HQ 112378

November 30, 1992

VES-13-18-CO:R:IT:C 112378 MLR

CATEGORY: Carriers

Deputy Assistant Regional Commissioner

Classification and Value Division

ATTN: Regional Vessel Repair Liquidation Unit

New York, New York 10048-0945

RE: Vessel Repair; 19 U.S.C. 1466; Protest No. 1001-92-102980;

Vessel Repair Entry No. C04-0009301-6; S/S LOUISIANA

V-001/West

Dear Sir:

This letter is in response to your memorandum of July 9,

1992, forwarding for our consideration the above-referenced

protest filed by Dyer, Ellis, Joseph & Mills, on behalf of

Ahrenkiel Ship Management (U.S.) Inc., and Lachmar, the operator

and owner, respectively, of the S/S LOUISIANA.

FACTS:

The record reflects that the subject vessel, the S/S

LOUISIANA, arrived at Boston, Massachusetts, on December 18,

1989\. Vessel repair entry number C04-0009301-6 was filed on

December 21, 1989, indicating work performed on the vessel in

Marseille, France. The application for relief, the subject of

Customs Ruling 111363, was granted and denied in part. The

applicants waived their right to petition for review and

requested immediate liquidation. The entry was liquidated on

January 31, 1992, for duty in the amount of \$873,841.00.

A protest was timely filed on April 28, 1992. The

protestant claims that many of the items found dutiable in the

entry of the LOUISIANA were found either non-dutiable by the New

Orleans Vessel Repair Liquidation Unit on a sister ship, the LAKE

CHARLES, or have been considered non-dutiable by Headquarters in

a protest filed by Ahrenkiel against the liquidation of the LAKE

CHARLES entry. The protestant states that only two items in the

application for relief of the LAKE CHARLES (the subject of

Customs Ruling 111143), the rudder upgrading and tailshaft

survey, were found dutiable. Customs Headquarters also denied

those items at the protest level (Customs Ruling 111971). The

protestant states that virtually identical work was performed on

both vessels. Photographs of the modification are included, and

we are invited to view the LOUISIANA.

We are asked to review the dutiability of numerous items.

ISSUE:

Whether the foreign shipyard operations performed aboard the

subject vessel are subject to duty pursuant to 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.

For the sake of clarity, we address the items in the same

order as they were discussed in the application for relief.

COST SEGREGATION: Items A.273, and G.1

The application for relief denied these items because the

charges alleged to be non-dutiable appeared to relate to both

non-dutiable and dutiable operations. The Customs Service has

held that when the cost of various items are not segregated or

separately shown, but are lumped together, duty will be assessed

on the entire cost even though certain items may be non-dutiable.

See C.I.E. 565/55, C.I.E. 1325/58, and C.D. 1836. Upon examining

item A.273, it appears that the staging cost in the amount of

FFrs11,000 is properly segregated; accordingly, this cost is non-

dutiable.

Item G.1 relates to painting and travel expenses of the

Ahrenkiel cleaning and painting gang. A separate letter listing

the cost of travel expenses in the amount of \$4,752 was included

with the application for relief; therefore, it appears that this

non-dutiable cost was properly segregated from the dutiable

painting cost.

INVOICE DESCRIPTION: Items A.177, A.212, and A.241

The application for relief held that these items did not

provide a sufficient description of the operations conducted.

Item A.177 relates to the cleaning of the forward deeptank,

allegedly not conducted in preparation of repairs. Customs has

long held the cost of cleaning is not dutiable unless it is

performed as part of, in preparation for, or in conjunction with

dutiable repairs or is an integral part of the overall

maintenance of the vessel; see C.I.E.s 18/48, 125/48, 910/59,

820/60, 51/61, 429/61, 569/62, 698/62; C.D. 2514; T.D.s 45001 and

49531\. With regard to item A.177, a thorough review of the

invoice reveals no repairs were made to the forward deeptank;

accordingly, we find this item non-dutiable.

Item A.212 states \"planning for gas trials\" in the amount of

FFrs37,100. Protestant alleges this was required by the U.S.

Coast Guard and American Bureau of Shipping (ABS) and in support

of general shipyard work conducted. Furthermore, protestant

alleges that the description is adequate since the New Orleans

Vessel Repair Liquidation Unit approved remission of this item

when performed on the LAKE CHARLES. First, we are not bound by

the determinations made by the New Orleans Vessel Repair

Liquidation Unit. Second, looking at the LAKE CHARLES item, the

description is the same; however, the cost is only FFrs18,850.

No explanation is given why the same work (as per the invoice

description), conducted by the same shipyard cost twice the

amount for the LOUISIANA. Third, upon reviewing the Coast Guard

and ABS documents, we find that gas trials were required and

items A.213 and A.214 relate to those surveys, but the protestant

still has not explained what the \"planning\" involved;

accordingly, we find this item dutiable.

Item A.241 relates to the installation of a battery back-up

system which is alleged to be a non-dutiable modification. The

protestant has now provided a photograph of the item to

supplement the invoice description; consequently, we find that

the installation constitutes a non-dutiable modification (see

discussion below relating to modifications).

INSPECTIONS: Numerous Items between A.114 and A.277; ABS

Invoices MS 7513-S, MS 7514-S and MS 7515-S

The protestant seeks remission for the inspection costs of

numerous items. The application for relief denied these items

because the evidence did not: (1) identify the particular items

surveyed, (2) relate the examination of those items to a

particular survey, (3) demonstrate that the particular survey

identified as a \"required survey\" was within the meaning of

C.S.D. 79-277 (see discussion below), and (4) segregate the costs

of opening and closing from other operations performed to permit

relief to be granted in accordance with C.S.D. 79-277.

In another application for relief submitted for

LOUISIANA entry no. C20-0012281-5 (the subject of Customs

Ruling 111545), inspection costs attributable both to repairs

and to a reactivation survey were discussed. As in that

instance, the record here shows that some of the items inspected

involved repairs. Customs has held that inspections not

resulting in repairs are not dutiable. Customs Ruling

110395; see American Viking Corp. v. United States, 37 Cust. Ct.

237, 247, C.D. 1830 (1956). Where periodic surveys are

undertaken to meet the specific requirements of, for example, a

classification society or insurance carrier, the cost of the

surveys is not dutiable even when dutiable repairs are effected

as a result thereof. C.S.D. 79-277; Customs Ruling 110368.

With increasing frequency, C.S.D. 79-277 has been utilized

by vessel owners seeking relief not only from charges appearing

on an ABS or U.S. Coast Guard invoice (the actual cost of the

inspection), but also as a rationale for granting non-dutiability

to a host of inspection-related charges appearing on a shipyard

invoice. In light of this continuing trend, we offer the

following clarification.

C.S.D. 79-277 discussed the dutiability of certain charges

incurred while the vessel underwent biennial U.S. Coast Guard

and ABS surveys. That case involved the following charges:

ITEM 29

\(a\) Crane open for inspection.

\(b\) Crane removed and taken to shop. Crane hob and

hydraulic unit dismantled and cleaned.

\(c\) Hydraulic unit checked for defects, OK.

Sundry jointings of a vessel\'s spare

renewed.

\(d\) Parts for job repaired or renewed.

\(e\) Parts reassembled, taken back aboard ship

and installed and tested.

In conjunction with the items listed above, we held that a

survey undertaken to meet the specific requirements of a

governmental entity, classification society, or insurance carrier

is not dutiable even when dutiable repairs are effected as a

result of the survey. We also held that where an inspection or

survey is conducted merely to ascertain the extent of damages

sustained or whether repairs are deemed necessary, the costs are

dutiable as part of the repairs which are accomplished. C.I.E.

429/61; C.S.D. 79-2, 13 Cust. B. & Dec. 993 (1979); C.S.D. 79-

277, 13 Cust. B. & Dec. 1395, 1396 (1979).

It is important to note that only the cost of opening the

crane was exempted from duty by reason of the specific

requirements of the U.S. Coast Guard and the ABS. The

dismantling and cleaning of the crane hob and hydraulic unit was

held dutiable as a necessary prelude to repairs. Moreover, the

testing of the hydraulic unit for defects was also found dutiable

as a survey conducted to ascertain whether repairs were

necessary. Although the invoice indicated that the hydraulic

unit was \"OK,\" certain related parts and jointings were either

repaired or renewed. Therefore, the cost of the testing was

dutiable.

We emphasize that the holding exempts from duty only the

cost of a required scheduled inspection by a qualifying entity

(such as the U.S. Coast Guard or the American Bureau of

Shipping). In the liquidation process, Customs should go beyond

the mere labels of \"continuous\" or \"ongoing\" before deciding

whether a part of an ongoing maintenance and repair program

labelled \"continuous\" or \"ongoing\" is dutiable.

Moreover, we note that C.S.D. 79-277 does not exempt repair

work done by a shipyard in preparation of a required survey from

duty. Nor does it exempt from duty the cost of any testing by

the shipyard to check the effectiveness of repairs found to be

necessary by reason of the required survey.

Turning to the case before us, as in Customs Ruling 111545,

we find the protestant\'s claim that certain \"required\" inspection

costs are non-dutiable to be problematic. The simple fact that

some classification society is involved in a survey does not

render all inspection costs non-dutiable. The mere labeling of

work \"inspection\" is ambiguous, for some of the documentation

provided does not demonstrate whether the cost for the inspection

was, for example, to ascertain the extent of the known

deterioration of the part, which is dutiable, or whether the cost

of the inspection was exclusively related to examination by the

classification society. All repairs involve some form of

inspection.

Upon examining ABS Reports submitted with this protest, we

agree with the protestant that the following items constitute

non-dutiable operations relating to required ABS surveys:

A.114 - Anchors & Chains

A.115 - Chain Lockers

A.120 - Opening & Closing of Ballast Water Tanks by Bottom

Plugs

A.131 - Seawater Valves & Overboard Discharge Valves (only

segregated amount in the amount of FFrs144,760 for survey is non-

dutiable)

A.136 - Condensers for Tg. (only segregated cost in the

amount of FFrs12,250 for opening and closing is non-dutiable)

A.140 - Aux. Turbines (only segregated cost in the amount of

FFrs620 for surveying couplings is non-dutiable)

A.170 - Bow Thruster (only segregated cost for electrical

checking in the amount of FFrs8,250 is non-dutiable)

A.172 - Megger Test of Electric Motor {although ABS report

MS 8250-G refers to a \"continuous machinery survey\", we find that

various electrical apparatus were tested as part of a periodic

survey rather than to determine the effectiveness of repairs

(i.e., \"all electrical motor insulation resistance were megger

test\[ed\]\" and found satisfactory)}.

A.180 - Main Turbine Coolers (only segregated inspection

cost in the amount of FFrs6,480 is non-dutiable)

A.210 - Cargo Tanks (although ABS Report MS 8250-G relates

that this item was part of a \"continuous hull survey\", it appears

that this survey was solely conducted as part of a periodic

survey rather than to determine the effectiveness of repairs)

A.213 - Gas Trials

A.214 - Gas Trials

A.242 - Ballast Valves

A.245 - General Alarm (only segregated cost in the amount of

1,380 for checking batteries is non-dutiable)

A.277 - Main Gas Valve

ABS Invoice MS 7514-S - ABS survey for drydocking,

tailshaft, liquified gas, inert gas system, intermediate,

continuous hull, continuous machinery, continuous LNG surveys and

gas trials.

ABS invoice 7515-S - ABS survey for modification of rudder

carrier bearing, starboard high suction sea chest piping and

valve fittings and garbage incinerator installation.

As to item A.128, the protestant alleges that it refers to

the shipyard\'s cost of preparing for a required ABS tailshaft

survey. Protestant claims that although Customs Ruling 111971

(the protest decision for the LAKE CHARLES), held that the

tailshaft work on the LAKE CHARLES was dutiable in that the

invoice revealed repairs as evidenced by \"cleaned, rebuilt

cracks\" and \"cleaned and reconditioned treading section\" (the

same description provided for the LOUISIANA), item A.128 should

be non-dutiable. Protestant states that repairs were not

conducted, and the record includes a memo from ABS in Marseille,

France, stating that tailshaft surveys on the LOUISIANA and LAKE

CHARLES were conducted and that \"no repairs were carried out and

no wear and tear were (sic) noted.\" This same memo was included

with the LAKE CHARLES protest. It is probably true that the ABS

survey found no repairs or wear and tear; however, as discussed

above, C.S.D. 79-277 does not exempt repair work done by a

shipyard in preparation of a required survey from duty. Item

A.128 is split into three parts: (1) access work, (2) in shop,

and (3) propeller nut work. The access work appears to be non-

dutiable; however, the \"in shop\" work appears to be dutiable

repairs done in preparation of the ABS survey as determined in

Customs Ruling 111971. Since no segregation of costs is

provided, the entire amount is dutiable.

Item A.174 indicates two ballast pumps were opened for

inspection and boxed up with new gaskets. Protestant states no

repairs were made; however, we find this item to be dutiable

because, although it may have been required as part of a required

ABS survey, the ABS Report MS 8250-G states that pumps (including

the No.1 and No. 2 ballast pumps) were \"overhauled\...and recorded

defective parts renewed\"; accordingly, looking beyond the

\"continuous survey\" label we find that the survey conducted was

more in the nature of checking the effectiveness of repairs.

While the survey may have been part of a required periodic

survey, it was conducted at this time for the owner\'s

convenience. Furthermore, item A.179 indicates two auxiliary

circulating pumps were opened for inspection and boxed up with

new gaskets; protestant states no repairs were made. ABS report

MS 8250-G indicates otherwise; accordingly, this item for the

same reasons as item A.174 is dutiable.

Item A.176 refers to a pressure test of the heating coils

which was conducted as part of the \"commencement of continuous

survey\" (ABS Report 8250-G). Protestant claims that this item

should be non-dutiable since it was an ABS requirement and the

repairs to the heating coils have been segregated in item A.257.

Although a continuous or special periodical survey may be

required, it is conducted at the owner\'s convenience; therefore,

we find that item A.176 was incurred to check the effectiveness

of repairs shown in item A.257, especially since the description

in A.257 does not include any testing. Accordingly, related item

A.175 for gas-freeing is dutiable as well.

Item A.225 states: \"all other relief Valves on cargo system

and void spaces to be overhauled.\" The valves were sent to the

shop, cleaned, seats were skimmed-up, ground and tested. This

appears to be a repair item and the tests are more in the nature

of checking the effectiveness of repairs; accordingly, this item

is dutiable except for the segregated transportation cost in the

amount of FFrs5,100.

ABS Invoice MS 7513-S - Annual ABS Load Line Inspection.

Although the applicant was informed that the ABS reports are

required, the record includes all reports except ABS Report MS

8249 for the Annual Load Line Inspection; accordingly, this item

is dutiable.

MODIFICATIONS:

The application for relief denied numerous items as non-

dutiable modifications since insufficient evidence was submitted.

In its application of the vessel repair statute, Customs has

held that modifications/alterations/additions to the hull and

fittings of a vessel are not subject to vessel repair duties.

Over the course of years, the identification of modification

processes has evolved from judicial and administrative precedent.

In considering whether an operation has resulted in a

modification which is not subject to duty, the following elements

may be considered.

1\. Whether there is a permanent incorporation into the hull or

superstructure of a vessel {see United States v. Admiral Oriental

Line et al., T.D. 44359 (1930)}, either in a structural sense or

as demonstrated by the means of attachment so as to be indicative

of the intent to be permanently incorporated. This element

should not be given undue weight in view of the fact that vessel

components must be welded or otherwise \"permanently attached\" to

the ship as a result of constant pitching and rolling. In

addition, some items, the cost of which is clearly dutiable,

interact with other vessel components resulting in the need,

possibly for that purpose alone, for a fixed and stable

juxtaposition of vessel parts. It follows that a \"permanent

attachment\" takes place that does not necessarily involve a

modification to the hull and fittings.

2\. Whether in all likelihood, an item under consideration would

remain aboard a vessel during an extended layup.

3\. Whether, if not a first time installation, an item under

consideration replaces a current part, fitting or structure which

is not in good working order.

4\. Whether an item under consideration provides an improvement

or enhancement in operation or efficiency of the vessel.

We agree with the protestant that the following items are

non-dutiable modifications:

A.122 - Installation of a new General Dynamics high suction

sea chest with associated valves and piping, including staging,

disconnection and modification of existing sections, fabrication

of associated piping and transportation of materials. A

photograph is included in the protest, and ABS report MS 8255

confirms the work conducted. Related items A.171 (claim for

remission of sea chest berth trial cost), B.10 (claim for

remission of sea chest transportation expenses), and E.3 (claim

for remission of sea chest purchase price) are also non-dutiable.

A.153 - Replacement of gas nozzles to increase gas velocity

and improve furnace combustion.

A.168 - Garbage Incinerator. A photograph is included in

the record and the ABS report MS 8255 confirm this as a non-

dutiable modification.

A.220 - Supply additional holding down bolts on manhole

covers. A photograph is included in this application to confirm

this as a non-dutiable modification.

A.229 - Move Fairlead. A photograph is included in the

protest confirming a modification to the hull and fittings.

A.230 - Replace spring arrangement for hatch covers with

counterweight arrangement. A photograph is included to confirm

the modification to the fittings.

A.231 - Installation of deflector plates in gangways for

draining purposes. A photograph is included in the protest

confirming a permanent addition to the hull.

A.232 - Installation of deck cleats. A photograph is

included confirming the permanent addition to the hull.

A.233 - Addition of chamber (compartment) for welding gas

cylinders in steering gear room affixed to existing bulkhead. A

photograph is included to confirm the permanent addition to the

hull.

A.234 - Fabrication and installation of water wash-down

system for bridge windows. A photograph confirms the permanent

addition to the hull.

A.244 - Installation of ventilators in console. A

photograph confirms the permanent addition to the fittings.

A.264 - Installation additional start/stop switches for fuel

oil transfer system. A photograph confirms this modification.

A.270 - Installation air ducts for main circulation air

supply pumps. A photograph confirms the permanent addition to

the hull.

A.276 - Fabrication and installation of compressor room

catwalk. A photograph confirms the permanent addition to the

hull.

A.284 - Installation of watertight door in bridge strut for

storage of line throwing equipment. A photograph confirms the

permanent addition to the hull.

A.285 - Fabrication and installation of paint storage racks

on forward bulkhead of paint locker with attendant modifications

of hull and fittings. A photograph confirms the permanent

addition to the hull.

A.287 - Installation of floor covering (carpeting and tile).

The costs for the sofas and armchairs are dutiable.

A.289 - Modification of sprinkler system to improve

drainage, including cutting pipe and installing flange.

A.291 - Installation of pollution containment bins for day

tank overflow vent and crankcase vent of inert gas tank,

including stop valves. A photograph confirms the permanent

addition to the hull.

A.292 - Fabrication and installation of separate steam trap

for heating coil system.

A.298 - Installation of padeye on stack platform for

lowering items into hatch.

A.302 - Addition of steel plate protection dams welded to

hull.

A.306 - Modification of radar mast to be hingeable. A

photograph confirms the permanent addition to the hull and

fittings.

As to item A.154, it indicates that the burner register on

the boilers was adjusted for better airduct sealing between the

active and non-active burners. This appears to be more in the

nature of a repair. No other evidence is provided to show it is

a modification; accordingly, this item is dutiable.

A.165 - Rudder Carrier, Rudder Stock, Rudder Pintle.

Protestant states that the work involving the rudder stock,

pintle and other rudder parts was not in the nature of a repair.

Instead, it was necessitated by the installation of the new

rudder carrier bearings. The installation of the bearings

required removal of the bushing and other adjustments to the

stock, pintle and other parts. None of this work, it is alleged,

would have been done if the rudder had not been upgraded with he

anti-friction bearing.

Customs Ruling 111971 considered this item for the LAKE

CHARLES. It was held that the \"crux of the work to the rudder

was a modification,\" but denied the protest on the basis that

some \"repairs\" were made and the repairs costs were not

segregated from the modification work. The protestant states

that in light of Customs\' ruling on the LAKE CHARLES protest and

without conceding the non-dutiability of item A.165, it has

requested Compagnie Marseillaise de Reparations to provide such

segregation for the LOUISIANA, as a basis for finding that

portion of the work related to the modification non-dutiable.

We have thoroughly reviewed the record and find no further

segregation other than three costs in the amount of FFrs576,000,

FFrs172,000, and FFrs45,000 which was not sufficient in Customs

Ruling 111971. Therefore, if the protestant can provide further

segregated cost amounts before reliquidation, the costs for the

modification aspects may be non-dutiable.

Item A.297 states that a 40 x 40 wire mesh screen was

installed in the fuel oil vent for the number 1 & 2 fuel oil

tanks. No other evidence is presented to show that this is a

non-dutiable modification; however, the record does reflect that

repairs were conducted in the fuel oil tanks (see A.257).

Furthermore, the fact alone that this was an ABS requirement,

does not render this item non-dutiable; accordingly, this item is

dutiable.

SUPPLIES FURNISHED FROM FOREIGN ENTITIES: Items B.1.b and B.1.f

on Establissements Tilley, S.A., Invoices 533/100907 and

537/100921

It is claimed that these invoices represent consumable

supplies. The application for relief denied these invoices

because no evidence was presented to show that each article was

not used for repairs performed by foreign labor pursuant to

C.I.E. 196/69. C.I.E. 196/60 held that consumable supplies

generally are not subject to vessel repair duty, unless used in

effecting dutiable repairs. The protestant states that this

basis for denial is unclear since there is no requirement to show

any connection between a particular consumable and any particular

repair. The protestant does not seek relief for tools that are

\"equipment.\"

Generally, the articles which may be retained on board a

vessel free of duty, under 19 U.S.C. 1446, are \"consumable

supplies\" including \"sea stores\", and articles consumed in their

use, unless purchased for repair purposes (T.D. 39340, as

modified by T.D. 39507). Sea stores are generally defined as

supplies for the consumption, sustenance, and medical needs of

the crew and passengers during the voyage. H.E. Warner, Trustee

v\. United States, 28 CCPA 143 at 150, C.A.D. 136 (1940) quoting

from Southwester Shipbuilding Co. V. United States, 13 Ct. Cust.

App. 74, T.D. 40934 (1025).

The articles listed on item B.1.b. were supplied by

Establissements Tilley S.A., a company in Marseille, France,

where the repair work was conducted. Furthermore, the articles

listed appear to be more in the line of articles used to effect

repairs, and not supplies for the consumption during a voyage

(i.e., standard wire cup brushes, paint sprays, paint rollers,

colored pencils, florescent pens, plastic goggles, disposable

dust masks, dog-leg brushes, wire brushes, boiler suits of

assorted sizes, hand scrapers, and black spray paint). Since the

burden of proof is upon the protestant to show that these items

were not used to effect repairs as required in C.I.E. 196/60, we

hold the entire invoice B.1.b to be dutiable.

The same analysis applies to item B.1.f. The only articles

on that invoice which we will hold non-dutiable because they are

more in the line of articles used during a voyage are as follows:

Spic and Span, disinfectant, Glad trash bags, and Fantastic

cleaner. The other articles are dutiable.

U.S. MATERIALS: Items E.2, E.6, E.7 & E.8, F.3, F.5, F.7:

It is claimed that these items relate to materials purchased

in the United States by the owner and installed by the foreign

shipyard as additions to the hull and fittings or as part of

repairs. The application for relief denied these items since the

documents submitted were internal documents (i.e., work orders or

purchase orders), and not invoices from the suppliers.

On August 20, 1990, the President signed into law Pub. L.

101-382, section 484E of which amends section 466, Tariff Act of

1930, as amended (19 U.S.C. 1466), by adding a new paragraph (h)

to the statute {19 U.S.C. 1466(h)}.

The new section provides in part that:

\(h\) The duty imposed by subsection (a) of this section shall not

apply to\--

\(2\) 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.

The effective date of the amendment is stated as follows:

Effective Date.\--The amendment made by this section

shall apply to\--

\(1\) any entry made before the date of enactment of this

Act that is not liquidated on the date of enactment of

this Act\....

Therefore, the provision is applicable in this instance.

While section 1466(h) applies by its terms only to foreign-

made imported parts, there is ample reason to extend its effect

to U.S.-made materials as well. To fail to do so would act to

discourage the use of U.S.-made materials in effecting foreign

repairs since continued linkage of remission provisions of

section 1466(d)(2) with the assessment provisions of section

1466(a) would obligate operators to pay duty on such materials

unless they were installed by crew or U.S. resident labor.

If an article is claimed to be of U.S. manufacture, there

must be proof of its origin in the form of a bill of sale or

domestic invoice. If a foreign manufactured article is claimed to

have been previously entered for consumption, duty paid by the

vessel operator, there must be proof of this fact in the form of

a reference to the consumption entry number for that previous

importation, as well as to the U.S. port of importation. If

imported articles are purchased in the United States from a party

unrelated to the vessel operator, a domestic bill of sale to the

vessel operator must be presented.

Further, with regard to imported articles, there must be

presented a certification on the CF 226 or an accompanying

document by a person with direct knowledge of the fact that an

article was imported or purchased for the purpose of either then-

existing or intended future installation on a company vessel.

Ordinarily, the vessel\'s master would not have direct knowledge

of that fact, and an agent may also be without such knowledge.

The second certification required by 19 U.S.C. 1466(h)(2) as to

the vessel\'s documentation (foreign or coasting trades) and

service (cargo vessel), will be made by the master on the vessel

repair entry (CF 226) at the time of arrival.

If the elements stated above are proven to the satisfaction

of Customs, the cost of foreign labor utilized for installation

of U.S.-made or previously imported articles will be subject to

duty under section 1466 in matters concerning repairs, and only

the cost of qualifying materials used in repairs will be free of

duty.

A U.S. bill of sale satisfying 19 U.S.C. 1466(h) has been

submitted for the following items; therefore, the costs

associated with these invoices are not subject to duty:

E.2 - Young Engineering Communication equipment

F.3 - Industrial control Transformers

F.5 - Electrical parts.

As to items E.6, E.7, E.8, and F.7, the protestant states

that the spare parts in question were purchased in the early

1980s and it is not standard business practice to keep supplier

invoices for years after purchase. Despite the unfortunate

circumstances, absent the requisite documentation we are unable

to hold these items non-dutiable.

HOLDING:

The protest is denied and granted in part as detailed in the

Law and Analysis portion of this ruling.

Sincerely,

Acting Chief

Carrier Rulings Branch