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HQ 113403

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April 24, 1995

VES-13-18-R:IT:C 113403 GOB

CATEGORY: CARRIER

Chief, Residual Liquidation and Protest Branch New York Region
Six World Trade Center
New York, New York 10048-0945

RE: 19 U.S.C. 1466; Vessel Repair Entry No. 514-3005082-6; Petition; S/S RESOLUTE, V-66

Dear Sir:

This is in response to your memorandum dated April 7, 1995 , which forwarded the petition submitted by Farrell Lines Incorporated ("petitioner") with respect to the above-referenced vessel repair entry.

The record indicates the following. The S/S RESOLUTE ("the vessel") is a U.S.-flag vessel owned by the U.S. Maritime Administration. The vessel had foreign shipyard work performed in Valletta, Malta and Cadiz, Spain in early 1994. On March 1, 1994, the vessel arrived at the port of Newark, New Jersey. The subject vessel repair entry was subsequently filed.

In Ruling 113310 dated March 8, 1995, it was determined that the foreign costs for which relief was sought were dutiable.

ISSUE:

Whether the subject costs are dutiable under 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.

The petitioner claims that because the port boiler desuperheater repairs proved unsatisfactory and had to be reworked, those repairs should be nondutiable. It has submitted an invoice from Kerney Ship Repair, Inc., a U.S. firm, in support of its claim.

In the application ruling in this case, Ruling 113310, we stated as follows:

Customs has long held that repairs which are completely ineffective and of no value to the vessel are not repairs subject to duty under the vessel repair statute (see T.D. 55193(24) and C.I.E. 1156/ 62). We note, however, that the record contains no proof to substantiate the claim that the specific repairs in question performed by Malta Drydocks were ineffective. Accordingly, in the absence of evidence to the contrary, we find the repairs on the two invoices in question to be dutiable. (Emphasis supplied.)

In C.S.D. 82-119, where the item at issue was found to be dutiable under 19 U.S.C. 1466, we stated:

CIE 1128/60 [reissued as T.D. 55193(24)] stands for the proposition that where repairs are completely ineffective and consequently of no value to the vessel, the cost thereof is not dutiable under the vessel repair statute...

On the facts of the case presented, the repairs made were ineffective in the sense that the radar was not made operational as a result of the work performed. On the other hand, we cannot say that the work was of no value to the vessel because the cause of the radar not being functional was diagnosed and a partial remedy was effected even though the radar was not made operational as a result.

After a consideration of the record, we find that the petitioner has not established that the foreign repairs were completely ineffective and of no value. The petitioner has not established a conclusive nexus between the repairs accomplished in Malta and Spain. Further, it has not established a conclusive nexus between the foreign repairs and the repairs performed by Kerney Ship Repair, Inc. Additionally, the petitioner would have to establish that the foreign repairs were of no value, which it has not done.

HOLDING:

As detailed supra, the petition is denied.

Sincerely,

Harvey B. Fox
Director
Office of Regulations and Rulings

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