HQ 112984: Vessel Repair; Applicability of 19 U.S.C. 1466 to work performed while vessel is under foreign-flag; STRONG CAJUN

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 112984                          
                           January 18, 1994

VES-13-08/18-CO:R:IT:C   112984 GOB

CATEGORY:  Carriers

District Director of Customs
101 E. Main Street
Norfolk, Virginia 23510

RE:  Vessel Repair; Applicability of 19 U.S.C. 1466 to work
     performed while vessel is under foreign-flag; STRONG CAJUN

Dear Sir:

     We have received correspondence dated January 7, 10, and 11,
1994 ("the submission") from Sharon Steele Doyle ("counsel") with
respect to the STRONG CAJUN ("the vessel"), which is owned by
Seacor Ocean Lines Inc. ("Seacor").  Your office and the Vessel
Repair Liquidation Unit in New Orleans have received copies of most
or all of the correspondence.  We are treating the correspondence
as a request for internal advice from your office pursuant to 19
CFR 177.11.  Please provide counsel with a copy of this ruling.

FACTS:

     The facts as presented by counsel may be summarized as
follows.  The vessel was built in Port Arthur, Texas in 1979 and
operated under the U.S. flag as the BIGORANGE X until she was sold
and reflagged Panamanian under MARAD Order MA16379 in August 1980. 
The vessel departed the U.S. in 1980 and has been foreign since
that time.  After departing the United States, the vessel operated
as a seismic vessel off the northern coast of Africa.  Seacor
purchased the vessel in January 1992, reflagged her under the
Vanuatu flag, and continued to operate her as a seismic vessel off
the African coast.  On October 3, 1993, the vessel entered Blohm
& Voss shipyard in Hamberg, Germany for conversion work to modify
the vessel for operation as a container ship.  After the conversion
work was completed at the cost of approximately DM5,000,000, the
vessel was documented under the U.S. flag on December 10, 1993. 
Since that time, some miscellaneous repairs have been accomplished
at an estimated cost of $10,000.
     
Seacor's Claims

     Seacor claims that 19 U.S.C. 1466 was not intended to apply
to work done on a vessel which is not under American registry at
the time the work is done.  It cites C.S.D. 83-35, C.S.D. 79-265,
and 


                              - 2 -

C.I.E. 854/60.  Seacor states that the facts in C.S.D. 90-22 are
distinguishable from the facts in this case.

     Seacor states that, in the event that 19 U.S.C. 1466 is found
to apply to the vessel, pursuant to 19 U.S.C. 1466(e) and 19 CFR
4.14(a)(2)(iii)(A), the only costs that are subject to declaration,
entry, and duty are the costs incurred from August 1980, the date
of departure from the United States, through February 1981.      
               
ISSUE:

     Whether, in the specific facts of this case as stated supra,
the duty imposed by 19 U.S.C. 1466(a) applies to foreign shipyard
work performed while the vessel was under a foreign-flag.

LAW AND ANALYSIS:

     19 U.S.C. 1466(a) states in part: 

     The equipments, or any part thereof, including boats,
     purchased for, or the repair parts or materials to be used,
or   the expenses of repairs made in a foreign country upon 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, shall on the first arrival of
     such vessel in any port of the United States, be liable to
     entry and the payment of an ad valorem duty of 50 per centum
     on the cost thereof in such foreign country. (emphasis
     provided.)

     The primary question at issue here is whether the phrase
underlined supra, "a vessel intended to be employed in such trade",
applies to the subject vessel.   

     C.S.D. 79-265, which pertained to the applicability of 19
U.S.C. 1466 to a foreign-built barge operating in foreign waters
under a certificate of American ownership, stated in part:

     T.D. 75-146(1), reissued as Legal Determination 3730-01 in the
     CIS, held that because the vessel repair statute, 19 U.S.C.
     1466, applies to the first arrival in a U.S. port (after
     foreign repairs or purchases of equipment) of a vessel
     documented under U.S. law, no liability for duty on foreign
     repairs arises if the vessel relinquishes its U.S.
     documentation after the repairs are made and is registered
     under a foreign flag prior to its arrival in the United
     States.

     CIE 854/60 dated June 17, 1960, held, in part, that drilling
     rigs, tenders, and other craft of American manufacture
     operating in Venezuelan waters and upon which repairs were
     effected while the vessels were under foreign registry are not
                              - 3 -

     liable to the provisions of 19 U.S.C. 1466.
     ...
     It is clear from the precedents outlined above that the vessel
     repair statute by its terms is intended to apply only to
     vessels which are American-registered when they arrive at a
     U.S. port, and in the narrow factual situation presented
     herein, only to repairs and equipment purchases accomplished
     during the period of time relating back from the vessel's
     arrival to when its American registry was obtained.  In the
     instant case, liability for declaration of foreign repairs
     will begin on October 12, 1977, the date on which the barge
     was officially documented by the U.S. Coast Guard.

     C.S.D. 83-35 stated in part:

     The Customs Service has always taken the position that the
     conjunctive phrase contained in 19 U.S.C. 1466(a), "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", means that the vessel repair statute
     levies a duty on expenditures for American vessels which are
     either documented to engage in foreign or coastwise trade or
     are non-documented but nonetheless intended to engage in
     foreign or coastwise trade.

     C.S.D. 90-22 stated in part:

     The vessel in question was constructed in a U.S. shipyard in
     (yr.) as a general cargo vessel.  It was documented under the
     United States flag and thus operated until June 5, 1989, when
     its sale to a foreign company invalidated its United States
     documentation.  On June 9, 1989, it was documented under a
     foreign flag and delivered to a foreign shipyard.  It has been
     under foreign documentation since that time, and remains so
     today.  Conversion work to transform the vessel into a surimi
     factory trawler commenced on June 14, 1989.
     ...
     Customs has long held that in certain cases foreign shipyard
     work performed on a vessel prior to its documentation under
     the laws of the United States is nondutiable under section
     1466.  Customs is now clarifying that position inasmuch as the
     factual situation in the case at issue might, with a slight
     change in circumstances, result in the assessment of duty. 
If   the vessel were about to enter the foreign or coastwise trade,
     section 1466 would apply.  We note, however, that in view of
     the fact that at the time of the conversion the subject vessel
     is not documented under the laws of the United States to
     engage in the foreign or coastwise trade, nor is it intended
     to engage in such trade but rather to engage in the fisheries,
     the conversion work is not within the purview of section 1466. 
     In addition, notwithstanding the issue of documentation, it
     would appear that the work in question constitutes     

                              - 4 -

     modifications to the vessel which are nondutiable under the
     vessel repair statute.
     ...
     Holding:
      1. Where a vessel is temporarily removed from U.S.
     documentation during the course of, or prior to, work
     performed in a foreign shipyard and is then redocumented for,
     or used in, or from available evidence deemed intended to be
     used in the U.S. foreign or coastwise trade, 19 U.S.C. 1466
is   applicable.

     The U.S. Coast Guard informs us that the vessel applied for
U.S. documentation on November 30, 1993 and was granted
documentation on December 10, 1993.

     After a consideration of the record and the applicable
precedent, we find that the duty imposed by 19 U.S.C. 1466(a) is
not applicable to the foreign shipyard work performed on the vessel
prior to its documentation as a U.S. vessel on December 10, 1993.

     We find that C.S.D. 90-22 is distinguishable from the case at
issue here in that the vessel here was under foreign documentation
for over 13 years.  It was not temporarily removed from U.S.
documentation.  

HOLDING:

     As stated supra, the duty imposed by 19 U.S.C. 1466(a) is not
applicable to the foreign shipyard work performed on the vessel
prior to its documentation as a U.S. vessel on December 10, 1993.



                              Sincerely,



                              Stuart P. Seidel
                              Director, International
                              Trade Compliance Division