
generally are not subject to vessel repair duty, unless used in
effecting dutiable repairs. The protestant states that this
basis for denial is unclear since there is no requirement to show
any connection between a particular consumable and any particular
repair. The protestant does not seek relief for tools that are
"equipment."
Generally, the articles which may be retained on board a
vessel free of duty, under 19 U.S.C. 1446, are "consumable
supplies" including "sea stores", and articles consumed in their
use, unless purchased for repair purposes (T.D. 39340, as
modified by T.D. 39507). Sea stores are generally defined as
supplies for the consumption, sustenance, and medical needs of
the crew and passengers during the voyage. H.E. Warner, Trustee
v. United States, 28 CCPA 143 at 150, C.A.D. 136 (1940) quoting
from Southwester Shipbuilding Co. V. United States, 13 Ct. Cust.
App. 74, T.D. 40934 (1025).
The articles listed on item B.1.b. were supplied by
Establissements Tilley S.A., a company in Marseille, France,
where the repair work was conducted. Furthermore, the articles
listed appear to be more in the line of articles used to effect
repairs, and not supplies for the consumption during a voyage
(i.e., standard wire cup brushes, paint sprays, paint rollers,
colored pencils, florescent pens, plastic goggles, disposable
dust masks, dog-leg brushes, wire brushes, boiler suits of
assorted sizes, hand scrapers, and black spray paint). Since the
burden of proof is upon the protestant to show that these items
were not used to effect repairs as required in C.I.E. 196/60, we
hold the entire invoice B.1.b to be dutiable.
The same analysis applies to item B.1.f. The only articles
on that invoice which we will hold non-dutiable because they are
more in the line of articles used during a voyage are as follows:
Spic and Span, disinfectant, Glad trash bags, and Fantastic
cleaner. The other articles are dutiable.
U.S. MATERIALS: Items E.2, E.6, E.7 & E.8, F.3, F.5, F.7:
It is claimed that these items relate to materials purchased
in the United States by the owner and installed by the foreign
shipyard as additions to the hull and fittings or as part of
repairs. The application for relief denied these items since the
documents submitted were internal documents (i.e., work orders or
purchase orders), and not invoices from the suppliers.
On August 20, 1990, the President signed into law Pub. L.
101-382, section 484E of which amends section 466, Tariff Act of
1930, as amended (19 U.S.C. 1466), by adding a new paragraph (h)
to the statute {19 U.S.C. 1466(h)}.
The new section provides in part that:
(h) The duty imposed by subsection (a) of this section shall not
apply to--
(2) the cost of spare repair parts or materials (other
than nets or nettings) which the owner or master of the
vessel certifies are intended for use aboard a cargo
vessel, documented under the laws of the United States
and engaged in the foreign or coasting trade, for
installation or use on such vessel, as needed, in the
United States, at sea, or in a foreign country, but
only if duty is paid under appropriate commodity
classifications of the Harmonized Tariff Schedule of
the United States upon first entry into the United
States of each such spare part purchased in, or
imported from, a foreign country.
The effective date of the amendment is stated as follows:
Effective Date.--The amendment made by this section
shall apply to--
(1) any entry made before the date of enactment of this
Act that is not liquidated on the date of enactment of
this Act....
Therefore, the provision is applicable in this instance.
While section 1466(h) 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
section 1466(d)(2) with the assessment provisions of section
1466(a) would obligate operators to pay duty on such materials
unless they were installed by crew or U.S. 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 a foreign manufactured 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 in the United States from a party
unrelated to the vessel operator, a domestic bill of sale to the
vessel operator must be presented.
Further, with regard to imported articles, there must be
presented a certification on the CF 226 or an accompanying
document by a person with direct knowledge of the fact that an
article was imported or purchased for the purpose of either then-
existing or intended future installation on a company vessel.
Ordinarily, the vessel's master would not have direct knowledge
of that fact, and an agent may also be without such knowledge.
The second certification required by 19 U.S.C. 1466(h)(2) as to
the vessel's documentation (foreign or coasting trades) and
service (cargo vessel), will be made by the master on the vessel
repair entry (CF 226) at the time of arrival.
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.
A U.S. bill of sale satisfying 19 U.S.C. 1466(h) has been
submitted for the following items; therefore, the costs
associated with these invoices are not subject to duty:
E.2 - Young Engineering Communication equipment
F.3 - Industrial control Transformers
F.5 - Electrical parts.
As to items E.6, E.7, E.8, and F.7, the protestant states
that the spare parts in question were purchased in the early
1980s and it is not standard business practice to keep supplier
invoices for years after purchase. Despite the unfortunate
circumstances, absent the requisite documentation we are unable
to hold these items non-dutiable.
HOLDING:
The protest is denied and granted in part as detailed in the
Law and Analysis portion of this ruling.
Sincerely,
Acting Chief
Carrier Rulings Branch