VES-13-18-RR:IT:EC 113700 CC
Chief, Vessel Repair Liquidation Unit
U.S. Customs Service
423 Canal St.
New Orleans, LA 70130
RE: Protest No. 2002-96-101054; Vessel Repair Entry No. C20-0040508-7; S/S ELIZABETH LYKES; V-121; 19 U.S.C.
1466(h)(2);
Dear Sir:
This is in response to your memorandum of July 11, 1996,
forwarding a protest with respect to the above-referenced vessel
repair entry.
FACTS:
The ELIZABETH LYKES is a U.S.-flag vessel owned and
operated by Lykes Brothers Steamship Company. Subsequent to the
completion of various foreign shipyard work, the vessel arrived
at New Orleans, Louisiana on February 6, 1995. A vessel repair
entry was filed on February 7, 1995.
An application for relief was timely filed. By a letter
dated January 10, 1996, from your office, the application was
granted in part and denied in part. The subject entry was
liquidated on February 2, 1996. A protest was timely filed by
Lykes Brothers Steamship Company on March 29, 1996.
The protestant protests your decision to deny relief for
three items: 3b, 3c, and 4. Item 3b is a 3CM radar. Item 3c is
the U.S. labor costs for installation of the 3CM radar. Item 4
is the U.S. labor costs for work on a 10CM radar.
You denied relief for Item 3b because it is equipment and
thus not eligible for duty-free treatment under 19 U.S.C.
1466(h)(2). You denied relief for the U.S. labor costs for items
3c and 4 because the installed parts and materials were not U.S.-manufactured.
The protestant claims that Item 3b should not be dutiable
pursuant to 19 U.S.C. 1466(h)(2) because U.S. parts and
materials were used, and the foreign parts and materials of this
item were duty-paid. For Item 3c the protestant claims that U.S.
labor costs should be duty-free since U.S. parts and materials
were used. For Item 4 the protestant claims that U.S. labor
should be duty-free when used in conjunction with foreign duty-paid parts or materials, pursuant to 19 U.S.C. 1466(h)(2).
ISSUE:
Whether the subject items are dutiable pursuant to 19 U.S.C.
1466.
LAW AND ANALYSIS:
19 U.S.C. 1466(a) provides, in part, for payment of an ad
valorem duty of 50 percent of the cost of foreign repairs to
vessels documented under the laws of the United States to engage
in the foreign or coastwise trade, or vessels intended to engage
in such trade.
19 U.S.C. 1466(h)(2) provides that duty imposed by
subsection (a) [19 U.S.C. 1466(a)] shall not apply to the
following:
[T]he 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.
The plain language of 19 U.S.C. 1466(h)(2) states that it
applies only to spare parts or materials; 19 U.S.C. 1466(h)(2)
does not allow for duty-free treatment of equipment. For Item 3b
relief was denied because the 3CM radar was determined to be
equipment, since the relevant documentation showed that this item
consisted of a complete radar unit which was imported. We have
reviewed the relevant documentation and agree that Item 3b
consisted of a complete radar unit. In similar rulings we have
found that a new radar system that is installed is considered
vessel equipment, rather than parts or materials. See
Headquarters Ruling (HQ) 113798, dated January 9, 1997 and HQ
114092, dated September 12, 1997 for a complete discussion of a
radar system being considered vessel equipment. Consequently, we
find that Item 3b is vessel equipment, and, thus, is not eligible
for duty-free treatment pursuant to 19 U.S.C. 1466(h)(2).
Also, 19 U.S.C. 1466(h)(2) does not allow for duty-free
treatment of U.S. labor. See, e.g., HQ 111692, dated December
17, 1991, and HQ 111789, dated January 29, 1992. Consequently,
the subject U.S. labor costs for items 3c and 4 would not be
eligible for duty-free treatment pursuant to 19 U.S.C.
1466(h)(2).
19 U.S.C. 1466 also provides, in pertinent part, the
following:
(d) If an 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....
19 CFR 4.14(c)(3) states that remission or refund of duty
is authorized if good and sufficient evidence shows:
(ii) United States parts and equipment installed
with American labor. The equipment, equipment parts,
repair parts or materials used on the vessel were
manufactured or produced in the United States and
purchased by the owner of the vessel in the United
States, and the labor necessary to install such
equipment or to make such repairs was performed by
residents of the United States or by members of the
regular crew of the vessel.
The U.S. labor costs for Item 3c are not eligible for a
remission or refund of duty pursuant to 19 U.S.C. 1466(d)(2)
and 19 CFR 4.14(c)(3)(ii), because the equipment installed,
the imported 3CM radar, is foreign-made.
HOLDING:
The subject items are dutiable pursuant to 19 U.S.C. 1466.
Accordingly, the protest is denied.
In accordance with Section 3A(11)(b) of Customs Directive
099 3550-065, dated August 4, 1993, Subject: Revised Protest
Directive, this decision should be mailed by your office to the
Protestant no later than 60 days from the date of this letter.
Any reliquidation of the entry in accordance with the decision
must be accomplished prior to mailing of the decision. Sixty
days from the date of the decision the Office of Regulations and
Rulings will take steps to make the decision available to customs
personnel via the Customs Rulings Module in ACS and the public
via the Diskette Subscription Service, Freedom of Information Act
and other public access channels.
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers
Branch