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HQ 111140


August 29, 1990

VES-13-18-CO:R:P:C 111140 GV

CATEGORY: CARRIER

Chief, Technical Branch
Commercial Region
Pacific Region
1 World Trade Center
Long Beach, California 90831

RE: Vessel Repair; Entry No. 808-0502976-8; LAWRENCE H. GIANELLA V-74; U.S. parts; Installation by Crew

Dear Sir:

This is in response to your memorandum dated June 20, 1990, transmitting an application for relief from duties assessed pursuant to 19 U.S.C. 1466. You request that we review six (6) items contained in the above entry. Our findings are set forth below.

FACTS:

The LAWRENCE H. GIANELLA is a U.S.-flag vessel owned by Wilmington Trust Company of Wilmington, Delaware, and operated by Ocean Ships, Inc. of Houston, Texas. The subject vessel had foreign shipyard work performed on her from September, 1989 through February, 1990. Subsequent to the completion of this work the vessel arrived in the United States at San Francisco, California on March 21, 1990. A vessel repair entry was filed on the date of arrival.

An application for relief, dated May 11, 1990, was timely filed. The applicant claims, inter alia, that the costs of various U.S.-made materials shipped foreign and installed by the vessel's crew are nondutiable (see Exhibits 1, 8, 14, 15, 17, and 18). In support of this claim the applicant submitted an affidavit from the Engineering Manager for Ocean Ships, Inc. (Exhibit B), and shipyard invoices of the materials in question.

ISSUE:

Whether the expenses for which the applicant seeks relief are dutiable under 19 U.S.C. 1466.

LAW AND ANALYSIS:

Title 19, United States Code, section 1466, provides in pertinent part, for payment of duty in the amount of 50 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 such trade.

In regard to the items specified for our review (Exhibits 1, 8, 14, 15, 17, and 18) the basis for which relief is sought is that these items were manufactured and purchased in the United States, shipped directly to the ship at the foreign shipyard, and installed by the vessel's crew.

In response to requests for advice regarding the dutiability under section of 1466 of equipments, parts, repair material, etc., which have been manufactured and purchased in the United States for installation abroad on U.S.-documented vessels, Customs, by memorandum dated April 19, 1989, and published in the Customs Bulletin of May 10, 1989, held that the use of foreign labor to install U.S. parts subjects both the parts and labor to duty. The memorandum further held that the installation of such parts by U.S. residents or regular crew labor warrants remission pursuant to section 1466(d)(2).

Upon further review of this matter, however, it appears that the implementation of Customs policy as set forth in the May 10, 1989, Customs Bulletin should have been preceded by the publication of a notice in the Federal Register soliciting comments from interested parties. Accordingly, until such time as said notice is published, Customs will uphold its position as delineated in T.D. 75-257, which held that where equipment, parts, repair materials, etc., which have been manufactured and purchased in the United States are installed abroad on U.S.- documented vessels by other than U.S. residents or regular crew, only the labor alone is dutiable. If the installation of such articles is performed by U.S. residents or the regular crew, remission is warranted pursuant to section 1466(d)(2).

In our adherence to the policy set forth in T.D. 75-257, however, it has come to our attention that affidavits have been submitted which misrepresent the place of manufacture of the articles in question. Inasmuch as we have come to learn of this misrepresentation, it is our policy to require evidence beyond an affidavit from an interested party to establish U.S. manufacture and U.S. purchase. Therefore, we require direct evidence of U.S. manufacture as well as U.S. purchase for remission to be granted.

In the application currently under consideration, the applicant has submitted invoices for the contested articles which indicate purchase in the United States. However, the record is devoid of evidence as to the articles' place of manufacture and
source of labor with the exception of the affidavit of the Engineering Manager for Ocean Ships, Inc. (Exhibit B). While this affidavit is sufficient proof of installation of the subject parts by members of the crew, it provides no direct evidence of U.S. manufacture of the parts.

Accordingly, the application is denied with respect to Exhibits 1, 8, 14, 15, 17 and 18 with the exception of freight and handling costs listed thereunder.

HOLDING:

The expenses for which the applicant seeks relief are dutiable under 19 U.S.C. 1466 with the exception of those costs noted above.

Sincerely,

B. James Fritz

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