VES-13-18-CO:R:IT:C 112667 DEC
Deputy Assistant Regional Commissioner
Classification and Value Division
ATTN: Regional Vessel Repair Liquidation Unit
New York, NY 10048-0945
RE: Vessel Repair; 19 U.S.C. 1466; Protest; Replacement Parts
Vessel Repair Entry No. 514-3003996-9
Date of Arrival: December 31, 1989
Port of Arrival: Elizabeth, N.J.
Vessel: M/V RALEIGH BAY
Date of Liquidation: June 21, 1991
Protest No.: 1001-91-202158
Dear Sir:
This letter is in response to your memorandum dated March 31,
1993, which forwards for our consideration a protest filed in
connection with the assessment of vessel repair duties on the above-
referenced vessel.
FACTS:
The M/V RALEIGH BAY, an American-flag vessel, underwent various
foreign shipyard operations while in Algreciras, Spain, during
December, 1989. Allegedly, the vessel suffered a "casualty" when
one of its turbo-chargers was damaged. Customs, however, found that
no casualty occurred, but indicated that if the vessel operators
supplied Customs with satisfactory evidence of the origin of the
replacement parts used for the repairs, then the parts could be
considered for duty-free treatment pursuant to 19 U.S.C. 1466(h),
but the foreign labor would remain dutiable.
The vessel operators submitted a BBC Service Report which
detailed the necessary replacement parts to repair the damaged
turbocharger. More specifically, this report notes that the
following items were required: (1) complete rotor P/N 21000; (2)
bearings P/N 32100/34100; (3) oil pumps P/N 36000/39000; and (4)
sealing bushes P/N 76002/51014. It is the dutiability of these
items that are contested in this protest.
-2-
ISSUE:
Whether satisfactory evidence has been presented to establish
if various replacement parts used for repairs to the M/V RALEIGH BAY
are U.S.- manufactured rendering them duty-free pursuant to 19
U.S.C. 1466(h).
LAW AND ANALYSIS:
Title 19, United States Code, section 1466, provides, in
pertinent part, for payment of an ad valorem duty of 50 percent on
the cost of foreign repairs to a vessel documented under the laws of
the United States to engage in the foreign or coasting trade, or a
vessel intended to be employed in such trade.
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).
Section 1466(h) provides in pertinent 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.
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
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.
-3-
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, a certification on
the CF 226 or an accompanying document prepared 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 must be presented. Ordinarily, the
vessel's master would not have direct knowledge of this 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.
The protestant has submitted various purchase orders, shipping
instructions, and statements from the vessel's master in support of
its claim that relief from vessel repair duties should be granted.
However, the position of Customs, which has been established through
administrative interpretation, is that a bill of sale or domestic
invoice must be submitted to establish proof of U.S. manufacture.
Consequently, the submitted documents would buttress the
protestant's claim for relief if they were submitted together with
the relevant invoices or bills of sale. The protestant's internally
created documents as well as the documents from the protestant's
shipping agent, standing alone, are not persuasive.
Our review of the submitted documents reveals that sufficient
evidence (i.e. bill of sale or domestic invoice) with respect to a
certain item has been submitted. Specifically, a U.S. invoice has
been submitted with respect to one rotor assembly ordered from Asea
Brown Boveri Turbocharger, Inc. ("ABB") costing $81,228.53. This
item was appropriately not assessed duty since the submitted
documents establish the parts to be of U.S. manufacture.
-4-
The protestant submitted another ABB invoice dated January 3,
1990 (invoice number 92023-45), for various parts. This document is
contradictory because it purports to represent an order from January
3, 1990, yet indicates that the parts were shipped November 13,
1990. This contradiction is further complicated because the subject
vessel arrived in the U.S. (December 31, 1989) prior to the customer
order date (January 3, 1990) included in the invoice. In addition,
the protestant has submitted an additional ABB document indicating
that the rotor assembly and two different types of sealing bushes
were shipped on December 19, 1990. Since the record lacks an
explanation of these contradictions from the protestant or its
vendor, relief with respect to these items is denied.
The remaining items for our consideration are the two bearing
assemblies and the two lube oil pumps. The protestant submitted a
letter from ABB indicating that two bearing assemblies costing
$2700.37 and $1814.88, respectively, and two lube oil pumps costing
$505.76 each as proof that these parts were U.S. manufactured. As
indicated previously, Customs requires an invoice or bill of sale to
prove an item was made in the U.S. Since the protestant has failed
to provide Customs with this required documentation, these items are
dutiable. Accordingly, relief from vessel repair duties with
respect to these items is denied.
Customs is aware that certain items which were assessed vessel
repair duty and were liquidated as part of this entry may not have
been used when the repairs were ultimately performed. Since the
vessel repair statute (19 U.S.C. 1466) applies duty to a vessel's
equipment and parts thereof, these unused parts are, presumptively,
subject to duty since they were aboard when the vessel entered the
U.S. and were a part of the vessel's supply of spares.
HOLDING:
After thorough review of the record and the additional evidence
presented, and as detailed in the Law and Analysis portion of this
ruling, this protest is granted in part and denied in part.
Sincerely,
Stuart P. Seidel
Director, International Trade