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HQ 112666


September 8, 1993

VES-13-18 CO:R:IT:C 112666 BEW

CATEGORY: CARRIER

Chief, Residual Liquidation and Protest Branch U.S. Customs Service
6 World Trade Center
New York, New York 10048-0945

RE: Protest No. 4106-91-000007; Cleveland, Ohio, Vessel Repair Entry No. 1001-92-201546, dated February 25, 1988; RICHARD REISS; drydocking; crane service; surveys; painting; 19 U.S.C. 1466

Dear Sir:

This is in response to a memorandum dated March 31, 1993, that forwards protest No. 4106-91-000007 concerning vessel repair entry No. 1001-92-201546, relating to the RICHARD REISS.

FACTS:

The RICHARD REISS, an American-flag vessel, underwent certain foreign shipyard operations in Port Weller, Canada. The vessel arrived in the United States at Erie, Pennsylvania, on December 12, 1987. A vessel repair entry (CF 226) was filed on February 25, 1988.

An application for relief was denied, and a petition was timely filed. By decision 111328 KVS, dated August 7, 1991, we found as follows:

... The petitioner seeks relief for certain items listed on Port Weller Dry Docks invoice nos. 12-25-87, 12-26-87 and 12-27-87, all of which are dated December 31, 1987. Invoice no. 12-25-87 lists charges related to drydocking expenses: blocks, line handling, water, telephone, garbage removal, tug service, etc. Consistent with previous Customs decisions regarding these items, the cost of these items (totalling Can.$ 59,357.60) is non-dutiable.

The applicant asserts that certain items should be non- dutiable as required inspections or surveys . . . among the charges asserted by the petitioner to be non-dutiable as a required inspection or survey is an item which lists the cost of painting draft marks and load line marks. The mere fact that a vessel underwent certain operations in compliance with regulations is not determinative as to a claim of non-dutiability. To analogize, we note that while vessels are required to retain various items of firefighting and other safety equipment on board, the foreign purchase of this equipment is, nonetheless, subject to the 50% ad valorem duty levied by 19 U.S.C. 1466. . . . Here, although the vessel may be required by the U.S. Coast Guard or American Bureau of Shipping to maintain clearly visible load lines and draft marks the process of keeping those markings in the required condition constitutes maintenance. . .

We parenthetically note that this painting operation appears to be part of an overall program of maintenance painting, as evidenced by the underwater painting operation listed on Port Weller Dry Docks invoice no. 12-27-87, the cost of which is acknowledged by the petitioner to be dutiable. Accordingly, the cost of painting load lines and draft marks (Can.$ 1,000.00) is dutiable.

The petitioner has also submitted American Bureau of Shipping report no. C8454 and accompanying invoice no. 175024 which were not included with its previous submission. Please note the above discussion on the subject of "surveys". In addition, the Customs Service has held that 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 labelled "continuous" or "ongoing" is dutiable. If the purpose of a 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 C.I.E. 429/61. . . .

Item (e) is also asserted to be non-dutiable. The invoice description for this item states, "open up sea valves and overboards for inspection and close up in good order upon completion of inspection." Careful examination of A.B.S. report no. 8454 ( p.2, item 4a and 4b) reveals that, in conjunction with the inspection of these items, engine cooling watergate valve guides were repaired and the drinking water pump suction valve was renewed. Since we are unable to identify the repair of these items on any other item listed on the Port Weller Dry Docks invoices, we conclude that the cost of the repair was incorporated into item (e).

The Customs Service has held that when the costs of various items are not segregated or separately shown, but are lumped together, duty will be assessed on the entire cost even though certain items may be non-dutiable (see C.I.E. 565/55, C.I.E. 1325/58 and C.D. 1836). Therefore, the cost of this item (Can.$ 8,000.00) is dutiable.

The entry was liquidated on September 13, 1991, and the protest was timely filed on November 22, 199l. The protestant claims that certain charges entered on the vessel repair entry as drydocking, crane services and surveys should not be considered dutiable.

ISSUE:

Whether sufficient evidence is presented to establish that the subject repairs constitute nondutiable drydocking, crane service, staging and surveys costs which are remissible 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.

Your memorandum states that your office inadvertently liquidated items of repair listed on page one of the Port Weller Dry Docks invoice No. 12-25-87, dated December 31, 1987, in the amount of $59,357.60 as 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.

Upon reviewing the entire record in this matter, we affirm our decision of August 7, 1991, as it relates to page one of invoice No. 12-25-87, listed as items 1 and 2 of the protest. The costs associated with items 1 and 2 are nondutiable. The protest is granted as to these two items.

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 labeled "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 that are accomplished pursuant to holdings in C.I.E. 429/61, C.S.D. 79-2, and C.S.D. 79-277.

Painting operations which are a part of an overall program of maintenance painting, as evidenced by the underwater painting operation listed on Port Weller Dry Docks invoice No. 12-27-87, are dutiable as maintenance repairs. The protestant acknowledged in the petition that the cost of this repair as a dutiable cost. Accordingly, we find the cost of painting load lines and draft marks, (Can.$ 1,000.00) to be dutiable.

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. We have thoroughly reviewed the entry documentation and the additional documents submitted with the protest in this matter. It is our conclusion that the repairs that were made to the certain items were made to replace a current part, fitting or structure that was not in good working order at the time of the inspection and repair. With regard to the American Bureau of Shipping (ABS) surveys under consideration our findings are as follows:

Items (a), (b) and (c) of Port Weller Dry Docks, invoice No. 12-26-87 are nondutiable. The protest is granted as to these three items.

Item (d) of Port Weller Dry Docks, invoice No. 12-26-87 is dutiable. The protest is denied as to this item.

Item (e) of Port Weller Dry Docks, invoice No. 12-26-87. The invoice description for this item states, "open up sea valves and overboards for inspection and close up in good order upon completion of inspection." A.B.S. report no. 8454 ( p.2, item 4a and 4b) reveals that, in conjunction with the inspection of these items, engine cooling watergate valve guides were repaired and the drinking water pump suction valve was renewed. Since we are unable to identify the repair of these items on any other item listed on the Port Weller Dry Docks invoices, we conclude that the cost of the repair was incorporated into item (e). In view of the fact that the cost for the dutiable repairs is not segregated from the nondutiable repairs, the entire item is dutiable. The protest is denied as to this item. HOLDING:

Following a thorough review of the LAW AND ANALYSIS of the evidence, the protest is granted with the exception of the items enumerated above. Please refer this matter immediately for reliquidation, and send a copy of this ruling to the protestant with the Customs Form 19.

Sincerely,

Stuart P. Seidel

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