HQ 0110597 - Protest No. 1001-7-002964 - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1992 HQ Rulings > HQ 0110294 - HQ 0110727 > HQ 0110597

HQ 110597

February 21, 1990

VES-13-18-CO:R:P:C 110597 KVS

CATEGORY: CARRIER

Deputy Assistant Regional Commissioner
Classification and Value Division
ATTN: Regional Vessel Repair Liquidation Unit 6 World Trade Center
New York, New York 10048-0945

RE: Protest No. 1001-7-002964
Newark Vessel Repair Entry 85-702904-3
Vessel: SEA-LAND LEADER V-86

Dear Sir:

This is in response to a transmittal from your office of protest no. 1001-7-002964, which concerns seven vessel repair entries: 85-702874-3 (voyage 84), 85-702886-6 (voyage 85), 85- 702904-3 (voyage 86), 85-702923-4 (voyage 87), 85-702940-9 (voyage 88), 85-702852-2 (voyage 89), and 85-702985-2 (voyage 91). Our findings are set forth below.

FACTS:

On March 27, 1985, the SEA-LAND LEADER commenced certain foreign shipyard operations to the engine room and bridge systems to convert the vessel from ACC (Automatic Control Console) to ACCU (Automatic Control Console Unattended) to permit unmanned engine room operation. This conversion was to be completed over a series of voyages encompassing the following seven entries: 85-702874-3, 85-702886-6, 85-702904-3, 85-702923- 4, 85-702940-9, 85-702852-2, and 85-702985-2. By prior arrangement with the Chief, Residual Liquidation and Drawback Branch, New York and Headquarters, Sea-Land was to declare a pro- rata amount of the conversion cost on each voyage. The invoices for the conversion would be submitted at the completion of the project. Liquidation of the entries was to be suspended until the conversion was completed.

A pro forma invoice from Wilton-Fijenoord (invoice 5849, account number 32-5247) for drydock repairs was submitted by Sea- land for entry 85-702874-3 (voyage 84). Sea-Land indicated in its application for relief that an invoice from Wilton- Fijenoord for the conversion would be submitted later. Acting under the inaccurate belief that the Wilton-Fijenoord invoice (no. 5849, account 32-5247) represented the cost for the foreign
shipyard conversion work (instead of the drydock costs that it actually represented), Customs ruled that since all of the conversion work had been completed on the first voyage, Sea-Land would not be permitted to prorate the cost of the conversion over a series of voyages (see Customs Letter 108105 JM (dated July 24, 1986)). When the commercial invoices were not received, entry 85-702874-3 (voyage 84) was liquidated using an estimated amount for all the repairs in the amount of $2,156,000.00.

Accordingly, Customs ruled that the prorated conversion costs declared on subsequent voyages (with the exception of the entry under protest) were duty-free as Customs had held the entire amount dutiable on entry 85-702874-3 (voyage 84).

When the invoices for the actual conversion costs were submitted with the last voyage, entry 85-702985-2 (voyage 91) (including Siemens-Allis invoice PE356838 dated July 31,1985, an illegible Siemens-Allis invoice dated either October or November 22, 1985, and Ocean Transport invoice F.35391 dated March 13, 1985), Customs ruled that the charges were dutiable, but liquidated the entry as duty-free, as the pro-rated estimated conversion costs had already been held dutiable on the first voyage, entry 85-702874-3 (voyage 84).

In requesting relief, the protest asserts that the foreign shipyard conversion work is a duty-free "modification" and requests that the prorated conversion cost declared on entry 85- 702904-3 (voyage 86) be liquidated as duty-free.

ISSUE:

Whether the prorated conversion cost declared on entry 85- 702904-3 (voyage 86), which has already been found dutiable on entry 85-702874-3 (voyage 84), may be liquidated as duty-free.

LAW AND ANALYSIS:

Section 466, Tariff Act of 1930, as amended (19 U.S.C. 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. In its application of the vessel repair statute (19 U.S.C. 1466), Customs has held that modifications, alterations, and additions to the hull and fittings of a vessel are not subject to vessel repair duties.

The protest, in asserting that the foreign shipyard conversion work is a duty-free "modification" and requesting that the prorated cost declared on entry 85-702904-3 (voyage 86) be liquidated as duty-free, states that:

...partial declarations were made on Entries 7029043, 7029234, 7029409, 7029522 ... and Customs liquidated these as duty-free. The final declaration, Entry 7029852 ... completed the project. This was declared as duty free and Customs liquidated it as such. Entry 85-7029043 should also be duty-free (emphasis added).

In regard to the apparent confusion as to the status of the entry 85-702904-3 (voyage 86), our records show that this entry has previously NOT been liquidated as duty-free and we assume that the inclusion of this entry on the list of those entries whose partial declarations have been liquidated as duty-free is in error. Review of the files submitted with the protest indicates that the sentence should read, "...partial declarations were made on Entries 702886-6, 7029234, 7029409, 7029522... and Customs liquidated these as duty-free".

Parenthetically, we must also comment on the protest's statements as to entry 85-702985-2 (voyage 91). While it is true that the partial declaration of the conversion cost declared on this final entry was liquidated as duty-free, the conversion cost was ruled as dutiable and the amount was attributed to a prior entry, number 85-702874-3 (voyage 84)(see Customs Letter 108111 JM). The liquidation of 85-702985-2 (voyage 91), then, was a bookkeeping measure and not, as the protest implies, as a determination that the conversion was a duty-free "modification".

As previously stated, we note that that the entry currently under protest, 85-702904-3 (voyage 86), is the only entry in the series of subsequent voyages which does not liquidate the prorated conversion cost as duty free (see Customs Letters 108106 JM, 108107 JM, 108108 JM, 108109 JM 108110 JM, and 108111 JM (all dated July 24, 1986)). Review of related files leads us to conclude that this was the result of a typographical error. Because the total cost of the conversion has already been held dutiable under the first entry, 85-702874-3 (voyage 84)(which is the subject of protest 1001-5-011485), the denial of this protest would result in the double payment of duty for the prorated amount listed on entry 85-702904-3 (voyage 86).

Accordingly, we hold that the prorated conversion cost declared on entry 85-702904-3 (voyage 86) may be liquidated as duty-free, subject to the caveat that the issue of the classification of the conversion as a duty-free "modification" will be determined in protest 1001-5-011485, filed in connection with entry 85-702874-3 (voyage 84), which held the entire conversion cost dutiable.

HOLDING:

The prorated conversion cost declared on entry 85-702904-3 (voyage 86) which has already been found dutiable on the entry for a previous voyage, may be liquidated as duty-free, subject to the caveat that the issue of the classification of the conversion as a "modification" will be determined in the protest filed in connection with the entry for the previous voyage.

Sincerely,

B. James Fritz

Previous Ruling Next Ruling