HQ 0112635 - Protest No. 2501-92-100077; San Diego, California, Vessel Repair Entry No. 534-1119525-7, dated April 17, 1992; M/V SEA JET I; Voyage 1; Dry dock; Cleaning; Hull Painting; 19 U.S.C. 1466 - United States International Trade Commision Rulings

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HQ 112635

August 5, 1993

VES-13-18 CO:R:IT:C 112635 BEW

CATEGORY: CARRIER

Deputy Regional Director
Commercial Operations
Pacific Region
1 World Trade Center
Long Beach, California 90831-0700

RE: Protest No. 2501-92-100077; San Diego, California, Vessel Repair Entry No. 534-1119525-7, dated April 17, 1992; M/V SEA JET I; Voyage 1; Dry dock; Cleaning; Hull Painting; 19 U.S.C. 1466

Dear Sir:

This is in response to a memorandum dated March 16, 1993, that forwards protest No. 2501-92-100077 concerning vessel repair entry No. 534-1119525-7, relating to the M/V SEA JET I, Voyage 1.

FACTS:

The SEA JET I is a U.S.-flag vessel owned by Hawaii Ocean Transit System. The record shows that the shipyard work in question was performed on the subject vessel in Ensenada, Mexico, on March 13, 1992.

The SEA JET I, arrived in San Diego, California, on April 9, 1992. The entry was liquidated on June 19, 1992, and the protest was timely filed on September 11, 1992.

Your office liquidated the entire entry as dutiable because the nondutiable repairs, namely, the drydocking charges were not segregated from the dutiable charges.

The protestant claims that certain charges entered on the vessel repair entry as "Dry Docking, Cleaning" are for drydocking the vessel in order to paint the vessel, and as such should not be considered dutiable.
ISSUE:

Whether sufficient evidence is presented to establish that the subject repairs constitute nondutiable drydocking and cleaning charges or a dutiable maintenance operation under the vessel repair statute (19 U.S.C. 1466).

LAW AND ANALYSIS:

Title 19, United States Code, section 1466, 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 foreign or coastwise trade, or vessels intended to engage in such trade.

In analyzing the dutiability of foreign vessel work, the Customs Service has consistently held that a cleaning operation which removes rust and deterioration or worn parts, and which is a necessary factor in the effective restoration of a vessel to its former state of preservation, constitutes vessel repairs (See C.I.E. 429/61). Insofar as inspection and cleaning operations are concerned, Customs has long held the cost of 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 (see C.I.E.'s 18/48, 125/48, 910/59, 820/60, 51/61, 429/61, 569/62, 698/62; C.D. 2514; T.D.'s 45001 and 49531).

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).

In the case under consideration, we find that the repair work associated with item No. (1) on the subject invoice, cleaning with spot coating, to be maintenance in nature.

Pursuant to C.I.E. 919/60 remission of duty assessed on the cost or repairs is not warranted under section 1466 where the repairs are maintenance in nature. Accordingly, we find the work associated with cleaning with spot coating to be dutiable.

Pursuant to CD 1836 charges for drydocking, for furnishing electricity, air and water, fees paid for the use of tugs and pilots in drydocking and undocking a vessel, staging, and crane expenses are not dutiable repairs if segregated on the invoice.

Pursuant to C.I.E. 1325/58 and C.I.E. 565/55, duties may not be remitted where the invoice does not segregate the dutiable costs from the nondutiable costs. In the subject invoice, the cost for cleaning operations associated with the dutiable repairs is not segregated from cost of the nondutiable drydocking.

Accordingly, we find that all costs associated with item No. (1) dry dock, clean and paint bottom, and item No. (2) paint under water hull, listed on Industria Naval invoice No. 0871 to be dutiable. The protest is denied as to all items of cost.

HOLDING:

Following a thorough review of the facts and evidence, and after an analysis of the law and applicable precedent decisions, the protest is denied as specified in the law and analysis portion of this decision.

Sincerely,

Acting Chief

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