VES-13-18-RR:IT:EC 113827 GG
Mr. Lawrence Ryan
Chief, Residual Liquidation and Protest Branch
U.S. Customs Service
6 World Trade Center, Room 761
New York, NY 10048
RE: Vessel repairs; SS S/L Expedition; Vessel repair entry # 514-3005515-5; 19 U.S.C. 1466(d)(2); 19 U.S.C. 1466(h)(2); U.S.
parts and equipment installed with American labor
Dear Mr. Ryan:
This is in response to a petition for review of a denial of
an application for relief from vessel repair duties, forwarded to
us by you on January 24, 1997. Your memorandum reference number
is VES-13-18-AD-NY-NWK-RLS ATC.
FACTS:
The U.S. vessel S/L Expedition had its starboard boiler
repaired in the Dominican Republic on October 5 and 6, 1996. A
vessel repair entry was filed on October 10, 1996. The entry
states that the repairs were emergency repairs performed by
welders flown in from the United States using U.S.-purchased
materials provided by the vessel. Another item on the entry,
involving cleaning services that are unrelated to the boiler
repair, is not at issue in this discussion.
The ship's owner, Sea-Land Service, Inc. ("Sea-Land"), filed
a timely application for relief from vessel repair duties, which
Customs denied in part on December 20, 1996. Customs cited as
its reason for denial the lack of evidence that the repair parts
were of U.S. origin and that the work was performed by U.S.
residents. Sea-Land filed its petition for review of the denial
on January 10, 1997, attaching a letter from Brady Marine Repair
Co., Inc. ("Brady"), in support of its contention that the
boiler repairs were not dutiable. This letter, dated January 8,
1997, provides the names and social security numbers of the two
Brady employees who performed the work, and states that to the
best of Brady's knowledge all materials used in the repair were
American manufactured and purchased. The Brady invoice to Sea-Land for the work performed in the Dominican Republic provides a
breakdown of labor, materials, and transportation costs, but
sheds no light on the residency of the welders or on the origin
of the repair materials.
ISSUE:
Whether the repair costs to the starboard boiler are
dutiable under the vessel repair statute.
LAW AND ANALYSIS:
Title 19, United States Code, section 1466(a), provides in
part for payment of an ad valorem duty of 50 percent 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 be employed in such trade.
The vessel repair duty is not imposed on materials or labor
when good and sufficient evidence indicates that the repair parts
were manufactured or produced in the United States and installed
by U.S. residents or by members of the regular crew of the
vessel. 19 U.S.C. 1466(d)(2). The origin and the
residency/crew member elements must both be present for relief to
be granted under this provision. Sea-Land, by supplying the
names of the Brady workers and their respective social security
numbers, has satisfied the second part of this test. It has
failed, however, to document in an adequate manner the U.S.
origin of the materials used in the repair. 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 a domestic invoice. See
Headquarters Ruling Letters (HRL) 112731, dated July 8, 1993;
112779, dated July 26, 1993; and 112128, dated July 29, 1992.
Brady's assertion in its January 8, 1997 letter to Sea-Land that
all materials used in the repair were American manufactured and
purchased, does not rise to the level necessary to establish U.S.
origin. Absent acceptable documentary evidence that the repair
materials were U.S. produced or manufactured, a petitioner cannot
claim remission under 19 U.S.C. 1466(d)(2), even though he has
adequately confirmed the U.S. residency of the workers who
performed the repairs.
Relief from vessel repair duties is also not available to
Sea-Land under 19 U.S.C. 1466(h)(2). This provision exempts
from vessel repair duty 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. To enable U.S.
manufacturers of parts and materials to compete on an equal
footing with their foreign counterparts, Customs has extended the
benefits of 1466(h)(2) to U.S.-made repair parts and materials.
See e.g., HRL's 111899, dated August 14, 1992; and 111338, dated
January 31, 1991. However, a vessel operator must still either
prove domestic origin by the presentation of satisfactory
documentary evidence of the kind discussed above, or demonstrate
that foreign spare parts or materials have been previously
entered for consumption with all applicable duties paid. A
reference to the consumption entry number and port of entry for
that previous importation will satisfy this requirement. If
imported articles are purchased in the U.S. from a party
unrelated to the vessel operator, a domestic bill of sale to the
vessel operator must be presented. Finally, the exemption from
vessel repair duty under 1466(h)(2) is contingent upon
certification that the spare repair parts or materials were
intended for use aboard a U.S. flag vessel engaged in foreign or
coastwise trade, and that such parts or materials were imported
for the purpose of either then-existing or intended future
installation on a company's vessels. Sea-Land has presented no
evidence to fulfill any of the above requirements, and
consequently, the cost of the materials used in the boiler
repairs is subject to vessel repair duty.
HOLDING:
The costs incurred to repair the starboard boiler are
subject to the 50% vessel repair duty imposed under 19 U.S.C.
1466(a).
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers
Branch