HQ 0112077 - Vessel repair; Petition for Review; Cleaning; Maintenance; Repair; Vessel EXPORT FREEDOM; Entry number C16-0007396-4 - 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 0112009 - HQ 0112144 > HQ 0112077

HQ 112077

February 11, 1992

VES-13-18-CO:R:IT:C 112077 LLB

CATEGORY: CARRIER

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

RE: Vessel repair; Petition for Review; Cleaning; Maintenance; Repair; Vessel EXPORT FREEDOM; Entry number C16-0007396-4

Dear Sir:

Reference is made to your memorandum of January 14, 1991, which forwards for our review and determination the Petition for Review of an earlier decision regarding the dutiability of certain foreign shipyard operations performed on the EXPORT FREEDOM. The appeal has been filed by the vessel operator, Farrell Lines, Inc., in connection with the above-captioned vessel repair entry.

FACTS:

The vessel EXPORT FREEDOM underwent numerous operations in a foreign shipyard, the record of which was submitted to Customs for a determination as to dutiability. Following that initial determination, an appeal was filed as to two items which had been held to be dutiable. These involved cleaning operations performed on the port and starboard boilers as well as on the main condenser (presented as invoice items 12 and 13, Part II, Malta Drydocks).

ISSUE:

Whether the operations under review constitute non-repair- related cleaning or, in the alternative, whether they are considered to be maintenance operations which are dutiable repair procedures.
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 analyzing the dutiability of foreign vessel work, the Customs Service has consistently held that cleaning is not dutiable unless it is performed as part of, in preparation for, or in conjunction with dutiable repairs or is an integral part of the overall maintenance of the vessel. E.g., Headquarters Ruling Letter 110841, dated May 29, 1990 (and cases cited therein). The Customs Service considers work performed to restore a part to good condition following deterioration or decay to be maintenance operations within the meaning of the term repair as used in the vessel repair statute. See generally, Headquarters Ruling Letter 106543, dated February 27, 1984; C.I.E. 142/61, dated February 10, 1961.

The dutiability of maintenance operations has undergone considerable judicial scrutiny. The United States Court of Customs and Patent Appeals, in ruling that the term repair as used in the vessel repair statute includes "maintenance painting," gave seminal recognition to the dutiability of maintenance operations. E. E. Kelly & Co. v. United States, 55 Treas. Dec. 596, T.D. 43322 (C.C.P.A. 1929). The process of chipping, scaling, cleaning, and wire brushing to remove rust and corrosion that results in the restoration of a deteriorated item in preparation for painting has also been held to be dutiable maintenance. States Steamship Co. v. United States, 60 Treas. Dec. 30, T.D. 45001 (Cust. Ct. 1931).

Most recently, the United States Customs Court examined whether the scraping and cleaning of Rose Boxes constituted dutiable repairs. Northern Steamship Company v. United States, 54 Cust. Ct. 92, C.D. 1735 (1965). Rose Boxes are parts fitted at the ends of the bilge suction to prevent the suction pipes from being obstructed by debris. In arriving at its decision, the court focused on whether the cleaning operation was simply the removal of dirt and foreign matter from the boxes or whether it resulted in the restoration of the part to good condition after deterioration or decay. Id. at 98. The court determined that the cleaning did not result in the restoration of the boxes to good condition following deterioration and consequently held that the work was not subject to vessel repair duties. Id. at 99. The Customs Service has ruled that the regular cleaning of filters in most instances does not result in liability for duty. See Headquarters Ruling Letter 107323, dated May 21, 1985.

We find the holding of the court in the matter of Northern Steamship, supra., to be dispositive of the issue before us. The operations under review were not performed in furtherance of any other operation, such as painting or repair of any sort, and did not address any decay or deterioration circumstances. Therefore, we find that they were not dutiable maintenance procedures but mere cleaning operations done in preparation for non-dutiable inspections.

HOLDING:

Following a thorough review of the evidence submitted as well as an analysis of the law and applicable precedents, we have determined to allow the Petition for Review submitted in this matter.

Sincerely,

B. James Fritz

Previous Ruling Next Ruling