United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1996 HQ Rulings > HQ 003812 - HQ 113322 > HQ 112028

Previous Ruling Next Ruling
HQ 112028





June 6, 1995

VES-13-18-R:IT:C 112028 BEW

CATEGORY: CARRIER

Port Director
Vessel Repair Liquidation Unit
423 Canal Street
New Orleans, Louisiana 70130-2341

RE: Vessel Repair; Application; M/V SEALAND QUALITY, V-42; Entry No. VR-16-0008524-0; Inspections; Cleaning; Staging; Protective Coverings; Removal of Debris; 19 U.S.C. §1466

Dear Sir:

This is in reference to your memorandum of December 5, 1991, that transmitted an application for relief from duties on behalf of Sea-Land Services, Inc., in relation to the above-referenced vessel repair entry dated August 1, 1991. The vessel arrived at the port of Charleston, South Carolina, on August 1, 1991. You request our review of the following items contained within the above-referenced entry:

Lloyd-Werft Invoice No. 0-181
Item 028 - Sea Chest (4) Inspection
Item 033 - Fathometer Well - Inspection item 172 - No. 1 Deep Tank
Item 199 - No. 5. Stbd. Wing Tank
Item 200 - No. 7 Port Wing Tank

Our view of this matter has been delayed pending the outcome of on-going litigation which has now been resolved. Our findings on this matter are set forth below.

FACTS:

The record reflects that the M/V SEA-LAND QUALITY arrived in the port of Port Charleston, South Carolina, on August 1, 1991, filed a timely vessel repair entry, and supplemented that entry as required by the Customs Regulations. The vessel SEALAND QUALITY underwent drydocking, survey, and repair operations in foreign shipyards in Germany, The Netherlands, and United Kingdom during the period of July 10 through July 23, 1991.

ISSUE:

Whether the foreign shipyard costs for which the applicant seeks relief are dutiable under 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 trades.

In the U.S. Court of Appeals for the Federal Circuit in Texaco Marine Services, Inc. and Texaco Refining and Marketing, Inc. v. United States, Slip Op. 93-1354, decided December 29, 1994 (affirming the decision of the U.S. Court of International Trade at 815 F.Supp. 1484 (1993)), the Court held that post-repair cleaning and protective coverings for repair work are dutiable under 19 U.S.C. § 1466.

In C.I.E. 429/61 we noted that:

... expenses which are incurred in conducting inspections made subsequent to the repairs, so as to ascertain whether the work had been properly performed, are dutiable as integral parts of the expenses of repairs although separatly [sic] itemized. Moreover, testing which is effected for the purpose of ascertaining whether repairs to certain machinery or parts of the vessel are required, or are performed in order to ascertain if the work is adequately completed, are also integral parts of the repairs and are accordingly 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 non-dutiable costs.

With regard to the dutiability of the work performed in item 028, the invoice reveals that coatings were applied after the inspection, and that the sea suction valves were to be protected against damage. The accessing work performed in item 028 was for the performance of inspection and dutiable repairs. The cost of the inspection is not segregated from the costs associated with the dutiable repairs, i.e., coatings and protective coverings. Since the cost for the inspection is not segregated from the cost of the dutiable repairs, the entire cost is dutiable. With regard to item 33, the invoice reveals that the manhole cover was opened and wiped for inspection, closed with new gaskets, and the Fathometer was thoroughly cleaned, scaled and coated. The inspection cost is not segregated from the dutiable costs for the cleaning, scaling and coating of the Fathometer. Since the cost for the inspection is not segregated from the cost of the dutiable repairs, the entire cost is dutiable.

With regard to item 172, all items of cost are dutiable except staging. The costs associated with ventilation and lighting cost are not segregated from the dutiable cleaning costs, therefore, the entire amount of DM 6.6690 is dutiable.

With regard to items 199 and 200, all items of cost are dutiable except the costs associated with staging and ventilation.

In regard to item No. 046 , Preparations and Precautions, we note that charges were incurred for protective coverings to prevent damage from dust and debris. Pursuant to the "but for" test enunciated by the U.S. Court of Appeals in Texaco Marine Services, Inc. and Refining and Marketing, Inc., v. United States, (Slip Op. 93-1354, decided December 29, 1994), protective coverings necessitated by dutiable repairs are dutiable. Accordingly, in view of the aforementioned court decision all items of cost listed in item 046, except staging are dutiable.

HOLDING:

Following a thorough review of the evidence submitted as well as an analysis of the applicable law and precedent, the applicaton is denied it in part, as specified in the Law and Analysis portion of this ruling.

Sincerely,

Arthur P. Schifflin

Previous Ruling Next Ruling