[Code of Federal Regulations]
[Title 19, Volume 1]
[Revised as of April 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 19CFR4.14]

[Page 18-22]
 
                        TITLE 19--CUSTOMS DUTIES
 
  CHAPTER I--UNITED STATES CUSTOMS SERVICE, DEPARTMENT OF THE TREASURY
 
PART 4--VESSELS IN FOREIGN AND DOMESTIC TRADES--Table of Contents
 
Sec. 4.14  Equipment purchases by, and repairs to, American vessels.

    (a) General provisions and applicability. Under section 466, Tariff 
Act of 1930, as amended (19 U.S.C. 1466), purchases for or repairs made 
to certain vessels while they are outside the United States, including 
repairs made while those vessels are on the high seas, are subject to 
declaration, entry and payment of ad valorem duty. This does not apply 
to reimbursement paid to members of the regular crew of a vessel for 
labor expended in making repairs to the vessel. These requirements are 
effective upon the first arrival of affected vessels in the United 
States or Puerto Rico. The vessels subject to these requirements include 
those documented under U.S. law for the foreign or coastwise trades, as 
well as those which were previously documented under the laws of some 
foreign nation or are undocumented at the time that foreign shipyard 
repairs are performed, but which exhibit an intent to engage in those 
trades under Customs interpretations. Duty is based on actual foreign 
cost. This includes the original foreign purchase price of articles 
which have been imported into the United States and are later sent 
abroad for use. For the purposes of this section, expenditures made in 
American Samoa, the Guantanamo Bay Naval Station, Guam, Puerto Rico, or 
the U.S. Virgin Islands are considered to have been made in the United 
States, and are not subject to declaration, entry or duty. Under 
separate provisions of law, the cost of labor performed, and of parts 
and materials produced and purchased in Israel are not subject to duty 
under the vessel repair statute. Additionally, expenditures made in 
Canada or in Mexico are not subject to any vessel repair duties. Even in 
the absence of any liability for duty, it is still required that all 
repairs and purchases, including those made in Canada, Mexico, and 
Israel, be declared and entered.
    (b) Applicability to specific types of vessels. (1) Fishing vessels. 
As provided in Sec. 4.15, vessels documented under U.S. law with a 
fishery endorsement are subject to vessel repair duties for covered 
foreign expenditures. Undocumented American fishing vessels which are 
repaired, or for which parts, nets or equipment are purchased outside 
the U.S. are also liable for duty.
    (2) Government-owned or chartered vessels. Vessels normally subject 
to the vessel repair statute because of documentation or intended use 
are not excused from duty liability merely because they are either owned 
or chartered by the U.S. Government.
    (3) Vessels continuously away for two years or longer. (i) Liability 
for expenditures throughout entire absence from U.S. Vessels that 
continuously remain outside the United States for two years or longer 
are liable for duty on any fish nets and netting purchased at any time 
during the entire absence. Vessels designed and used primarily for 
transporting passengers or merchandise, which depart the United States 
for the sole purpose of obtaining equipment, parts, materials or repairs 
remain fully liable for duty regardless of the duration of their absence 
from the United States.
    (ii) Liability for expenditures made during first six months of 
absence. Except as provided in paragraph (b)(3)(i) of this section, 
vessels that continuously remain outside the United States for two years 
or longer are liable for duty only on those expenditures which are made 
during the first six months of their absence. See paragraph (h)(3) of 
this section. However, even though some costs might not be dutiable 
because of the six-month rule, all repairs, materials, parts and 
equipment-related expenditures must be declared and entered.
    (c) Estimated duty deposit and bond requirements. Generally, the 
person authorized to submit a vessel repair declaration and entry must 
either deposit or transmit estimated duties or produce evidence of a 
bond on Customs Form 301 at the first United States port of arrival 
before the vessel will be permitted to depart from that port. A 
continuous or single entry bond of sufficient value to cover all 
potential

[[Page 19]]

duty on the foreign repairs and purchases must be identified by surety, 
number and amount on the vessel repair declaration which is submitted at 
the port of first arrival. At the time the vessel repair entry is 
submitted by the vessel operator to the appropriate VRU port of entry as 
defined in paragraph (g) of this section, that same identifying 
information must be identified on the entry form. Sufficiency of the 
amount of the bond is within the discretion of Customs at the arrival 
port with claims for reduction in duty liability necessarily being 
subject to full consideration of evidence by Customs. Customs officials 
at the port of arrival may consult the appropriate Vessel Repair Unit 
(VRU) port of entry as identified in paragraph (g) of this section or 
the staff of the Entry Procedures and Carriers Branch in Customs 
Headquarters in setting sufficient bond amounts. These duty, deposit, 
and bond requirements do not apply to vessels which are owned or 
chartered by the United States Government and are actually being 
operated by employees of an agency of the Government. If operated by a 
private party for a Federal agency under terms whereby that private 
party is liable under the contract for payment of the duty, there must 
be a deposit or a bond filed in an amount adequate to cover the 
estimated duty.
    (d) Declaration required. When a vessel subject to this section 
first arrives in the United States following a foreign voyage, the 
owner, master, or authorized agent must submit a vessel repair 
declaration on Customs Form 226, a dual-use form used both for 
declaration and entry purposes, or must transmit its electronic 
equivalent. The declaration must be ready for presentation in the event 
that a Customs officer boards the vessel. If no foreign repair-related 
expenses were incurred, that fact must be reported either on the 
declaration form or by approved electronic means. The Customs port of 
arrival receiving either a positive or negative vessel repair 
declaration or electronic equivalent will immediately forward it to the 
appropriate VRU port of entry as identified in paragraph (g) of this 
section.
    (e) Entry required. The owner, master, or authorized representative 
of the owner of any vessel subject to this section for which a positive 
declaration has been filed must submit a vessel repair entry on Customs 
Form 226 or transmit its electronic equivalent. The entry must show all 
foreign voyage expenditures for equipment, parts of equipment, repair 
parts, materials and labor. The entry submission must indicate whether 
it provides a complete or incomplete account of covered expenditures. 
The entry must be presented or electronically transmitted by the vessel 
operator to the appropriate VRU port of entry as identified in paragraph 
(g) of this section, so that it is received within ten calendar days 
after arrival of the vessel. Claims for relief from duty should be made 
generally as part of the initial submission, and evidence must later be 
provided to support those claims. Failure to submit full supporting 
evidence of cost within stated time limits, including any extensions 
granted under this section, is considered to be a failure to enter.
    (f) Time limit for submitting evidence of cost. A complete vessel 
repair entry must be supported by evidence showing the cost of each item 
entered. If the entry is incomplete when submitted, evidence to make it 
complete must be received by the appropriate VRU port of entry as 
identified in paragraph (g) of this section within 90 calendar days from 
the date of vessel arrival. That evidence must include either the final 
cost of repairs or, if the operator submits acceptable evidence that 
final cost information is not yet available, initial or interim cost 
estimates given prior to or after the work was authorized by the 
operator. The proper VRU port of entry may grant one 30-day extension of 
time to submit final cost evidence if a satisfactory written explanation 
of the need for an extension is received before the expiration of the 
original 90-day submission period. All extensions will be issued in 
writing. Inadequate, vague, or open-ended requests will not be granted. 
Questions as to whether an extension should be granted may be referred 
to the Entry Procedures and Carriers Branch in Customs Headquarters by 
the VRU ports of entry. Any request for an extension beyond a 30-day 
grant issued by a VRU must be submitted through that unit to the Entry 
Procedures and Carriers

[[Page 20]]

Branch, Customs Headquarters. In the event that all cost evidence is not 
furnished within the specified time limit, or is of doubtful 
authenticity, the VRU may refer the matter to the Customs Office of 
Investigations to begin procedures to obtain the needed evidence. That 
office may also investigate the reason for a failure to file or for an 
untimely submission. Unexplained or unjustified delays in providing 
Customs with sufficient information to properly determine duty may 
result in penalty action as specified in paragraph (j) of this section. 
Extensions granted for the filing of necessary evidence may also extend 
the time for filing Applications for Relief (see paragraph (i)(1) of 
this section).
    (g) Location and jurisdiction of vessel repair unit ports of entry. 
Vessel Repair Units (VRUs) are responsible for processing vessel repair 
entries. VRUs are located in New York, New York; New Orleans, Louisiana; 
and San Francisco, California. The New York unit processes vessel repair 
entries received from ports of arrival on the Great Lakes and the 
Atlantic Coast of the United States north of, but not including, those 
located in the State of Virginia. The New Orleans unit processes vessel 
repair entries received from ports of arrival on the Atlantic Coast from 
and including those in the State of Virginia, southward, and from all 
United States ports of arrival on the Gulf of Mexico including ports in 
Puerto Rico. The San Francisco unit processes vessel repair entries 
received from all ports of entry on the Pacific Coast including those in 
Alaska and Hawaii.
    (h) Justifications for relief from duty. Claims for relief from the 
assessment of vessel repair duties may be submitted to Customs. Relief 
may be sought under paragraphs (a), (d), (e), or (h) of the vessel 
repair statute (19 U.S.C. 1466(a), (d), (e), or (h)), each paragraph of 
which relates to a different type of claim as further specified in 
paragraphs (h)(1)-(h)(4) of this section.
    (1) Relief under 19 U.S.C. 1466(a). Requests for relief from duty 
under 19 U.S.C. 1466(a) consist of claims that a foreign shipyard 
operation or expenditure is not considered to be a repair or purchase 
within the terms of the vessel repair statute or as determined under 
judicial or administrative interpretations. Example: a claim that the 
shipyard operation is a vessel modification.
    (2) Relief from duty under 19 U.S.C. 1466(d). Requests for relief 
from duty under 19 U.S.C. 1466(d) consist of claims that a foreign 
shipyard operation or expenditure involves any of the following:
    (i) Stress of weather or other casualty. Relief will be granted if 
good and sufficient evidence supports a finding that the vessel, while 
in the regular course of its voyage, was forced by stress of weather or 
other casualty, while outside the United States, to purchase such 
equipment or make those repairs as are necessary to secure the safety 
and seaworthiness of the vessel in order to enable it to reach its port 
of destination in the United States. For the purposes of this paragraph, 
a ``casualty'' does not include any purchase or repair made necessary by 
ordinary wear and tear, but does include the failure of a part to 
function if it is proven that the specific part was repaired, serviced, 
or replaced in the United States immediately before the start of the 
voyage in question, and then failed within six months of that date.
    (ii) U.S. parts installed by regular crew or residents. Relief will 
be granted if equipment, parts of equipment, repair parts, or materials 
used on a vessel were manufactured or produced in the United States and 
were purchased in the United States by the owner of the vessel. It is 
required under the statute that residents of the United States or 
members of the regular crew of the vessel perform any necessary labor in 
connection with such installations.
    (iii) Dunnage. Relief will be granted if any equipment, equipment 
parts, materials, or labor were used for the purpose of providing 
dunnage for the packing or shoring of cargo, for erecting temporary 
bulkheads or other similar devices for the control of bulk cargo, or for 
temporarily preparing tanks for carrying liquid cargoes.
    (3) Relief under 19 U.S.C. 1466(e). Requests for relief from duty 
under 19 U.S.C. 1466(e) relate in pertinent part to matters involving 
vessels normally

[[Page 21]]

subject to the vessel repair statute, but that continuously remain 
outside the United States for two years or longer. Vessels that 
continuously remain outside the United States for two years or longer 
may qualify for relief from duty on expenditures made later than the 
first six months of their absence. See paragraph (b)(3)(ii) of this 
section.
    (4) Relief under 19 U.S.C. 1466(h). Requests for relief from duty 
under 19 U.S.C. 1466(h) consist of claims that a foreign shipyard 
operation or expenditure involves any of the following:
    (i) Expenditures on LASH barges. Relief will be granted with respect 
to the cost of equipment, parts, materials, or repair labor for Lighter 
Aboard Ship (LASH) operations accomplished abroad.
    (ii) Certain spare repair parts or materials. Relief will be granted 
with respect to the cost of spare repair parts or materials which are 
certified by the vessel owner or master to be for use on a cargo vessel, 
but only if duty was previously paid under the appropriate commodity 
classification(s) as found in the Harmonized Tariff Schedule of the 
United States when the article first entered the United States.
    (iii) Certain spare parts necessarily installed on a vessel prior to 
their first entry into the United States. Relief will be granted with 
respect to the cost of spare parts only, which have been necessarily 
installed prior to their first entry into the United States with duty 
payment under the appropriate commodity classification(s) as found in 
the Harmonized Tariff Schedule of the United States.
    (i) General procedures for seeking relief. (1) Applications for 
Relief. Relief from the assessment of vessel repair duty will not be 
granted unless an Application for Relief is filed with Customs. Relief 
will not be granted based merely upon a claim for relief made at the 
time of entry under paragraph (e) of this section. The filing of an 
Application for Relief is not required, nor is one required to be 
presented in any particular format, but if filed it must clearly present 
the legal basis for granting relief, as specified in paragraph (h) of 
this section. An Application must also state that all repair operations 
performed aboard a vessel during the one-year period prior to the 
current submission have been declared and entered. A valid Application 
is required to be supported by complete evidence as detailed in 
paragraphs (i)(1)(i)-(vi) and (i)(2) of this section. Except as further 
provided in this paragraph, the deadline for receipt of an Application 
and supporting evidence is 90 calendar days from the date that the 
vessel first arrived in the United States following foreign operations. 
The provisions for extension of the period for filing required evidence 
in support of an entry, as set forth in paragraph (f) of this section, 
are applicable to extension of the time period for filing Applications 
for Relief as well. Applications must be addressed and submitted by the 
vessel operator to the appropriate VRU port of entry and will be decided 
in that unit. The VRUs may seek the advice of the Entry Procedures and 
Carriers Branch in Customs Headquarters with regard to any specific item 
or issue which has not been addressed by clear precedent. If no 
Application is filed or if a submission which does not meet the minimal 
standards of an Application for Relief is received, the duty amount will 
be determined without regard to any potential claims for relief from 
duty (see paragraph (h) of this section). Each Application for Relief 
must include copies of:
    (i) Itemized bills, receipts, and invoices for items shown in 
paragraph (e) of this section. The cost of items for which a request for 
relief is made must be segregated from the cost of the other items 
listed in the vessel repair entry;
    (ii) Photocopies of relevant parts of vessel logs, as well as of any 
classification society reports which detail damage and remedies;
    (iii) A certification by the senior officer with personal knowledge 
of all relevant circumstances relating to casualty damage (time, place, 
cause, and nature of damage);
    (iv) A certification by the senior officer with personal knowledge 
of all relevant circumstances relating to foreign repair expenditures 
(time, place, and nature of purchases and work performed);
    (v) A certification by the master that casualty-related expenditures 
were

[[Page 22]]

necessary to ensure the safety and seaworthiness of the vessel in 
reaching its United States port of destination; and
    (vi) Any permits or other documents filed with or issued by any 
United States Government agency other than Customs regarding the 
operation of the vessel that are relevant to the request for relief.
    (2) Additional evidence. In addition, copies of any other evidence 
and documents the applicant may wish to provide as evidentiary support 
may be submitted. Elements of applications which are not supported by 
required evidentiary elements will be considered fully dutiable. All 
documents submitted must be certified by the master, owner, or 
authorized corporate officer to be originals or copies of originals, and 
if in a foreign language, they must be accompanied by an English 
translation, certified by the translator to be accurate. Upon receipt of 
an Application for Relief by the VRU within the prescribed time limits, 
a determination of duties owed will be made. After a decision is made on 
an Application for Relief by a VRU, the applicant will be notified of 
the right to protest any adverse decision.
    (3) Administrative protest. Following the determination of duty 
owing on a vessel repair entry, a protest may be filed under 19 U.S.C. 
1514(a)(2) as the only and final administrative appeal. The procedures 
and time limits applicable to protests filed in connection with vessel 
repair entries are the same as those provided in part 174 of this 
chapter. In particular, the applicable protest period will begin on the 
date of the issuance of the decision giving rise to the protest as 
reflected on the relevant correspondence from the appropriate VRU.
    (j) Penalties--(1) Failure to report, enter, or pay duty. It is a 
violation of the vessel repair statute if the owner or master of a 
vessel subject to this section willfully or knowingly neglects or fails 
to report, make entry, and pay duties as required; makes any false 
statements regarding purchases or repairs described in this section 
without reasonable cause to believe the truth of the statements; or aids 
or procures any false statements regarding any material matter without 
reasonable cause to believe the truth of the statement. If a violation 
occurs, the vessel, its tackle, apparel, and furniture, or a monetary 
amount up to their value as determined by Customs, is subject to seizure 
and forfeiture and is recoverable from the owner (see Sec. 162.72 of 
this chapter).
    (2) False declaration. If any person required to file a vessel 
repair declaration or entry under this section, knowingly and willfully 
falsifies, conceals or covers up by any trick, scheme, or device a 
material fact, or makes any materially false, fictitious or fraudulent 
statement or representation, or makes or uses any false writing or 
document knowing the same to contain any materially false, fictitious or 
fraudulent statement, that person will be subject to the criminal 
penalties provided for in 18 U.S.C. 1001.

[66 FR 16397, Mar. 26, 2001]