ENT-1/CON-3/CON-7-CO:R:E:C 225339 AJS

Laurence J. Lasoff, Esq.
Collier, Shannon, Rill & Scott
3050 K Street, N.W. Ste. 400
Washington, D.C. 20007

RE: Equipment and supplies for oil spill cleanup in the U.S. Virgin Islands; General Note 1; General Note 2; coastwise trade; 19 U.S.C. 1433; 19 U.S.C. 1434; Subheading 9801.00.10; "exportation".

Dear Mr. Lasoff:

This is in reply to your request of April 14, 1994, concerning Marine Spill Response Corporation (MSRC).

FACTS:

MSRC is a mutual benefit corporation organized exclusively to promote the welfare of the public by mitigating environmental damage to the waters of the United States. Under its charter MSRC can only respond to spills occurring within or threatening the waters (including the territorial seas and the exclusive economic zone) of the United States (including the several states of the U.S., the District of Columbia, the Commonwealth of Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, the Commonwealth of the Northern Mariana Islands, and any other territory or possession of the United States). MSRC equipment and resources were acquired through grants provided by the Marine Preservation Association (MPA). MPA is a non-profit organization whose members include oil companies, shippers and receivers of oil and others who pay dues to MPA based on the amount of oil they handle in the marine environment. Certain MPA members have entered into contracts with MSRC to fulfill their required spill

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response plans and obligations under the Oil Pollution Act of 1990 (OPA). MSRC will also respond to oil spills of non-members through agreements with the U.S. Government or through agreements with non-members.

MSRC operates five regional response centers which house necessary vessels (i.e., U.S.-built and flagged), equipment, supplies and personnel to promptly respond to oil spills in order to satisfy certain of its clients' obligations as required under the OPA. In addition to the five regional centers, MSRC has other facilities located in different locations, which serve as prestaging sites. These sites also contain certain equipment that may be necessary should a spill occur in a particular area. MSRC maintains records of the inventoried equipment and supplies located at each center and site. The equipment and supplies used by MSRC are of both U.S. and foreign origin. The foreign origin merchandise is imported into the U.S. and all applicable duties are paid upon initial entry.

In situations involving a spill in U.S. waters, MSRC equipment and supplies will be sent by vehicle, air or sea to the spill site. MSRC must use its best efforts to initiate response activities immediately and must use different equipment from the various centers and sites as necessary to respond to the particular demands of the spill. Once the spill response activities are completed, all vessels, equipment and supplies are cleaned and returned to the original response center or site in the U.S., Puerto Rico or the U.S. Virgin Islands so that they can be readied for subsequent oil spill events. During response activities, equipment may break and the entire piece of equipment or just the broken part may be returned to the U.S. for repair.

ISSUE:

Whether the subject equipment and supplies are exported when sent on an oil spill.

Whether the subject equipment and supplies are subject to Customs pre-exportation procedural requirements for articles exported and returned or to Customs entry filing procedures or duties upon their return to their U.S. port of origin.

LAW AND ANALYSIS:

All goods provided for in this schedule and imported into the customs territory of the United States from outside thereof are subject to duty or exempt therefrom as prescribed in general note 3 through 13, inclusive. General Note 1, Harmonized Tariff Schedule of the United States (HTSUS). The term "customs

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territory of the United States", as used in the tariff schedule, includes only the States, the District of Columbia and Puerto Rico. General Note 2, HTSUS.

MSRC will operate from various locations in the U.S. Under its Charter "MSRC can only respond to spills occurring within or threatening the waters (including the territorial seas . . .) of the U.S. (including . . . the District of Columbia, the Common- wealth of Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, the Commonwealth of the Northern Mariana Islands, and any other territory or possession of the U.S."

The recovery of spilled oil from a point or points in the 3- mile U.S. territorial sea and the unloading/discharge of the oil at another such point or points constitutes coastwise trade which, pursuant to 46 U.S.C. App. 883, may only be performed by vessels which are U.S.-built, owned and documented (i.e., coastwise-qualified). At this time, the response centers house U.S.-built and flagged oil spill vessels. Oil spill recovery operations conducted solely within U.S. territorial waters (not including the exclusive economic zone) by other than coastwise- qualified vessels are prohibited by 46 U.S.C. App. 883.

We note that with respect to Guam, American Samoa, Wake, Midway, or Kingman Reef, vessels issued a certificate of documentation with a registry endorsement (i.e., foreign-built and U.S.-flagged) pursuant to 46 U.S.C. 12105(b) may engage in the coastwise trade. With regard to the Commonwealth of the Northern Mariana Islands (CNMI), sections 502(b) and 503(b) of the "Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America" provide in part that except for activities of the U.S. Government and its contractors in the CNMI, the coastwise laws of the United States do not apply to the CNMI. Furthermore, the coastwise laws are not applicable to American Samoa pursuant to 48 U.S.C. 1664, or to the U.S. Virgin Islands pursuant to 46 U.S.C. App. 877 (see also 101.1(m), Customs Regulations and 19 U.S.C. 1401(h)).

As noted in the above statutory and regulatory authority, a port in the USVI is considered a foreign port for purposes of vessel entry and clearance. Accordingly, a vessel arriving in the U.S. from the USVI must immediately report its arrival pursuant to 19 U.S.C. 1433 and make formal entry within twenty- four hours after arrival pursuant to 19 U.S.C. 1434. A vessel leaving the U.S. bound to the USVI must clear for foreign pursuant to 46 U.S.C. App. 91.

Your request correctly notes that "exportation" is defined by 19 CFR 101.1(k) as:

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A severance of goods from the mass of things belonging to this country with the intention of uniting them to the mass of things belonging to some foreign country. The shipment of merchandise abroad with the intention of returning it to the United States with the design to circumvent provisions of restriction or limitation of the tariff laws or to secure benefit accruing to imported merchandise is not an exportation. Merchandise of foreign origin returned from abroad under these circumstances is dutiable according to its nature, weight, and value at the time of its original arrival in this country.

See Swann & Finch Company v. United States, 190 U.S. 143 (1903).

We agree that the equipment and supplies sent to the USVI do not satisfy the above description. In situations involving a spill, equipment and supplies will be sent by vehicle, air or sea to the spill site. Once the spill response activities are completed, all equipment and supplies are cleaned and returned to their point of origin. Therefore, no intent exists to unite them to the mass of things belonging to the USVI. Accordingly, no exportation of the subject equipment and supplies occurs.

Subheading 9801.00.10, HTSUS, provides for the free entry of U.S. products that are exported and returned without having been advanced in value or improved in condition by any means while abroad, provided the documentary requirements of 19 CFR 10.1 are met. You request whether Customs' pre-exportation procedural requirements for articles exported and returned are applicable. Inasmuch as no exportation has occurred in this instance, these procedural requirements are inapplicable.

As noted previously, all goods imported into the customs territory of the U.S. from outside thereof are subject to duty or exempt therefrom. Inasmuch as no exportation has taken place in this instance, the subject equipment and supplies are not imported when returned to the U.S. However, in order to support the determination that an exportation did not occur, documentation will be required to verify exactly which equipment and supplies are initially sent to the spill and that these same equipment and supplies are returned to the point of origin. For example, the manifest required for an outgoing vessel in 19 CFR 4.60 could be provided listing the equipment and supplies on the vessel, and the manifest required for an incoming vessel in 19 CFR 4.7 could be provided listing the equipment and supplies on that vessel. This type of documentation would enable Customs to verify that the items returned to the customs territory of the U.S. are also the same items which departed the customs territory of the U.S.

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Your request states that departures of equipment and supplies from the U.S. may be by aircraft. 19 CFR 122.61(a)(1) requires that all aircraft, except public and private, leaving the U.S. for a foreign area are required to clear if carrying merchandise for hire. 19 CFR 122.79(a) provides that an air cargo manifest shall be filed for aircraft transporting cargo between the U.S. and U.S. possessions. In addition, a Shipper's Export Declaration is required for shipments from the U.S. to the USVI. It appears that equipment and supplies departing by aircraft would be subject to these provisions.

HOLDING:

The subject equipment and supplies are not exported when sent to the USVI in response to an oil spill.

The subject equipment and supplies are not subject to Customs pre-exportation procedural requirements for articles exported and returned because they are not exported. In addition, they would not be subject to duty because they are not exported. Proper documentation must be provided to establish that the equipment and supplies returning to the customs territory of the U.S. are the same items which originally departed the customs territory

U.S. vessels arriving with the subject equipment and supplies from a foreign place are subject to Customs reporting and entry filing procedures pursuant to 19 U.S.C. 1433 & 1434. The subject vessels, departing the U.S. bound to the USVI, must also clear for foreign pursuant to 46 U.S.C. App. 91. In addition, items departing the U.S. by aircraft for the USVI are subject to the requirements of 19 CFR 122.61 and 122.79.


Sincerely,


John Durant, Director
Commercial Rulings Division