VES-13-18-CO:R:IT:C 112118 GFM
Deputy Assistant Regional Commissioner
Commercial Operations Division
423 Canal Street
New Orleans LA 70130-2341
RE: Vessel Repair Entry No. VR-C20-0036617-2; M/V ACADIAN
COMMANDER; One-Round-Voyage Rule; Six-month expiration
Dear Sir:
Reference is made to your memorandum of November 20, 1991,
which forwards for our review and recommendation the Application
for Relief from the assessment of vessel repair duties filed on
behalf of Seacor Supply Ships, Inc. in regard to the above
captioned vessel repair entry. Our findings are set forth below.
FACTS:
The record reflects that the ACADIAN COMMANDER is a United
States-flag vessel owned by Seacor Supply Ships, Inc. In its
application for relief, vessel owner states that on April 4,
1989, the vessel undertook repairs to its No. 1 main engine at
Bludworth Bond Shipyard in Houston, Texas prior to its subsequent
voyage to Great Yarmouth, U.K. After docking at Great Yarmouth,
and pursuant to a vessel inspection, it was determined that said
engine again required replacement. As a result, on November 13,
1989, some seven months after the original engine replacement, an
additional engine was installed. Applicant now seeks remission
of duties paid on these foreign repairs pursuant to the "one-
round-voyage" rule.
ISSUES:
(1) Whether duties paid for the equipment and the
described repairs for the vessel under consideration are
entitled to remission pursuant to 19 U.S.C. 1466(d)(1)
under the "one-round-voyage" rule.
(2) In the alternative, whether said vessel owner is
entitled to remission of duties based upon any of the exemptions
enumerated in 19 U.S.C. 1466.
(3) Whether the equipment installed during said foreign
repair is subject to duty pursuant to 19 U.S.C. 1466(h).
LAW AND ANALYSIS:
Title 19, United States Code, section 1466, provides, in
pertinent part, that the equipment purchased for and the 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 intended to be employed in those trades shall be subject to
the payment of an ad valorem duty of 50 percent of the cost of
that equipment and those repairs. Under certain circumstances,
however, subsections of the statute do allow remission of said
duties.
The "one-round-voyage" rule, as abstracted in Treasury
Decision (T.D.) 71-83(38), provides that:
If satisfactory evidence is furnished clearly showing
any part of a vessel to have been repaired and/or
serviced just prior to the commencement of a voyage
from a United States port, it is reasonable to assume
that the part is seaworthy for a round voyage, foreign
and return. Unless evidence indicates some other
reason necessitated the repairs during the voyage,
failure of that part to function within six months
after the repair and/or servicing in the United States
may be considered a casualty within the meaning of [19
U.S.C. 1466(d)]. However, remission of duty
under that statute in the circumstances is limited to
duty on the essential, minimum foreign repairs to the
parts.
Additionally, section 4.14(c)(3)(i), Customs Regulations (19
C.F.R. 4.14(c)(3)(i), provides, with regard to the "one-round-
voyage" rule, that:
For the purpose of this section, the term "casualty"
does not include any purchases or repairs necessitated
by ordinary wear and tear, but does include a part's
failure to function if satisfactory evidence shows that
the specific part was repaired or serviced immediately
before starting the voyage from the United States port
and that the part failed to function within six months
of such repair or servicing.
With regard to the facts of this case, it is clear that the
"one-round-voyage" rule will not provide relief to the applicant.
Treasury Decision 71-83(38) has been interpreted to grant relief
where part failure has occurred during the next voyage following
repairs, repairs due to casualty excepted, provided that the need
for such repairs occurs within six months of the original
repairs. In this case, it is undisputed that the initial repairs
to the main engine occurred on April 4, 1989, at Houston, Texas.
It is also undisputed that said foreign repairs were affected on
November 13, 1989 at Great Yarmouth, England. As a result,
because the required repairs were not completed within the six-
month time period as mandated by the statute, relief cannot be
granted.
As it has thus been established that the "one-round-
voyage" rule is inapplicable, the transaction in question must
now be evaluated in light of other possible exemptions enumerated
in 19 U.S.C. 1466.
The first of these, section 1466(d)(1) provides for the
remission or refund of such duties if the owner or master
furnishes good and sufficient evidence that the vessel was
compelled by stress of weather or other casualty to put into the
foreign port to make repairs to secure the safety and
seaworthiness of the vessel to enable it to reach its port of
destination.
Additionally, section 1466(d)(2) provides for the remission
or refund of such duties if the owner or master furnishes good
and sufficient evidence that the equipment or repair parts or
material were manufactured or produced in the United States and
the labor necessary to install them was performed by residents of
the United States or members of the regular crew of the vessel.
In the past, the Customs Service has linked this duty remission
provision to the duty assessment provision in subsection (a) of
the statute. 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 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 logical association
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 by making it 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
labor cost is dutiable.
In applying these statutes to the case at hand, it is clear
that based upon the documentary evidence submitted, applicant
is not entitled to a remission of duties for said foreign
repairs.
With regard to 19 U.S.C. 1466(d)(1), the record contains
no evidence indicating that a stress of weather or other
casualty occurred. The documents submitted with the application
indicate that said repairs were affected pursuant to a
recommendation made during a vessel inspection which occurred at
Great Yarmouth, England. Thus, as the vessel was not forced to
put into port due to stress or other casualty, this section
cannot be relied upon to provide relief.
Similarly, the record is also void of any documents which
would provide a factual basis for relief under 19 U.S.C.
1466(d)(2). This section provides that remission will lie if it
can be shown that: (1) the installed equipment is of U.S.
manufacture, and (2) the installation was affected by U.S.
resident or regular vessel crew labor. Here, applicant supplied
no evidence concerning either the origin of the engine installed
in Great Yarmouth or the nationality of the labor crew which
installed that engine. Absent any affirmative documentation on
this issue, duties may not be remised under this section.
The remaining aspect of our analysis concerns the
dutiability of the engine eventually installed on board the
vessel in Great Yarmouth, England.
On August 20, 1990, the President signed into law the
Customs and Trade Act of 1990 (Pub. L. 101-382), section 484E of
which amends 19 U.S.C. 1466 by adding a new subsection (h).
Subsection (h) has two elements, which are as follows:
(h) The duty imposed by subsection (a) of this section shall
not apply to--
(1) the cost of any equipment, or any part of
equipment, purchased for, or the repair parts
or materials to be used, or the expense of
repairs made in a foreign country with
respect to, LASH (Lighter Aboard Ship) barges
documented under the laws of the United
States and utilized as cargo containers, or
(2) the 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.
In all cases which meet the conditions imposed by the
statutory amendment, uniform treatment will be accorded to parts
sent from the United States for use in vessel repairs abroad.
This will be so regardless of whether they are proven to have
been produced in the U.S., or 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,
in cases which qualify under the new law.
In accordance with the statute's provisions, the applicant
bears the burden of proving payment of duties on such equipment.
In the present case, the submitted documents suggest that the
engine in question was sent by ship from Houston, Texas, for
installation at Great Yarmouth, England. Again, however, the
record contains no documents pertaining to the sale or
manufacture of the engine. In the absence of definitive
documentation regarding the engine's origins, we must presume
that said equipment is subject to duty. In light of the
foregoing, we shall refer this particular matter of the engine's
origin to the U.S. Customs Service Regional Office in New
Orleans, Louisiana for assessment of duty and further
disposition.
HOLDINGS:
(1) The duties paid for equipment and vessel repairs
pursuant to 19 U.S.C. 1466(d)(1) under the "one-round-voyage"
rule are not remissible.
(2) Vessel owner is not entitled to remission of duties
based upon any other exemption enumerated in 19 U.S.C. 1466.
(3) The determination as to whether the equipment installed
during the foreign repair is subject to duty is hereby remanded
to the U.S. Customs Regional Office in New Orleans, Louisiana for
assessment of duties and further disposition.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch