VES-13-18-CO:R:IT:C 112859 GEV
Deputy Assistant Regional Commissioner
Commercial Operations
c/o Regional Commissioner
New Orleans, Louisiana 70130-2341
RE: Protest No. 1801-92-100003; Vessel Repair Entry No. C18-
0013095-2; Government-owned Vessels; Maritime
Administration; MARAD; Undocumented Vessels; S/S COMET
Dear Sir:
This is in response to your memorandum dated August 12, 1993,
forwarding for our review and ruling the above-referenced protest
on the assessment of vessel repair duties.
FACTS:
The record reflects that the subject vessel, the S/S COMET,
arrived at the port of Jacksonville, Florida, on January 30, 1991.
Vessel repair entry no. C18-0013095-2, was filed on the same day
as arrival. The entry indicates that the vessel is owned by the
United States of America, Department of Transportation, Maritime
Administration (MARAD), and had repairs performed in Dubai, U.A.E.
during the period of December 24, 1990 - January 7, 1991. The
record also shows that the vessel is a vessel of the Ready Reserve
Fleet (RRF) that was not documented by the United States Coast
Guard when the aforementioned repairs were performed; the vessel
was operated by a private operator at the time of entry.
ISSUE:
Whether undocumented MARAD RRF vessels are intended to engage
in the foreign or coasting trade, thereby subjecting such vessels
to the application of vessel repair duties under 19 U.S.C. 1466.
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LAW AND ANALYSIS:
Title 19, United States Code, 1466, provides in pertinent
part for payment of duty in the amount of fifty percent ad valorem
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 engage in the foreign or coastwise trade. The
Customs Regulations apply this provision to government-owned or
chartered vessels "if documented with a registry, coastwise trade,
or Great Lakes trade endorsement, or if undocumented, intended to
engage in foreign, coastwise, or Great Lakes trade." 19 C.F.R.
4.14(a)(2)(ii) (1992) (emphasis added).
To conclude that the repairs made to the undocumented S/S
COMET are subject to duty, we must first determine whether the
vessel was intended to engage in the foreign or coastwise trade.
Foreign Trade is defined as the "[c]ommercial interchange of
commodities between countries; export and import trade." Black's
Law Dictionary 583 (5th Ed. 1979). Further, trade connotes buying
and selling for profit. American Heritage Dictionary of the
English Language 1284 (2d Ed. 1985). The Customs Service has held
that government-owned, but privately operated vessels engaged
exclusively in the carriage of government cargo are not engaged in
the foreign or coasting trade within the meaning of 19 U.S.C.
1466. C.I.E. 202/48, dated June 4, 1948. Moreover, undocumented
government vessels that are not intended to engage in the foreign
or coasting trade are not required to file a vessel repair entry.
Id.; C.I.E. 2335/66, dated November 30, 1966.
Whether an undocumented vessel is intended to engage in trade
must be established through the submission of evidence on the use
of the vessel. MARAD has submitted documents to demonstrate that
its RRF ships are not permitted to engage in commercial trade.
While such ships are activated, the ships are under operational
control of the Military Sealift Command (MSC). The vessel masters
must respond to "all directives and instructions received from
COMSC (the Navy's Sealift Type Commander) and cognizant Navy OPCON
authorities," for MSC point-to-point cargo operations. MARAD
Operations Manual, 2.4.1.1. Further, no ship or ships of the RRF
are permitted to carry or to store non-defense related cargo
without Department of Defense concurrence. Memorandum of
Understanding between the Department of Defense and the Department
of Transportation [MOU], Art. 7. The MOU specifically states that
activated RRF ships shall not compete with, substitute for, or
displace privately-owned United States-flag vessels. Id.
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Based on these authorities, we find that undocumented MARAD
RRF vessels that have been activated under MSC control do not carry
commercial cargo and are therefore not intended to engage in the
foreign or coasting trade. Such vessels are therefore not subject
to vessel repair duties under 19 U.S.C. 1466. The S/S COMET,
being an active undocumented RRF ship at the time the foreign
repairs now under consideration were performed, is not subject to
duty under 19 U.S.C. 1466. The protest is therefore granted.
This determination applies only to undocumented vessels owned
by MARAD. Documented vessels that are owned or operated by MARAD
continue to be subject to vessel repair duties under 19 U.S.C.
1466.
HOLDING:
Undocumented MARAD RRF vessels that have been activated under
the control of the MSC do not carry commercial cargo and are
therefore not intended to engage in the foreign or coasting trade.
Such vessels are therefore not subject to the provisions of 19
U.S.C. 1466. The foreign repairs in question, performed on the
S/S COMET which was an undocumented RRF ship at the time the
repairs were performed, are not subject to duty under 19 U.S.C.
1466. The protest is therefore granted.
Sincerely,
Arthur P. Schifflin
Chief