Vessel repair; Vessel continuously abroad; Six-month rule; 19 U.S.C. 1466(e)

HQ 113319 March 27, 1995 VES-13-18-CO:R:IT:C 113319 LLB CATEGORY: Carriers Mr. Dean Kewish Senior Counsel, Santa Fe International Corp. Two Lincoln Centre, Suite 1100 5420 LBJ Freeway Dallas, Texas 75240-2648 RE: Vessel repair; Vessel continuously abroad; Six-month rule; 19 U.S.C. 1466(e) Dear Mr. Kewish: Reference is made to your letter of January 9, 1995, in which you request that we rule upon the application of the vessel repair statute to a mobile offshore drilling rig operated by a subsidiary of Santa Fe International Corporation. Our findings are contained in the ruling which follows. FACTS: A mobile offshore drilling rig was constructed in a foreign shipyard in 1983. The rig was documented as a vessel of the United States at the time it was first delivered from the construction yard. Since that time, the rig has been continuously operated abroad, never having entered the United States. The owner now is contemplating whether to move the vessel to United States waters. ISSUE: Whether the vessel repair statute imposes any potential for duty liability upon a vessel which, although documented under the laws of the United States, has never been in the United States since its foreign construction and delivery. LAW AND ANALYSIS: Title 19, United States Code, section 1466(a), 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 the foreign or coastwise trade, or vessels intended to be employed in such trade. The vessel repair 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. In this case, as in our precedent case 111298 LLB, the vessel will be arriving in the U.S. for the first time and cannot meet the literal requirement of having previously departed from the United States. The intent of the provision is that duty be collected on repairs to vessels which may have been taken abroad for the purpose of obtaining foreign repairs, thus the six-month limitation on dutiability during periods of extended absence from the United States. The fact that a U.S.-flag vessel has not previously been in the U.S. should not, however, act to deny the benefit of the six-month duty cap. In the present case, the date of first entry of the newly constructed vessel into service abroad is the date on which we consider the statutory six-month period to have begun for duty purposes. Subsection (e) of the statute applies vessel repair duty to repair parts purchased or repairs made during the first six months of an extended absence. The statutory language is read disjunctively to apply, as the situation dictates, to either purchases or installations. (Customs Ruling Letter 109300, July 1, 1988). HOLDING: Following a thorough review of the facts in this matter, and after an analysis of the law and relevant precedents, we have determined that the provisions of 19 U.S.C. 1466(e) are applicable to a vessel upon its first arrival in the United States, as outlined in the Law and Analysis portion of this ruling. Sincerely, Arthur P. Schifflin Chief Carrier Rulings Branch