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HQ 111304

March 4, 1991

VES-13-18 CO:R:IT:C 111304 JBW

CATEGORY: CARRIER

Chief, Technical Branch
Commercial Operations
Pacific Region
1 World Trade Center
Long Beach, CA 90831

RE: Vessel Repair; Taxes; 19 U.S.C. 1466; GREEN WAVE; Protest No. 27040 002990.

Dear Sir:

This letter is in response to your memorandum of September 11, 1990, which forwards for our review and ruling the above- referenced protest against the assessment of vessel repair duties.

FACTS:

The record reflects that the subject vessel, the GREEN WAVE, arrived at Port Hueneme, California, on March 10, 1989. Vessel repair entry, number C27-0012577-9, was filed on the same day as arrival and indicates that shipyard work was performed in New Zealand. The protestant filed an application for relief, which addressed the issues of casualty and of taxes assessed by the Government of New Zealand. This office denied relief on both issues. Headquarters Ruling Letter 110425, dated November 30, 1989. The entry was liquidated on April 20, 1990, and the protestant timely filed its protest on July 16, 1990.

The vessel owner protests only that portion of our ruling that found the cost of the New Zealand goods and services tax (GST) dutiable. The protestant claims that the vessel, being exempt from the GST by law, was never charged these taxes. The record reflects that Ascot Shipping, Ltd., collated and paid the various shipyard charges on the account of the protestant. The GST, which appear on the Sinclair Melbourne & Co., Ltd, invoices, were paid by Ascot Shipping, which in turn received a refund of the taxes. The Ascot Shipping invoice paid by the protestant reflects the Sinclair Melbourne invoiced amounts minus the GST.

ISSUE:

Whether foreign government taxes that were included on a shipyard invoice, but were never paid by the protestant are dutiable under 19 U.S.C. 1466 (1988).

LAW AND ANALYSIS:

Title 19, United States Code, section 1466, provides in pertinent part for payment of duty in the amount 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 engage in such trade. The Customs Service has held that foreign government taxes constitute dutiable expenses as that term is used in the vessel repair statute. Headquarters Ruling Letter 110425. The statute limits the assessment of duties to those costs incurred in a foreign country. If the vessel owner demonstrates that costs were never in fact incurred, then no duty on the amount of those costs is owed.

The protestant claims that it never paid the GST that appear on the Sinclair Melbourne invoices. Rather, the GST was paid by Ascot Shipping, the agent for the protestant in New Zealand, which ultimately received a refund of the GST. The claim of the protestant is supported by a list of charges owing to Ascot Shipping by the protestant; this list shows the cost of the work performed by Sinclair Melbourne deducted by the amount of the GST. We thus conclude that the GST were never paid by the protestant and are thus not dutiable under 19 U.S.C. 1466.

As part of your memorandum, you state that the protestant is claiming a duty refund of $1,532.03 (U.S.), but that the protestant includes as part of its protest GST that were listed on invoices that your office determined were not dutiable. This office does not have a complete account of the liquidation of this entry. However, it is axiomatic that only duties that were paid are subject to refund. In reliquidating this entry, your office should refund only those duties that the protestant can demonstrate were actually paid. If GST was included on invoices that were determined to be non-dutiable, then no duty was paid on the GST and no duty refund is available.

HOLDING:

Foreign government taxes that were included on a shipyard invoice, but were never paid by the protestant are not dutiable under 19 U.S.C. 1466. The protest is granted, subject to the requirement that only duties that the protestant can demonstrate were actually paid are eligible for refund.

Sincerely,

B. James Fritz
Chief

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