HQ 0110743 - Repetition of precedent alone is not a basis for relief; Supplementation of original entry after 2 years denied; inspections; transportation; drydocking; modifications Vessel: EXXON BATON ROUGE V-01/87 - 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 0110731 - HQ 0110894 > HQ 0110743

HQ 110743

July 25, 1990

VES-13-18-CO:R:P:C 110743 KVS

CATEGORY: CARRIER

Chief
Residual Liquidation and Protest Branch
6 World Trade Center
New York, NY 10048

RE: Repetition of precedent alone is not a basis for relief; Supplementation of original entry after 2 years denied; inspections; transportation; drydocking; modifications Vessel: EXXON BATON ROUGE V-01/87
Vessel Repair Entry No. C10-4903433-8

Dear Sir:

This is in response to your memorandum of December 18, 1989, which transmits for our consideration a petition for review filed in connection with the EXXON BATON ROUGE V-01/87, vessel repair entry no. C10-4903433-8. Our findings are set forth below.

FACTS:

The BATON ROUGE, a U.S.-flag vessel, underwent foreign shipyard operations from November 14, 1986, to January 8, 1987, at Lisbon, Portugal. The vessel arrived in the United States on January 29, 1987, at New York and made entry on February 6, 1987.

The petitioner filed an application for relief from vessel repair duties on April 23, 1987. The application was granted in part and denied in part in Customs Letter Ruling 110087 RAH (dated June 10, 1989). The petitioner was notified of our decision on the application on October 18, 1989.

The petition for review currently under consideration was timely filed on November 10, 1989. In addition to contesting certain items denied in our decision on the application, the petitioner also seeks to amend its original entry by a letter dated March 1, 1989, which submits invoice no. 11097 (dated February 13, 1989) from A.R.N.O. Shipyard, located in Brest, France.

ISSUE:

Whether the foreign shipyard operations performed on the subject vessel are dutiable pursuant to 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 engaged, intended to engage, or documented under the laws of the United States to engage in the foreign or coastwise 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. In C.I.E. 204/60 (dated 3/3/60) we held that properly segregated costs of transportation of machinery from a vessel to the shop and return thereto are not dutiable as expenses of repairs within the meaning of the vessel repair statute. Accordingly, after examining Lisnave shipyard invoice #1392/86/LISN, we find the charges listed for transportation on the following items to be non-dutiable:

Item Number Amount

5............................................$ 1,120.00 8............................................$ 310.00 12...........................................$ 3,920.00 14...........................................$ 3,720.00 19...........................................$ 180.00 23...........................................$ 1,500.00 24...........................................$ 1,530.00 25...........................................$ 380.00 27...........................................$ 220.00 28...........................................$ 240.00 36...............................(part I)....$ 6,680.00 (part II)...$ 1,780.00
(part III)..$ 1,780.00
37...........................................$11,980.00 40...........................................$ 920.00 55...........................................$ 560.00 74...........................................$ 180.00 75...........................................$ 680.00 82...........................................$ 4,120.00 92...........................................$ 300.00 94...........................................$ 220.00 97...........................................$ 380.00 103..........................................$ 540.00 104..........................................$ 410.00 105..........................................$ 960.00

Item Number (cont.) Amount

106..........................................$ 960.00 (shipping)..$ 720.00
107..........................................$ 160.00 108..........................................$ 40.00 109..........................................$ 160.00 112..........................................$ 480.00 119..........................................$ 1,860.00 123..........................................$ 80.00 127..........................................$ 910.00 130..........................................$ 380.00 135..........................................$ 180.00 148..........................................$ 1,800.00 149..........................................$ 680.00 153..........................................$ 140.00 157..........................................$ 680.00 162..........................................$ 380.00 195..........................................$ 340.00
$54,560.00

Item 1 on Lisnave Shipyard invoice #1392/86/LISN lists certain services performed in connection with drydocking that Customs has previously held to be non-dutiable. Accordingly, we find the following subparts of Item 1 to be non-dutiable:

Subpart (Service Performed) Amount

4 (garbage removal)..........................$ 1,760.00 5 (ground wire)..............................$ 100.00 9 (portable telephones)......................$ 640.00 10 (protective paper).........................$ 1,800.00 12 (transfer of ship stores to vessel)........$ 900.00 (additional crane service).................$ 2,640.00 13 (owner's materials transp. fm airport).....$ 2,720.00 14 (shore steam)..............................$ 5,150.00 17 (temporary bilge pumps)....................$ 5,000.00 18 (temporary heaters)........................$11,100.00 (mooring)..................................$ 1,820.00 (fire protection)..........................$ 1,700.00 (fire watch)...............................$22,400.00 22 (crane service)............................$ 525.00 25 (transfer of containers on vessel).........$ 1,780.00
$60,035.00

Regarding item 1, subpart 18-4, which lists the cost of obtaining gas free certificates, the Customs Service has held
that the cost of obtaining gas free certificates is dutiable as an ordinary and necessary expense incident to repair operations and must be apportioned between dutiable and free items (see C.I.E. 1188/60). Accordingly, the cost listed on the invoice under item 1 for obtaining gas free certificates ($2,860.00) must be apportioned between the dutiable and non-dutiable items.

Customs has also held other services related to drydocking to be classifiably free from the duty imposed by the vessel repair statute. The costs listed for ventilation, lighting, staging, fire watch, fire protection, fumigation, or rain shelters listed on Lisnave invoice #1392/86/LISN under the following items are duty-free:

Item number Amount

3...(fumigation).............................$ 520.00 36..(PART I)(staging)........................$ 4,820.00 ..........(lighting).......................$ 5,560.00 ..........(ventilation)....................$ 3,680.00 ..........(fire protection)................$ 6,400.00 ..(PART II)(lighting)......................$ 1,580.00 ...........(ventilation)...................$ 1,260.00 ...........(fire watch)....................$ 2,100.00 ..(RENEWALS(lighting)......................$ 1,310.00 ............(ventilation)..................$ 9,080.00 ............(fire watch)...................$10,800.00 40..(lighting)...............................$ 460.00 ..(ventilation)............................$ 430.00 ..(fire watch).............................$ 800.00 128..(staging)...............................$ 200.00 143..(staging)...............................$ 1,200.00 145..(crane service).........................$ 1,860.00 ..(lighting)..............................$ 520.00 ..(crane service).........................$ 3,200.00 ..(lighting)..............................$ 620.00 ..(crane service).........................$ 4,320.00 ..(lighting)..............................$ 840.00 ..(crane service).........................$ 3,640.00 ..(lighting)..............................$ 2,680.00 ..(crane service).........................$ 520.00 ..(crane service).........................$ 580.00 146..(ventilation)...........................$12,360.00 ..(lighting)..............................$ 8,440.00 ..(crane service).........................$ 6,720.00 ..(rain shelters).........................$ 580.00 147..(ventilation)...........................$13,230.00 ..(lighting)..............................$ 8,680.00 ..(crane service).........................$ 6,920.00 ..(rain shelters).........................$ 580.00 $126,490.00

The petition for relief also seeks relief for various items denominated as "inspections". In seeking relief, the petitioner repeats time after time one sentence of Customs precedent which may or may not be applicable to the contested item (The repeated quote is "C.S.D. 79-277 Held that a survey is undertaken to meet specific requirements of a government entity, classification society, insurance carrier etc., the cost is not dutiable even when dutiable repairs are effected as a result thereof." [sic]) The petitioner makes no argument nor alleges facts which provide any relationship between the Customs precedent cited and the item for which relief is sought. For relief to be granted, it is incumbent upon the party seeking relief to specify a basis upon which relief can be granted. The mere listing of an invoice line item followed by a sentence of precedent, which may or may not be applicable, is not a sufficient basis for us to grant relief. Accordingly, we find the following items on Lisnave invoice 1392/86/LISN to be dutiable:

Item Number Amount

5............................................$ 2,920.00 6............................................$ 1,680.00 7............................................$ 2,730.00 19...........................................$ 4,480.00 ...........................................$ 1,320.00 24...........................................$ 9,520.00 27...........................................$ 1,410.00 32...........................................$ 320.00 42...........................................$ 1,640.00 43...........................................$ 5,345.00 45...........................................$ 840.00 46...........................................$ 1,070.00 48...........................................$ 1,080.00 49...........................................$ 770.00 51...........................................$ 2,280.00 54...........................................$ 4,300.00 56...........................................$ 5,490.00 69...........................................$ 1,360.00 78...........................................$ 750.00 80...........................................$ 230.00 82...........................................$ 4,120.00 85...........................................$ 1,980.00 87...........................................$ 8,700.00 88...........................................$ 8,390.00 93...........................................$ 1,530.00 95...........................................$ 1,250.00 97...........................................$ 175.00 100..........................................$ 7,320.00 ..........................................$ 1,240.00 103..........................................$ 2,620.00 118..........................................$ 1,380.00

Item Number (cont.) Amount

129..........................................$ 9,560.00 131..........................................$ 880.00 133..........................................$ 560.00 134..........................................$ 320.00 136..........................................$ 1,720.00 138..........................................$ 1,100.00
$102,380.00

The petitioner also seeks relief for various items on the basis that the work performed involved either the installation and modification of the hull and fittings or the removal of obsolete equipment from the vessel. The Customs Service has held that for an item to be characterized as a non-dutiable modification, it must encompass the installation of of an item as a new design feature, not as a replacement for, or restoration of, parts now performing a similar function. We have also held that the decision in each case as to whether an installation constitutes a non-dutiable addition to the hull and fittings of the vessel depends to a great extent on the detail and accuracy of the drawings and invoice descriptions of the actual work performed. Even if the article is considered to be part of the hull and fittings of a vessel, the repair of that article, or the replacement of a worn part of the hull and fittings, is subject to vessel repair duties.

After review of the shipyard invoice and the drawings submitted, we find that the following contested items involved either the utilization of a new design feature, the replacement of non-defective obsolete equipment with a different type of equipment, or the removal of obsolete equipment with no replacement, so as to allow the item to be used in another manner. These items can be characterized as modifications to the vessel and as such, are non-dutiable:

Item Number Amount

11 (tank pipe removal)......................$ 6,480.00 .........................................$ 480.00 34 (sacrificial anodes removal).............$ 6,860.00 38 (refuel at sea equipment)................$ 2,100.00 40 (port chain locker)......................$ 4,270.00 71 (filter relocation)......................$ 3,260.00 143 (starboard running lights)...............$ 3,830.00 144 (steam to electric whistle)..............$ 2,240.00
$29,520.00

The petitioner also seeks relief for all items listed on American Bureau of Shipping invoice #830310, dated March 9, 1987. Included among the charges listed for performing various surveys is a charge of $585.00 for overtime and a charge of $156.60 for expenses. Since some of the costs listed on the invoice are dutiable (i.e. repairs in the amount of $4,385.55), the overtime and expenses charges must be segregated between the dutiable and non-dutiable charges. Since these charges are not separated, the entire amount of these charges ($585.00 and $156.60) is dutiable, as well as the amount listed for repairs ($4,385.55). The remaining items on the invoice are non- dutiable.

Finally, the petitioner, by letter dated March 1, 1989, seeks to supplement its original entry by submitting A.R.N.O. shipyard invoice #11097 in the amount of $24,846.18, for costs incurred by the yard prior to the cancellation of the scheduled drydocking for the BATON ROUGE. The petitioner claims "it was unaware of any yard preparation work until the invoice of 14 Feb. 1989 was received." However, we note that A.R.N.O., by letter dated November 27, 1986, informed the petitioner of these charges and references two previous telexes (#1330 DB, dated November 13, 1986, and 1148 DB, dated September 26, 1986) sent in connection with these charges.

The evidence submitted indicates that the petitioner was notified of the existance of these charges at least 124 days prior to the entry of the vessel into the United States. We know of no basis for relief which would allow us to grant relief in such circumstances. Accordingly, relief for this invoice is denied. Additionally, we are referring this matter to your office with the recommendation that penalty action be instituted for failure to file in accordance with the appropriate Customs regulations and statutes.

HOLDING:

Following a thorough review of the documentation submitted by the petitioner, and as detailed in the Law and Analysis section of this ruling, the petition for review is granted in part and denied in part.

Sincerely,

Stuart P. Seidel

Previous Ruling Next Ruling