HQ 0112899 - Vessel Repair; 19 U.S.C. 1466; Protest No. 3126-93-100012; Inspection; Ultrasonic Testing; ARCO TEXAS V-230; Vessel Repair Entry No. C31-0005019-5 - United States International Trade Commision Rulings

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HQ 112899

November 19, 1993

VES-13-18-CO:R:IT:C 112899 DEC

CATEGORY: CARRIER

Deputy Regional Director
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90831

RE: Vessel Repair; 19 U.S.C. 1466; Protest No. 3126-93-100012; Inspection; Ultrasonic Testing; ARCO TEXAS V-230; Vessel Repair Entry No. C31-0005019-5

Dear Sir:

This letter is in response to your memorandum of September 13, 1993, which forwards the above-referenced protest of the assessment of vessel repair duties filed in connection with the ARCO TEXAS.

FACTS:

The record reflects that the ARCO TEXAS arrived at the port of Valdez, Alaska, on June 1, 1991. Vessel repair entry, number C31- 0005019-5, was filed on June 3, 1991. The entry indicated that extensive shipyard work was performed at Hyundai Mipo Dockyard Company. An application for relief was timely filed. Among the items determined to be subject to vessel repair duty was the cost associated with an ultrasonic inspection. The vessel operator challenged the initial determination of dutiability of this item. In ruling on the petition, Customs upheld the dutiability of the ultrasonic testing. In its protest, the vessel operator has submitted additional evidence indicating that the ultrasonic survey was performed by a non-qualifying entity on behalf of the American Bureau of Shipping in the course of a regulatory-required survey.

ISSUE:

Whether the cost of an ultrasonic inspection which is part of a periodic American Bureau of Shipping survey that is sub-contracted is subject to the assessment of vessel repair duty pursuant to Title 19, United States Code, section 1466.

LAW AND ANALYSIS:

Title 19, United States Code, section 1466, provides in pertinent part for payment of duty in the amount of fifty 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.

The Customs Service has held that where periodic surveys are undertaken to meet the specific requirements of a governmental entity, a classification society, or insurance carrier, the cost of the surveys is not dutiable even when dutiable repairs are effected as a result thereof. Headquarters Ruling Letter 110368, dated July 26, 1989. In a recent case, we emphasized that this interpretation exempts from duty only the cost of a required scheduled inspection by a qualifying entity. Headquarters Ruling Letter 111328, dated August 7, 1991. If, however, the survey is to ascertain the extent of damage sustained or whether repairs are deemed necessary, then the costs are dutiable as part of the repairs that are accomplished. C.I.E. 429/61; C.S.D. 79-2, 13 Cust. B. & Dec. 993 (1979); C.S.D. 79-277, 13 Cust. B. & Dec. 1395, 1396 (1979).

The protestant seeks relief from the assessment of duty on the cost of ultrasonic thickness gauging that was required by the American Bureau of Shipping. Based on the above-cited authorities, the cost of the American Bureau of Shipping survey is not subject to duty. Consequently, the survey by Sanki Marine Service, which may be characterized as being performed by a qualifying entity because it was conducted on a sub-contractual basis for a non-dutiable ABS survey, is not subject to vessel repair duty.

HOLDING:

Based on a review of the record together with the protestant's additional submission, Customs finds that the cost of a sub- contracted ultrasonic inspection that is performed to meet the specific requirements of a governmental entity, a classification society, or insurance carrier is not subject to the assessment of vessel repair duty pursuant to 19 U.S.C. 1466. The protestant's request for relief is granted in full.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to the mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Lexis, Freedom of Information Act and other public access channels.

Sincerely,

Arthur P. Schifflin

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