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HQ 113048

April 12, 1994

VES-13-18-CO:R:IT:C 113048 GOB

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; SEA-LAND LIBERATOR, V-140; Entry No. C27-0112477-1; Application

Dear Sir:

This is in response to your memorandum dated March 18, 1994, which forwarded the application for relief submitted by Sea-Land Service, Inc. ("applicant") with respect to the above-referenced entry.

FACTS:

The record reflects the following. The SEA-LAND LIBERATOR ("vessel") is a U.S.-flag vessel owned and operated by the applicant. Certain foreign shipyard work was performed on the vessel on voyage 140. The vessel arrived at the port of Los Angeles on November 8, 1993 and filed a vessel repair entry.

You have requested us to review invoices #7, 10, 11, and 12.

Application

The applicant states:

...problems were encountered with turbocharger number 3. This turbocharger was overhauled in Hong Kong on 24 October and upon sailing was found to be in worse condition than prior to overhaul. In Kaohsiung on 26 October this turbocharger was again opened and inspected. At this time it was decided to proceed to Kobe, Japan for an emergency port call so that a corrective overhaul could be performed.

ISSUE:

Whether the items at issue are dutiable pursuant to 19 U.S.C. 1466.

LAW AND ANALYSIS:

19 U.S.C. 1466 provides for the payment of duty at a rate 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 be employed in such trade.

Invoices #10 and 11

Invoice #10 contains a handwritten notation at the bottom of the second page, which states as follows:

Free due to unsatisfactory work. Sealand refused payment. Note, item 11 is reinspection of #3 turbo charger and item 12 is another overhaul done during emergency call in Kobe Japan 29 Oct.

Invoice #11 contains a handwitten notation at the bottom which states:

Free - turbo charger #3 unsuccessful repair in HKG.

Although it is not stated who made these handwritten notations, we assume that the applicant did.

We find that the applicant has not provided evidence or documentation upon which to make a determination that the expenses on these invoices are nondutiable. Accordingly, the expenses on these invoices are dutiable.

The invoices indicate that the expenses thereon were incurred. The only indications to the contrary are the handwritten notations stated supra. We are unable to conclude that the expenses listed on these invoices are not expenses of repairs made in a foreign country pursuant to 19 U.S.C. 1466(a) in the absence of clear, conclusive documentation from the shipyard that these expenses have not been paid and that the shipyard is not pursuing payment, i.e., the shipyard has agreed not to charge the applicant for these repairs.

Invoices #7 and 12

We concur with the liquidator's analysis with respect to the dutiability of the items on these invoices.

On the CF 226, the applicant has described the pertinent work as follows:

Invoice #7 - Overhaul rotor for No. 1 turbo charger, main engine.

Invoice #12 - Install new rotor and repair No. 3 turbo charger to correct surging problem.

Each of these invoices contains numerous items which are, or strongly appear to be, directly related to the basic repair and/or replacement of equipment. These items are dutiable in the absence of satisfactory evidence or documentation that they are not repairs or the replacement of equipment and are not directly related to the repairs or replacement of equipment.

HOLDING:

As detailed supra, the application for relief is denied.

Sincerely,

Arthur P. Schifflin
Chief

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