VES-13-18-CO:R:IT:C 112934 DEC
Regional Director
Commercial Operations Division
ATTN: Vessel Repair Liquidation Unit
New Orleans, Louisiana 70130
RE: Vessel Repair; Petition for Review; Spare Parts; U.S. Labor
Vessel Repair Entry No. C15-0019322-7
Date of Arrival: February 11, 1993
Port of Arrival: Sunny Point, North Carolina
Vessel: M/V GREEN RIDGE V-24
Dear Sir:
This ruling is in response to your memorandum dated October 20,
1993, which forwards the petition for review filed in connection
with the assessment of vessel repair duties on the above-referenced
vessel for our review.
FACTS:
The M/V GREEN RIDGE is an American-flag vessel owned by Central
Gulf Lines, Incorporated. In January, 1993, three employees of the
Louisiana Maintenance & Repair Company, Incorporated (LAMARCO)
boarded the subject vessel to perform various operations while the
vessel was underway to Bermuda. In addition, two employees of
General Engineering & Machine Works (General Engineering) met the
subject vessel on January 14, 1993, while the vessel was at St.
George, Bermuda to perform additional operations. Both LAMARCO and
General Engineering have submitted documents stating that the
employees who worked on the GREEN RIDGE are United States citizens.
Subsequently, the vessel arrived in the United States on February
11, 1993. A timely vessel repair entry was filed on April 8, 1993.
On September 13, 1993, the United States Customs Service's
Vessel Repair Liquidation Unit in New Orleans, Louisiana, denied the
vessel operator's application for relief based on Headquarters
Ruling 112069 (May 21, 1992). Subsequently, the Customs Service
issued Headquarters Ruling 112728 (Oct. 8, 1993) which modified
ruling 112069 and held that the cost of U.S.-resident labor is not
subject to duty under 19 U.S.C. 1466 when no foreign parts,
equipment, or materials are used in conjunction with the expertise
of U.S. labor.
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ISSUE:
Whether the work performed upon the subject vessel is 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 fifty 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.
Title 19 United States Code, section 1466(d) states that:
If the owner or master of such vessel furnishes good and
sufficient evidence that-
. . .
(2) such equipments or parts thereof or repair
parts or materials, were manufactured or
produced in the United States, and the labor
necessary to install such equipments or to
make such repairs was performed by residents
of the United States, or by members of the
regular crew of such vessel . . .
then the Secretary of the Treasury is authorized to
remit or refund such duties . . . (emphasis added).
19 U.S.C. 1466(d)(1993).
While a literal reading of the statute appears to require that
materials used in repairs to be of U.S.-origin and that the
installation be performed by U.S.-resident labor or by members of
the vessel's regular crew, it is Customs position that such a
reading serves to frustrate the intent of the vessel repair statute.
Therefore, Headquarters Ruling 112728 (Oct. 8, 1993) holds that the
cost of U.S.-resident labor is not subject to duty under 19 U.S.C.
1466 if no foreign parts, equipment or materials are used in
conjunction with the expertise of U.S. labor. However, the use of
U.S.-labor in conjunction with foreign parts, equipment, or
materials is dutiable pursuant to 19 U.S.C. 1466(d)(2).
Applying the holding in Headquarters Ruling 112728 (Oct. 8,
1993) to this case, the petitioner's request for relief must be
denied absent evidence indicating the origin of the parts referenced
to in the LAMARCO and the General Engineering invoices. This case
is distinguishable from Headquarters Ruling 112728 (Oct. 8, 1993)
because it involves the use of spare parts as evidenced by the
references made to spare parts in the invoices. Consequently,
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unless and until documentary evidence establishing the place of
manufacture or production of the spare parts that were used in the
operations aboard the GREEN RIDGE is submitted, these invoices
remain dutiable.
HOLDING:
After a thorough review of the record, the petition for relief
is denied based on insufficient documentation as to the origin of
the spare parts referenced to in the submitted invoices. The
petitioner should be informed of the right to file a protest
following liquidation of this entry, as evidenced by the posting of
the bulletin notice of liquidation.
Sincerely,
Arthur P. Schifflin
Chief
Carrier Rulings Branch