HQ 112632: Vessel Repair; 19 U.S.C. 1466; Petition for Review; Spare Parts Vessel Repair Entry No. 514-3004727-7 Date of Arrival: May 11, 1992 Port of Arrival: Newark, N.J. Vessel: S.S. LESLIE LYKES

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                              HQ 112632

                           April 20, 1993


VES-13-18-CO:R:IT:C  112632 DEC

CATEGORY:  Carriers


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; Petition for Review; Spare Parts
     Vessel Repair Entry No. 514-3004727-7
     Date of Arrival:  May 11, 1992
     Port of Arrival:  Newark, N.J.
     Vessel:  S.S. LESLIE LYKES

Dear Sir:

     This letter is in response to your memorandum dated March 12,
1993, which forwards for our consideration a petition for review
filed in connection with the assessment of vessel repair duties on
the above-referenced vessel.


FACTS:
 
     The S.S. LESLIE LYKES, an American-flag vessel, underwent
various foreign shipyard operations while in Damman, Saudi Arabia,
during March, 1992, as a result of an unidentified vessel's fishing
net becoming entangled in the subject vessel's propeller.

     An application for relief from vessel repair duties was timely
filed.  Subsequently, a petition challenging our determination
holding certain replacement parts dutiable was, also, timely filed. 


ISSUE:

     Whether the purchase of U.S. manufactured replacement parts
purchased in the U.S. via a foreign representative and installed
with foreign labor is dutiable.







                                 -2-


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.

     The petitioner claims that relief from vessel repair duties
should be granted with respect to the invoice representing the
purchase of various spare parts because they are U.S. made.

     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.  

     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 





                                 -3-


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 has been submitted combined with supporting
documentation from the parts manufacturer that the parts are U.S.
made.  Therefore, the costs associated with this invoice pertaining
to the spare parts are not subject to duty.  However, the itemized
cost of the foreign labor ($5284) contained in the invoice shall
remain dutiable.


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 petition for relief is granted.  

                                     Sincerely,




                                     Acting Chief
                                     Carrier Rulings Branch