HQ 0110704 - Protest No. 1601-9-000075; Vessel Repair Entry No. C16- 0007324-6, dated December 28, 1989; Date of Arrival: December 28, 1989; Port of Arrival: Charleston, S.C.; Vessel: M/V NEDLLOYD HUDSON, Voyage No. 008 - United States International Trade Commision Rulings

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HQ 110704

May 4, 1990

VES-13-18-CO:R:P:C 110704 BEW

CATEGORY: CARRIER

Deputy Assistant Regional Commissioner
Commercial Operations Division
ATTN: Vessel Repair Liquidation Unit
New Orleans, Louisiana 70130

RE: Protest No. 1601-9-000075; Vessel Repair Entry No. C16- 0007324-6, dated December 28, 1989; Date of Arrival: December 28, 1989; Port of Arrival: Charleston, S.C.; Vessel: M/V NEDLLOYD HUDSON, Voyage No. 008

Dear Sir:

Reference is made to your memorandum of December 14, 1989, which forwarded the above-captioned protest from the assessment of vessel repair duties for our determination.

FACTS:

Between December 14 and December 17, 1988, while in Rotterdam, Holland, and Bremerhaven, Germany, the vessel M/V NEDLLOYD HUDSON underwent various shipyard repairs. The dutiability of these operations has previously been considered by your office. The protestant elected not to file an Application for Relief. The entry was liquidated on April 28, 1989. The protest was timely filed on June 9, 1989. Included in your considerations was the matter of whether the cost associated with the following items:

I. HS 5227 - Lubrafil filter

II. HS 5228 - ABS Special Survey

III. HS 5229 - #2 Sulzer engine parts, and

IV. HS 8716 - G'Hart,
is dutiable under the statute. These are the only items which are presently being protested.

ISSUE:

Whether remission of duties is warranted under the statute when the evidence of cost is supported only by internal cost documents.

Whether fees for an ABS Survey and postage and insurance are dutiable costs under the statute.

LAW AND ANALYSIS:

Section 1466 provides, in pertinent part, for payment of duty in the amount of 50 percent ad valorem of 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 Regulations provide in section 4.14 (d)(1)(iii) (19 CFR 4.14 (d)(1)(iii)), a specific listing of the kinds of documentary evidence which "shall" be filed to support applications for relief from vessel repair duties. Listed first among these are "...itemized bills, receipts, and invoices". To be sure, other types of proof are of great value in supporting applications, but none enjoy the primacy of actual itemized cost documents issued by a foreign shipyard.

In this case we are presented with a vessel operator- generated document which is, at best, insufficient and self- serving. This point is sought to be made that Sea-Land has been submitting and Customs accepting such proofs for some years now. This may be so, but we are unaware of cases in which total reliance was placed on such submissions. As previously indicated, such documentation is a welcome supplement to probative evidence. This does not indicate however, that it is an acceptable substitute for same. Accordingly, the protest is denied as to items I. HS 5227 and III. HS 5229 #2 Sulzer engine parts.

Item IV. HS 8716 G'Hart covers the cost of postage and insurance fees. Inasmuch as the dutiable status of expenses such as these has never been determined by either the courts or Customs, we find them to be analogous to the costs of drydocking
and general services (which are non-dutiable pursuant to C.I.E. 1188/60) in that they are not part of the actual repair work done. Accordingly, the protest is granted as to this item.

Customs has held that 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; however, in the liquidation process Customs should go beyond the mere labels of "continuous" or "ongoing" before deciding whether the item is dutiable. If an inspection or survey is conducted as a part of an ongoing maintenance and repair program labelled "continuous" or "ongoing" the cost is dutiable. Also, if the survey is to ascertain the extent of damage sustained, or to ascertain if the work is adequately completed, the costs are dutiable as part of the repairs which are accomplished pursuant to holdings in C.I.E. 429/61, C.S.D. 79-2, and C.S.D. 79-277. The survey under consideration is nondutiable. Accordingly, the protest is granted as to this item.

HOLDING:

Following thorough review and analysis of the facts, law and evidence, it is our determination that the protest is denied as to Items I and IV, and granted as to Items II and III. Accordingly, the protest is allowed in part, and reliquidation is directed.

Sincerely,

B. James Fritz
Chief

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