HQ 0110914 - Vessel repair; cleaning; scavenger air spaces; piston; insufficient evidence; survey - United States International Trade Commision Rulings

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HQ 110914

October 4, 1990

VES-13-18-CO:R:P:C 110914 KVS

CATEGORY: CARRIER

Chief
Residual Liquidation and Protest Branch
6 World Trade Center
New York, NY 10048-0954

RE: Vessel repair; cleaning; scavenger air spaces; piston; insufficient evidence; survey
Vessel: SEA-LAND ACHIEVER V-10
Vessel Repair Entry No. 514-3003724-5
Date of Arrival: March 31, 1989
Port of Arrival: Newark, New Jersey

Dear Sir:

This is in response to your memorandum of March 2, 1990, which forwards for our consideration a petition for review filed in connection with the SEA-LAND ACHIEVER, vessel repair entry no. 514-3003724-5. Our findings are set forth below.

FACTS:

The ACHIEVER, an American-flag vessel, underwent foreign shipyard operations in Algeciras, Spain, on March 9, 1989. The work encompassed the cleaning of the vessel scavenger air spaces as well as work done on the number 2 piston. Subsequent to these operations, the vessel arrived at the United States at Newark, New Jersey, on March 31, 1989 and made formal entry in a timely manner.

The petitioner filed an application for relief from vessel repair duties on May 30, 1989. The vessel owner was notifed of Customs decision denying the application in part in a letter dated October 18, 1989. The petition for review currently under consideration was timely filed on November 6, 1989.

ISSUE:

Whether the foreign shipyard work performed aboard the subject vessel is non-dutiable pursuant to 19 U.S.C. 1466, where
the invoice and supporting documentation do not provide a clear description of the work performed and where no segregation of charges has been made.

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.

However, the Customs Service held in C.I.E. 51/61 (dated January 19, 1961) that cleaning operations are not subject to duty unless performed in preparation for, or as an integral part of repairs. The petitioner asserts that Nico Spain, S.A. invoice #000835 should be held non-dutiable as cleaning within the meaning of C.I.E. 51/61.

The scavenger air spaces on Sulzer Diesel Engines are subject to the accumulation of carbon deposits. This is a potential fire hazard and should be maintained according to the Sulzer maintenance manual specifictions. Therefore, the removal of carbon deposits can be viewed as a maintenance function, which the Customs Service has found to be dutiable. In T.D. 43322 (dated April 2, 1929), which discussed the dutiability of maintenance painting, the court stated:

It is a matter of common knowledge that the words "maintain" and "maintenance" are frequently used in the sense of keeping a thing in good condition by means of
"repairs." For example, to maintain a highway, ordinarily, means to keep it in a proper state of repair. Obviously,
"maintenance," whether used in connection with a ship or other thing, means to keep or preserve in a good condition. This may, and frequently does, involve the making of repairs.

Disposition of the issue currently before us, however, does not necessitate a finding that the cleaning of the scavenger air spaces constitutes maintenance. In describing the work undertaken aboard the subject vessel, Nico Spain, S.A. invoice #000835 states only that the work was carried out "as per enclosed signed copy of time-sheet." The attached time sheet indicates that, in addition to the cleaning of the scavenger air spaces, other work was also completed. Specifically, the time sheet carries the entry "Assistance Piston Number 2." Based upon this brief notation, we are unable to conclude whether the
assistance given to piston number 2 encompassed dutiable or non- dutiable operations.

However, the Customs Service has held that where the costs of dutiable and non-dutiable items are not segregated, but are grouped together, duty will be assessed on the entire cost (see C.I.E. 565/55, C.I.E. 1325/58 and C.D. 1836). Since no segregation of charges has been made, we find the entire amount listed on Nico Spain invoice #000835 to be dutiable.

The petitioner also asserts that A.B.S. Invoice #8403917 should be non-dutiable. In support of its position, the petitioner asserts that the invoice is non-dutiable because the A.B.S. inspector's report states that the survey completed was a "continuous survey" and that had there been any damages, the A.B.S. report would have so stated.

The Customs Service 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 a part of an ongoing maintenance and repair program labeled "continuous" or "ongoing" is dutiable. Although, 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 the holdings in C.I.E. 429/61 (dated April 28, 1961), C.S.D. 79-2 (dated October 3, 1978), and C.S.D. 79-277 (dated March 21, 1979).

In the case under consideration, the survey performed was not in the nature of a general survey, which we held to be non- dutiable in C.I.E. 429/61. Instead, the only item surveyed was the No. 2 Cylinder, part of which is piston no. 2, the subject of the "assistance" held dutiable above.

Given these facts, we are unable to conclude that the survey was not performed for the purpose of checking the effectiveness of the dutiable "assistance" rendered and we find the cost to be dutiable. Accordingly, the petition for relief is denied.

HOLDING:

In the absence of a clear description of the work performed aboard the subject vessel, and where no segregation of charges is provided, the entire amount of charges for foreign shipyard operations is dutiable pursuant to 19 U.S.C. 1466.

Sincerely,

B. James Fritz

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