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HQ 115726





July 15, 2002

VES-13-18-RR:IT:EC 115726 GEV

CATEGORY: CARRIER

William N. Myhre, Esq.
Preston Gates Ellis & Rouvelas Meeds LLP
1735 New York Avenue NW
Suite 500
Washington, D.C. 20006-5209

RE: Foreign Repairs; Recreational Vessel; 19 U.S.C. § 1466

Dear Mr. Myrhe:

This is in response to your letter dated July 2, 2002, on behalf of your client, Mr. Hans W. Mauritzen, of Bellevue, Washington, regarding the applicability of 19 U.S.C. § 1466 to foreign repairs done to his recreational vessel. Our ruling on this matter is set forth below.

FACTS:

Mr. Mauritzen, a Norwegian-born, naturalized U.S. citizen, owns the ODIN, a U.S.-flag vessel endorsed only with a recreational endorsement. It was originally built in 1915 in Norway as a fishing vessel and was acquired by Mr. Mauritzen in 1981 for use as a personal pleasure craft.

In planning to step down as the head of the shipping company he founded in Seattle, Washington, Mr. Mauritzen decided to retire to his native Norway. As part of those plans, he made arrangements to transport the ODIN back to Norway so he could continue to use the vessel for personal recreational purposes. In keeping with those plans, the vessel was transported by another vessel to Norway, departing the Port of Tacoma, Washington, on August 24, 1997, and arriving in Mr. Mauritzen’s hometown of Stavanger, Norway, on September 29, 1997.

While in transit to Norway the vessel was damaged and was moved to a small shipyard in March 1998 to undergo surveys and further analysis of the needed work. Upon review of the scope of the damage, Mr. Mauritzen decided to make additional modifications to make the vessel more suitable for use in Norwegian and Northern Europe waters. This work commenced April 1998. The project was delayed for various reasons, including problems with the shipyard. The basic work was completed in June of last year with some additional work undertaken this year. The scope of the work expanded while the vessel was in the yard and eventually included the installation of a complete new Norwegian electrical system with compatible motors and pumps, new propulsion machinery, a new galley with modern appliances, new tanks, bathroom facilities, and other interior fittings, as well as a new wheelhouse, deck and masts.

During this period, Mr. Mauritzen’s retirement plans changed for personal reasons and he decided to stay in the United States rather than move back to Norway on a permanent basis. He would like to bring the ODIN back to the United States for continued recreational use, but cannot economically justify such a move if the work done to the vessel in Norway is subject to the assessment of a 50% duty pursuant to 19 U.S.C. § 1466.

ISSUE:

Whether the U.S.-flag, recreational endorsed vessel described above is subject to the provisions of 19 U.S.C. § 1466.

LAW AND ANALYSIS:

Title 19, United States Code, § 1466(a) (19 U.S.C. § 1466(a)), provides in pertinent part for the payment of an ad valorem duty of 50 percent of the cost of “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”

With respect to the ODIN, it is readily apparent that in possessing only a recreational endorsement, it is documented under U.S. law for neither the foreign nor coastwise trade. Furthermore, the
circumstances of this case do not indicate that the vessel was intended to be employed in either of those trades. (See Customs Bulletin of March 18, 1998, vol. 32, no. 11, at pp. 7-10, setting forth Customs position that vessels not documented under U.S. law to engage in the foreign or coastwise trade may still fall within the purview of the vessel repair statute if available evidence indicates it is intended to be used in such trades.) Consequently, the ODIN is not included within the scope of 19 U.S.C. § 1466.

Assuming, arguendo, that the ODIN would fall within the purview of the vessel repair statute, we note that this statute provides in subsection (e) (19 U.S.C. § 1466(e)), that when a vessel covered by the vessel repair statute:
arrives in a port of the United States two years or more after its last departure from a port in the United States, the duties imposed by [section 1466] shall apply only with respect to[purchases and repairs] made during the first six months after the last departure of such vessel from a port of the United States.

Accordingly, only those foreign expenditures incurred within the first six months after the last departure of the subject vessel from the Port of Tacoma (August 24, 1997) would be subject to the provisions of the statute. Since the shipyard work began April 1998, approximately eight months after last leaving a U.S. port, and the vessel has not yet returned to the United States (an absence of nearly five years), the vessel would be exempt from any duty imposed under the vessel repair statute. It would, however, still be required to file a declaration that no repairs were performed during the aforementioned six-month period (i.e., a “negative declaration”; see 19 CFR § 4.7(d)(1)(ii)).

HOLDING:

The U.S.-flag, recreational endorsed vessel described above is not subject to the provisions of 19 U.S.C. § 1466.

Sincerely,

Jeremy Baskin
Acting Chief

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