Vessel Repair; 19 U.S.C. 1466; Entry No. 1511-92-100001; Maritime Administration; Undocumented vessel; NORTHERN LIGHT; Protest

HQ 113193 August 12, 1994 VES-13-18-CO:R:IT:C 113193 GOB CATEGORY: Carriers Deputy Assistant Regional Commissioner Commercial Operations Division Attn: Regional Vessel Repair Liquidation Unit New Orleans, Louisiana 70130 RE: Vessel Repair; 19 U.S.C. 1466; Entry No. 1511-92-100001; Maritime Administration; Undocumented vessel; NORTHERN LIGHT; Protest Dear Sir: This letter is in response to your memorandum which forwarded for our review and ruling the above-referenced protest on the assessment of vessel repair duties. FACTS: The record reflects that the NORTHERN LIGHT ("vessel"), which is owned and operated by the Maritime Administration of the Department of Transportation ("MARAD"), arrived at the port of Morehead City, North Carolina on June 6, 1991 and filed a vessel repair entry. ISSUE: Whether undocumented MARAD RRF vessels are intended to engage in the foreign or coasting trade, thereby subjecting such vessels to liability under 19 U.S.C. 1466. LAW AND ANALYSIS: 19 U.S.C. 1466 provides for the payment of duty at a rate 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 be employed in such 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..." (emphasis supplied.) 19 CFR 4.14(a)(2)(ii). - 2 - To conclude that the repairs made to the subject vessel 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 "commercial interchange of commodities between countries; export and import trade." Black's Law Dictionary (5th Ed. 1979). Further, the word "trade" indicates buying and selling for a profit. American Heritage Dictionary of the English Language (2nd 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 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. The protestant has submitted documentation to establish 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 will 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. 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"), Article 7. The MOU specifically states that activated RRF ships shall not compete with, substitute for, or displace privately- owned United States-flag vessels. Based on the record, 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. This determination applies only to undocumented vessels owned by MARAD. Documented vessels owned or operated by the MARAD continue to be subject to vessel repair duties under 19 U.S.C. 1466. This determination is consistent with previous rulings, including 112115 dated May 18, 1993, with respect to MARAD RRF vessels. - 3 - HOLDING: Undocumented MARAD RRF vessels that have been documented 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 vessel repair duties under 19 U.S.C. 1466. Accordingly, the subject vessel is not subject to 19 U.S.C. 1466. The protest is granted. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, the Freedom of Information Act and other public access channels. Sincerely, Arthur P. Schifflin Chief Carrier Rulings Branch