HQ 0110661 - Vessel repair; cleaning; casualty - United States International Trade Commision Rulings

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HQ 110661

June 1, 1990

VES-13-18-CO:R:P:C 110661 KVS

CATEGORY: CARRIER

Deputy Assistant Regional Commissioner
Commercial Operations Division
423 Canal Street
New Orleans, LA 70130-2341

RE: Vessel repair; cleaning; casualty
Vessel: S/S GOLDEN ENDEAVOR
Date of Arrival: August 20, 1989
Port of Arrival: New Orleans, Louisiana
Vessel Repair Entry No. C20-0024662-2

Dear Sir:

This is in response to your memorandum of November 27, 1989, which forwards for our consideration an Application for Relief filed in connection with the GOLDEN ENDEAVOR, vessel repair entry no. C20-0024662-2. Our findings are set forth below.

FACTS:

The GOLDEN ENDEAVOR (owned by Irving Trust Co. and operated by American Maritime Transport Inc.) underwent foreign shipyard operations at Athens, Greece, from July 4, 1989, to July 31, 1989. The vessel arrived in the United States on August 20, 1989, at New Orleans, Louisiana. On October 11, 1989, American Maritime Transport (hereinafter referred to as "applicant") requested an extension for the time in which to file an application for relief from vessel repair duties. The request was granted and the application for relief was timely filed on November 17, 1989.

In support of its application for relief, the applicant has submitted Hellenic Shipyards Co. invoice no. 275, dated October 11, 1989. Of the items listed on this invoice, thirteen have been submitted for our review.

ISSUE:

Whether the foreign shipyard work performed on the subject vessel for which the applicant seeks relief is dutiable under 19 U.S.C. 1466.

LAW AND ANALYSIS:

Title 19, United States Code, section 1466(a), 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 the foreign or coastwise trade, or vessels intended to be employed in such trade.

In its application of 19 U.S.C. 1466(a), the Customs Service has held that certain shipyard operations should not be classified as dutiable repairs within the meaning of the vessel repair statute. With regard to Item 204 - Hull Painting, the invoice lists staging in the amount of $2,500.00. In C.I.E. 1822/58, Customs held that the cost of staging is not dutiable. Accordingly, we find the staging cost to be non-dutiable.

Item 225 Anchor Chains - A.B.S. Inspection, and Item 501 Port and Starboard Boilers -Inspection - U.S.C.G., both list cleaning costs which are claimed to be non-dutiable as incident to a classification survey. The facts before us indicate that, in addition to inspections, both of these areas were the site of dutiable repairs. We have held that cleaning operations are not subject to duty unless performed in preparation for, or as an integral part of repairs. (C.I.E. 51/61; see also Customs Letter Rulings 109789 GV (dated November 4, 1988) and 109306 BEW (dated November 7, 1988)). Here, although the cleaning under consideration may have been necessary for an A.B.S. and U.S. Coast Guard inspections, it was also an integral part of the repairs carried out. Therefore, we find these costs to be dutiable.

Item 227 - Anchor Replacement, is claimed to be non-dutiable by reason of casualty. Title 19, United States Code, section 1466(d)(1) provides that the duty levied by section 1466(a) may be remitted if good and sufficient evidence is furnished establishing that the vessel was compelled by stress of weather or other casualty to put into a foreign port to make repairs to secure the safety and seaworthiness of the vessel to enable her to reach her port of destination. In order to qualify for duty remission, the party seeking relief must show both the occurrence of a casualty and that the repair was necessary for safety and seaworthiness.

In the case under consideration, the applicant has not demonstrated that the vessel was unseaworthy. To the contrary, following the alleged casualty which occurred on June 13, 1989, the vessel sailed from Port Said, Egypt (which has adequate repair facilites and where the damage was surveyed by A.B.S. in report no. PD1928, dated June 17, 1989) to the Greek shipyard for a scheduled drydocking before making this repair on July 31,

1989. Accordingly, we find that the cost of the replacement is dutiable. However, the amount listed for rigging is non- dutiable.

Additionally, we note that neither A.B.S. report no. PD1928, datd June 17, 1989, relating to anchor damage and A.B.S. report no. PD 1929, also dated June 17, 1989, relating to hull damage, has been submitted by the applicant). Previously, we have held that the cost of obtaining damage surveys is dutiable. Therefore, we require that the applicant submit the missing reports. If the A.B.S. reports are in the nature of damage surveys, please liquidate accordingly.

Item 303 - Port Sideshell Repair (Tanks 2 and 3); Item 350 Starboard Sideshell Repair (Tank 4); Item 408 Evaporator; Item 409 Evaporator Deck - Scale and Paint Prior to Doubling; Item 504 Superheater Tube Renewal Port and Starboard Boilers; and Item 505 Boiler Valve Inspection all include a charge for cleaning. The applicant, in asserting that these charges are not dutiable, contends that the cleaning costs were not related to any repairs but were done in preparation for future cargo. In Northern Steamship Co. v. United States, C.D. 2514, the Customs Service held that cleaning undertaken for the purpose of readying the ship for future cargo is not dutiable. That case can be distinguished from the present situation in that no repairs were made to the areas cleaned in Northern Steamship, supra. Here, as a letter from the Port Engineer (Exhibit I(f)) indicates, the cleaning was necessary to remove the debris resulting from repairs. Therefore, under the facts before us, the cleaning undertaken was an integral part of repairs within the meaning of C.I.E. 51/61, and as such, these costs are dutiable.

Item 330 Incinerator Hookup, is claimed by the applicant to be a non-dutiable permanent modification to the vessel's hull and fittings. However, examination of the shipyard invoice reveals that repairs were also included in the cost listed. In C.I.E. 1325/58, the Customs Service held that the entire cost of an item is dutiable where non-dutiable charges are not itemized from dutiable items. Here, the invoice under consideration does not segregate the costs of the alleged modification from the cost of the repairs completed. Accordingly, we find that the entire amount is dutiable.

Item 406 Megger Readings - Service includes maintenance and servicing functions as well as inspection. Here, as above, there is no segregation of maintenance and inspection costs. Accordingly, the entire amount is dutiable.

Item 412 Fire and Butterworth Connection to Sea Chest Modification is claimed by the applicant to be a non-dutiable permanent modification to the hull and fittings. However,
examination of the shipyard invoice reveals that this alleged modification utilizes valves which were overhauled by the shipyard. Since the invoice does not itemize between modification and repair costs, we find the entire amount to be dutiable, less the itemized amounts for rigging and ventilation.

HOLDING:

After thorough review of the evidence submitted, and as detailed in the Law and Analysis portion of this ruling, we recommend that the application for relief be granted in part and denied in part.

Sincerely,

B. James Fritz

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