Conversion of U.S.-flag vessel in a foreign shipyard

HQ 109701 August 22, 1988 VES-13 CO:R:P:C 109701 DHR Category: Carriers James P. Walsh, Esq. Suite 800 1752 N Street NW Washington, D.C. 20036 RE: Conversion of U.S.-flag vessel in a foreign shipyard Dear Mr. Walsh, This is with reference to your letter of August 10, 1988, concerning the conversion of a U.S.-flag vessel in a foreign shipyard. ISSUE: Whether the U.S.-flag vessel ENDURANCE (592206), which was used as an oil rig supply vessel and has not been in the United States since 1980, is exempt from the assessment of duty on work done to it in a foreign shipyard. FACTS: According to the vessel's log books, the vessel was built in the United States in 1978 and was documented under the laws of the United States. The vessel left Brownsville, Texas, on April 9, 1980, and headed to Capetown, South Africa. It departed Capetown on June 11, 1980 for Singapore. According to the log, the ENDURANCE worked as an oil supply vessel in the Java Sea and East China Seas until it was laid up in Johore Bahru, Malaysia, in January, 1986. The vessel remained in Malaysia until it was sold. The present owner sailed the vessel from Singapore to Pusan, Korea, from July 13 to 14, 1987. The vessel has since remained at the Hyundai Shipyard in Pusan, where it is undergoing conversion. Alaska Trawl Fisheries, Inc. intends to return the vessel to the United States sometime during the month of August or September. LAW AND ANALYSIS: Section 1466, title 19, United States Code, provides for a duty of 50% to be assessed on equipment purchased for and repairs made to vessels documented under the laws of the United States to engage in the foreign or coasting trade or to a U.S. Vessel intended to be employed in such trade. The duty is to be assessed upon the vessel's first arrival in the United States after such purchase of equipment or repairs. Subsection (e) of section 1466 exempts from the duty provisions vessels designed and used primarily for purposes other than transporting passengers or merchandise in trade if the Vessel arrives back in the United States two years or more after its last departure from the United States. This exemption is not operative during the first six months after the last departure from the United States. The ENDURANCE was not designed or used primarily to transport passengers or merchandise in the foreign or coasting trade. There is nothing in the record to indicate the Vessel returned to the United States within two years of its last departure nor does the record indicate the Vessel purchased equipment or had repairs made in a foreign country within six months of its departure. HOLDING: In view of the foregoing, the ENDURANCE will not be subject to the duty prescribed by 19 U.S.C. 1466 upon its arrival back in the United States for the first time since its departure in 1980. Sincerely, B. James Fritz Chief, Carrier Rulings Branch