HQ 0110949 - Vessel Repair; Application; 19 U.S.C. 1466; 19 C.F.R. 4.14; Bunker Survey; Protest # 1001-9-003201; SEA-LAND VALUE. - United States International Trade Commision Rulings

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HQ 110949

August 1, 1990

VES-13-02/13-18 CO:R:P:C 110949 JBW

CATEGORY: CARRIER

Deputy Assistant Regional Commissioner
Classification and Value Division
ATTN: Regional Vessel Repair Liquidation Unit 6 World Trade Center
New York, New York 10048-002980

RE: Vessel Repair; Application; 19 U.S.C. 1466; 19 C.F.R. 4.14; Bunker Survey; Protest # 1001-9-003201; SEA-LAND VALUE.

Dear Sir:

This letter is in response to your memorandum of March 22, 1990, which forwards for our review and ruling the above captioned protest from the assessment of vessel repair duties.

FACTS:

The record reflects that the subject vessel, the SEA- LAND VALUE, arrived in the port of New York, New York, on January 2, 1989. Vessel repair entry 514-3003603-1, Customs Form 226, was filed on the same day indicating that a bunker survey and fuel analysis were performed while the ship was in Spain.

On March 21, 1989, Sea-Land Service, Inc., (protestant) submitted a letter, titled "APPLICATION FOR RELIEF OF DUTY." This letter lists the work performed, the cost of the work, and the estimated duty. For each entry, the estimated duty is claimed to be zero. Reference is made to "Ruling" [C.I.E.] 429-61 in the far left column of each line of the two work descriptions. However, the letter proffers no reason or analysis on how this ruling applies, nor does the protestant specifically state its basis for relief.

The vessel repair unit liquidated the entry on April 14, 1989, and posted the liquidation notice on the same day. On May 22, 1989, the protestant submitted another letter in which it "protests" the failure of the Vessel Repair Unit to give "formal written notice" justifying the liquidation. In the same letter, the protestant requests all decisions relating to the dutiability under 19 U.S.C. 1466 (1982) of non-repair related expenses. The Vessel Repair Unit issued a "Notice of Action" on May 26, 1989, in which it directed the protestant to perfect its protest within ninety days of liquidation.

The protestant filed its protest on June 9, 1989. On this form, the protestant again claims that it received no notice or justification for the assessment of duty. Furthermore, in an accompanying letter, the protestant states that it has nothing in its files to show that a bunker survey or fuel analysis is required to be declared or is dutiable.

ISSUES:

(1) Whether the Customs Service is obligated to respond to a deficient application for relief from vessel repair duties.

(2) Whether a bunker survey and a fuel analysis, performed for reasons not related to repairs of the vessel, are subject to duty under 19 U.S.C. 1466.

LAW AND ANALYSIS:

In your transmittal memorandum, you state that you deemed the protestant's submission of March 21, 1989, not to be an application for relief. Consequently, you state that no formal notice of decision need be sent to the protestant.

The Customs Regulations state that an application for relief need not be in any particular form. 19 C.F.R. 4.14(d)(1)(i). However, the regulations state and this office has consistently held that an application must identify the items for which relief from payment of duty is sought as well as the legal bases for the Customs Service not to assess duty. Id.; Headquarters Ruling Letter 110107, dated August 30, 1989.

We agree with your assessment that the protestant's letter of March 21, 1989, does not meet the regulatory criteria for an application. The mere citation to a ruling from the Customs Service without analysis of the applicability of this ruling does not amount to a statement of the legal basis upon which the applicant is seeking relief. The issue arises, then, of whether the Customs Service is obligated to respond to a deficient application.

Section 4.14(d)(1)(v) of the Customs Regulations provides in pertinent part:

Within 60 days after receipt of an application for relief by a vessel repair liquidation unit, the appropriate regional commissioner shall either approve or deny the application for relief or forward it to Headquarters for advice....The appropriate regional commissioner shall give prompt written notice of any final decision to the party who submitted the application. The notice shall advise the party of its right to petition for review of the decision....

19 C.F.R. 4.14(d)(1)(v). Furthermore, 19 C.F.R. 4.14(e) provides that where an application for relief is timely filed, the vessel repair entry may be liquidated thirty days after the date of the written notice to the party who filed the application for relief, as provided in 19 C.F.R. 4.14(d)(1)(v), unless a petition for review is filed under 19 C.F.R. 4.14(d)(2)(ii).

This office has stated that all applications must be answered. Headquarters Ruling Letter 110246, dated July 14, 1989. If the letter seeking relief falls short of the regulatory requirements for an application, then your response should identify the deficiencies. Id. Liquidation in such cases should be suspended until the time period for filing an application or, if appropriate, a petition for relief has passed. Id. Posting the notice of liquidation, as was done in this case, does not appear to us to be sufficient written notice.

In your memorandum, you address the issue of whether a routine bunker survey and fuel analysis is dutiable. 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.

Customs has held that inspections not resulting in repairs are not dutiable. Headquarters Ruling Letter, 110395, dated September 7, 1989; 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 a classification society, insurance carrier, etc., the cost of the surveys is not dutiable even when dutiable repairs are effected as a result thereof. Headquarters Ruling Letter 110368, dated July 26, 1989. However, if the survey is to ascertain the extent of damage sustained or to ascertain the extent of damage sustained, then the costs are dutiable as part of the repairs that are accomplished. C.I.E. 429/61; C.S.D. 79-2; C.S.D. 79-277. In the liquidation process, Customs should look beyond the mere labels of "continuous" or "ongoing" before deciding whether the item is dutiable. If an inspection or a survey is conducted as a part of a maintenance and repair program labelled "continuous" or "ongoing," the cost of such survey is dutiable if it is in fact repair related.

The bunker survey and fuel analysis undertaken in this case are not dutiable. While the survey appears to fall within the category of "continuous" or "ongoing," the record reveals no repairs to the vessel either before or after the survey.

In your memorandum, you point out that this office held, in Headquarters Ruling Letter 109816, dated November 17, 1988, that a bunker survey was dutiable. We believe that the circumstances of that case differ from those presented in the present case. In the earlier case, we determined that the bunker survey was dutiable, for the applicant provided insufficient evidence to show that the survey was not connected to the other repairs that the vessel underwent. In contrast, the survey conducted in the present case is more in the nature of a periodic inspection and has no connection with repairs to the vessel.

HOLDINGS:

The Customs Service is under an obligation to respond to all applications, including those that do not meet the regulatory criteria for establishing an application. The response of the Customs Service should point out the deficiencies of the letter.

The bunker survey and fuel analysis, not being repair related, are not dutiable. The protest is therefore granted.

Sincerely,

B. James Fritz
Chief

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