HQ 111880: Vessel Repair; Entry No. C18-0016818-4; S.S. ROVER V-72; U.S. Parts

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 111880

                        February 7, 1992

VES-13-18-CO:R:IT:C 111880 GEV

CATEGORY:  Carriers

Deputy Assistant Regional Commissioner
Commercial Operations Division
423 Canal Street
New Orleans, Louisiana 70130-2341

RE:  Vessel Repair; Entry No. C18-0016818-4; S.S. ROVER
     V-72; U.S. Parts

Dear Sir:

     This is in response to your memorandum dated August 23,
1991, forwarding an application for relief from duties assessed
under 19 U.S.C. 1466.  You request our advice regarding the
evidence required for remission under 19 U.S.C. 1466(h).

FACTS:

     The S.S. ROVER is a U.S.-flag vessel owned by Central Gulf
Lines, Inc. of New Orleans, Louisiana.  The subject vessel
underwent foreign shipyard work during the period of November,
1990 through April, 1991.  Subsequent to the completion of the
work the subject vessel arrived in the United States in
Jacksonville, Florida, on May 6, 1991.  A vessel repair entry was
filed on May 9, 1991.

     Pursuant to an extension of time, an application for relief
was timely filed on August 6, 1991.  The applicant has requested
relief for various parts claimed to be purchased in the United
States and installed foreign on the subject vessel.  In support
of this claim the applicant has submitted documentation including
various U.S. vendors' invoices and/or air freight bills.

ISSUE:

     Whether vessel parts purchased in the United States and
shipped foreign for installation aboard a U.S.-flag vessel are
exempted from duty pursuant to 19 U.S.C. 1466(h).

                              - 2 -

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.

     The Customs and Trade Act of 1990 (Pub. L. 101-382) which
amends 19 U.S.C. 1466, exempts from duty under the statute, the
cost of spare repair parts or materials which have been
previously imported into the United States as commodities with
applicable duty paid under the Harmonized Tariff Schedule of the
United States (HTSUS).  The amendment specifies that the owner or
master must provide a certification that the materials were
imported with the intent that they be installed on a cargo vessel
documented for and engaged in the foreign or coasting trade.

     The certification required by 19 U.S.C. 1466(h)(2) as to the
vessel's documentation (foreign or coasting trades) and service,
will be made by the master on the vessel repair entry (CF 226)
at the time of arrival.  The fact of payment of duty under the
HTSUS for a particular part must be evidenced as follows.  In
cases in which the vessel operator or a related party has acted
as the importer of foreign materials, or where materials were
imported at the request of the vessel operator for later use by
the operator, the vessel repair entry will identify the port of
entry and the consumption entry number for each part installed on
the ship which has not previously been entered on a CF 226.  In
cases in which the vessel operator has purchased imported
materials from a third party in the United States, a bill of sale
for the materials shall constitute sufficient proof of prior
importation and HTSUS duty payment.  This evidence of proof of
importation and payment of duty must be presented to escape duty
and any other applicable consequences.

     In addition, we require certification on the CF 226 or an
accompanying document by a person with direct knowledge of the
fact that an article was imported for the purpose of either then-
existing or intended future installation on a company's vessels.
Ordinarily, the vessel's master would not have direct knowledge
of that fact, and an agent may also be without such knowledge.

     Customs has in the past linked this duty remission
provision to the duty assessment provision in subsection (a) of
the statute.  In the face of argument to the contrary we have
held that a two-part test must be met in order for remission of
duty to be granted:  first, that the article must be of U.S.
manufacture; and, second, it must be installed by a U.S.-resident
or regular vessel crew labor.  The reason for this position is
that (d)(2) refers to "such equipments or parts...", etc.,
without any other logical placement for the word "such" occurring
in that subsection. We inferred that "such" articles must refer
to those installed under subsection (a), absent any other
reasonable predication.  The new amendment puts this issue to
rest; it is clear that as concerns foreign-made parts imported
for consumption and then installed on U.S. vessels abroad, the
labor required for their installation is separately dutiable.  A
part may now be considered exempt from vessel repair duty albeit
the foreign cost labor is dutiable.

     Uniform treatment will be accorded to parts sent from the
United States for use in vessel repairs abroad, regardless of
whether they are proven to be produced in the U.S., or have been
proven to have been imported and entered for consumption with
duty paid.  In both cases, the cost of the materials is duty
exempt and only the cost of foreign labor necessary to install
them is subject to duty.  Crew member or U.S.-resident labor
continues to be free of duty when warranted.

     The effective date of this amendment makes this section
applicable to any entry made before the date of enactment of this
Act that is not "finally liquidated" (i.e., for which a timely
protest was filed or court action initiated) on the date of
enactment of this Act, and any entry made--

          (A) on or after the date of enactment of this
              Act, and
          (B) on or before December 31, 1992.

     Since the subject entry has not been "finally liquidated" as
noted above, the new section 1466(h) is applicable to this entry
as it relates to spare parts.

     In regard to the documentation submitted for this particular
application for relief, we note that the requisite certification
discussed above is not included for any of the parts under
consideration.  In addition, although U.S. invoices have been
submitted, there is no proof that any of the parts in question
are of U.S. manufacture.  Furthermore, we note that for some of
the parts which the applicant contends are exempt from duty,
there is no U.S. invoice but only an air freight bill.
Accordingly, the evidence submitted is insufficient to grant
relief under 19 U.S.C. 1466(h) for any of the parts under
consideration.


HOLDING:

     Vessel parts purchased in the United States and shipped
foreign for installation aboard a U.S.-flag vessel are exempted
from duty pursuant to 19 U.S.C. 1466(h), provided the requisite
evidentiary documentation is submitted.

     Accordingly, with respect to the application under
consideration, relief should be granted for those items covered
by a U.S. invoice if the required certification is submitted, or
proof is submitted that the parts in question were manufactured
in the United States. (see ruling 111205)  However, in regard to
those items for which no U.S. invoice was provided but merely
documentation showing that the parts in question were shipped
from the U.S. to the foreign shipyard, relief should be denied.

                                   Sincerely,




                                   B. James Fritz
                                   Chief
                                   Carrier Rulings Branch