VES-13-06-OT-RR:BSTC:CCR H242464 DAC
Edward Washburn
GM Engineering and Technical Services
Horizon Lines, Inc.
600 E. Las Colinas Blvd., Suite 600
Dallas, TX 75039
RE: 19 U.S.C. § 1466, Vessel repair; United States Korea Free Trade Agreement; United States Singapore Free Trade Agreement; Harmonized Tariff Schedule of the United States (2013), Section XXII, Chapter 98, Subchapter XVIII.
Dear Mr. Washburn:
This is in response to your June 5, 2013, ruling request regarding the vessel repair statute, 19 U.S.C. § 1466, and the dutiable or nondutiable treatment of foreign shipyard repairs, work and “equipment” based upon the United States-Korea Free Trade Agreement (“Korea FTA”) and the United States Singapore Free Trade Agreement (“Singapore FTA”). Our determination is set forth below.
FACTS
Horizon Lines, Inc. (“Horizon”), operates the M/V HORIZON SPIRIT and the M/V HORIZON RELIANCE. The HORIZON SPIRIT and the HORIZON RELIANCE are both United States-flagged vessels. Horizon proposes to have work performed on both vessels in foreign shipyards located in China, Korea, and Singapore. Horizon proposes to have the vessel propulsion systems changed to diesel engine power systems on both vessels, and the steam turbine propulsion systems will be removed. You further state that “equipment” for the vessel may be purchased in Korea, Sweden and Germany.
ISSUES
Whether the work to be performed in a shipyard in China is dutiable under 19 U.S.C. § 1466.
Whether the work to be performed in a shipyard in Korea is dutiable under 19 U.S.C. § 1466 or nondutiable under the United States Korea Free Trade Agreement.
Whether the work to be performed in a shipyard in Singapore is dutiable under 19 U.S.C. § 1466 or nondutiable under the United States Singapore Free Trade Agreement.
Whether the “equipment” to be purchased in Korea, Sweden and Germany is dutiable under 19 U.S.C. § 1466 or nondutiable.
LAW AND ANALYSIS
Title 19, United States Code, section 1466 (19 U.S.C. § 1466), provides for the payment of duty at a rate of fifty percent ad valorem on the cost of equipment for and 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 relevant statute, 19 U.S.C. § 1466, provides, in pertinent part:
19 U.S.C. § 1466. Equipment and repairs of vessels
(a) Vessels subject to duty; penalties. 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. * * *
19 U.S.C. § 1466. (emphasis added.)
The provisions of the Korea FTA were adopted by the United States with the enactment of the United States – Korea Free Trade Agreement Implementation Act (the “Act”), Pub. L. 112-41, 125 Stat. 428 (19 U.S.C. § 3805 note), on October 21, 2011. On March 6, 2012, President Barack H. Obama signed the Presidential Proclamation (8783) to implement the provisions of the Korea FTA. The proclamation, which was published in the Federal Register on March 19, 2012, (77 Fed. Reg. 15943), modified the Harmonized Tariff Schedule of the United States (“HTSUS”). The modifications to the HTSUS included the addition of a new General Note with regards to the Korea FTA and the insertion throughout the HTSUS of the preferential duty rates under the Korea FTA, in which the code “KR” appears in parenthesis in the “Special” rate of duty subcolumn.
The provisions of the Singapore FTA were adopted by the United States with the enactment of the United States – Singapore Free Trade Agreement Implementation Act (the “Act”), Pub. L. 108-78, 117 Stat. 948 (19 U.S.C. § 3805 note), on September 3, 2003. On December 30, 2003, President George W. Bush signed the Presidential Proclamation (7747) to implement the provisions of the Singapore FTA. The proclamation, which was published in the Federal Register on December 31, 2003, (68 Fed. Reg. 75793), modified the HTSUS. The modifications to the HTSUS included the addition of a new General Note with regards to the Singapore FTA and the insertion throughout the HTSUS of the preferential duty rates under the Singapore FTA, in which the code “SG” appears in parenthesis in the “Special” rate of duty subcolumn.
Chapter 98, subchapter XVIII, of the 2013 HTSUS relates to the vessel repair statute, 19 U.S.C. § 1466, and includes provisions that incorporate the Korea FTA and the Singapore FTA.
The relevant provisions in the 2013 HTSUS, Chapter 98, subchapter XVIII, provide, in pertinent part:
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 described in U.S. note 1 to this subchapter:
9818.00.07 Other, upon first arrival in any port of the United States of any vessel described in U.S. note 1 to this subchapter
General rate of duty 50 percent of the cost of such goods or repairs
Special rate of duty Free (…KR…SG)
Subheading 9818.00.07, HTSUS, is among the provisions that have the codes “KR” and “SG” in the “Special” rate of duty subcolumn indicating the applicability of the Korea FTA and the Singapore FTA, respectively.
Subheading 9818.00.07, HTSUS, provides for the general requirements of 19 U.S.C. § 1466, specifically, the dutiability on the cost of foreign vessel repairs and equipment purchased in a foreign country. The codes “KR” and “SG” appear in the parenthesis in the “Special” rate of duty subcolumn for this subheading and indicate the applicable rate of duty for this subheading is “Free” for both Korea (KR) and Singapore (SG).
We point out that based upon the information provided in your letter, and without a full examination of the pertinent shipyard invoices, we are unable to make a definitive determination with respect to all of the proposed work described, such as which work would constitute dutiable equipment and repairs and which work would constitute a modification.
With regards to the purchase of equipment for the vessel, in accordance with 19 U.S.C. § 1466 and the HTSUS, 9818.00.07, we determine equipment for the vessel purchased in either Germany or Sweden may be dutiable. However, in accordance with the Korea FTA, equipment for the vessel purchased and manufactured in Korea may be nondutiable.
Based upon the information provided in your request, 19 U.S.C. § 1466 and the provisions in the HTSUS, 9818.00.07, we therefore determine that the proposed work to be performed on both of the subject vessels in a foreign shipyard located in China may be dutiable. In light of the Korea FTA and the provisions in the HTSUS, we further determine that the proposed work to be performed on both of the subject vessels in a foreign shipyard located in Korea may be nondutiable. Similarly, in light of the Singapore FTA and the provisions in the HTSUS, we also determine that the proposed work to be performed on both of the subject vessels in a foreign shipyard located in Singapore may be nondutiable.
HOLDING
Based upon the information provided, in accordance with 19 U.S.C. § 1466 and the HTSUS, 9818.00.07, the purchase of equipment for the vessel in either Germany or Sweden would be dutiable. However, in accordance with the Korea FTA, equipment for the vessel purchased and manufactured in Korea may be nondutiable.
We further determine that based upon the information provided in your request, the vessel repair statute, 19 U.S.C. § 1466 and the provisions in the HTSUS, 9818.00.07, the proposed work to be performed on both of the subject vessels in a foreign shipyard located in China may be dutiable. Additionally, in light of the Korea FTA and the provisions in the HTSUS, we further determine that the proposed work to be performed on both of the subject vessels in a foreign shipyard located in Korea may be nondutiable. Similarly, in light of the Singapore FTA and the provisions in the HTSUS, we also determine that the proposed work to be performed on both of the subject vessels in a foreign shipyard located in Singapore may be nondutiable.
We emphasize that this letter is merely advisory in nature and does not eliminate the requirement to declare work performed abroad at the vessels’ first United States port of arrival, nor does it eliminate the requirement to file vessel repair entries showing this work. See 19 CFR § 4.14. Furthermore, any final determination on this matter is contingent on CBP’s review of the evidence submitted pursuant to 19 CFR § 4.14(i).
Sincerely,
Lisa L. Burley
Acting Chief/ Supervisory Attorney-Advisor
Cargo Security, Carriers and Restricted Merchandise Branch
Office of International Trade, Regulations & Rulings
U.S. Customs and Border Protection