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HQ 226737

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March 12, 1996

VES-13-18-RR:IT:EC 226737 GOB

CATEGORY: CARRIER

U.S. Customs Service
Chief, Liquidation Section II
P.O. Box 2450
San Francisco, CA 94126

RE: Vessel Repair Entry No. 603-1020206-8; 19 U.S.C. 1466; Hull cleaning; Maintenance; Restoration

Dear Sir:

This is in response to your memorandum dated February 5, 1996, which forwarded the application for relief submitted on behalf of American Seafoods Company ("applicant") in connection with the above-referenced vessel repair entry.

FACTS:

The AMERICAN EMPRESS ("the vessel") is a U.S.-flag vessel owned by the applicant. Certain foreign shipyard work was performed on the vessel prior to its arrival at the port of Seattle, Washington on August 3, 1995. The subject entry was filed on August 4, 1995.

You have asked us to consider the dutiability under 19 U.S.C. 1466 of item 0040, hull cleaning.

ISSUE:

Whether the hull cleaning is 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.

The invoice at issue states in pertinent part:

HULL CLEANING
Providing pressure washing equipment and handling to dock bottom.
...
Power washing hull with fresh water to remove salt deposits and marine growth.
...
Hand scraping marine growth...

In Texaco Marine Services, Inc. v. United States, 44 F.3d. 1539 (1994), the Court of Appeals for the Federal Circuit held that the costs of post-repair cleaning and protective coverings related to repairs were dutiable under 19 U.S.C. 1466.

In Ruling 112045 dated September 4, 1992, we stated, in pertinent part:

Cleaning operations which remove rust and deterioration and worn parts, and which are a necessary factor in the effective restoration of a vessel to its former state of preservation, constitute vessel repairs (See C.I.E. 429/61). Customs has long held the cost of cleaning is not dutiable unless it is performed as part of, in preparation for, or in conjunction with dutiable repairs or is an integral part of the overall maintenance of the vessel; see C.I.E.'s 18/48, 125/48, 910/59, 820/60, 51/61, 429/61, 569/62, 698/62; C.D. 2514; T.D.'s 45001 and 49531. Pursuant to C.I.E. 919/60 remission of duty assessed on repairs is not warranted under section 1466 where the repairs are maintenance in nature.

In Ruling 111571 dated March 4, 1992, we stated, in pertinent part:

In analyzing the dutiability of foreign vessel work, the Customs Service has consistently held that cleaning is not dutiable unless it is performed as part of, in preparation for, or in conjunction with dutiable repairs or is an integral part of the overall maintenance of the vessel. E.g., Headquarters Ruling Letter 110841, dated May 29, 1990 (and cases cited therein). The Customs Service considers work performed to restore a part to good condition following deterioration or decay to be maintenance operations within the meaning of the term repair as used in the vessel repair statute. See generally, Headquarters Ruling Letter 106543, dated February 27, 1984; C.I.E. 142/61,, dated February 10, 1961.

The dutiability of maintenance operations has undergone considerable judicial scrutiny. The United States Court of Customs and Patent Appeals, in ruling that the term repair as used in the vessel repair statute includes "maintenance painting," gave seminal recognition to the dutiability of maintenance operations. E.E. Kelly & Co. v. United States, 55 Treas. Dec. 596, T.D. 43322 (C.C.P.A. 1929). The process of chipping, scaling, cleaning, and wire brushing to remove rust and corrosion that results in the restoration of a deteriorated item in preparation for painting has also been held to be dutiable maintenance. States Steamship Co. v. United States, 60 Treas. Dec., T.D. 45001 (Cust. Ct. 1931).

Most recently, the United States Customs Court examined whether the scraping and cleaning of Rose Boxes constituted dutiable repairs. Northern Steamship Company v. United States, 54 Cust. Ct. 92, C.D. 1735 (1965). Rose Boxes are parts fitted at the ends of the bilge suction to prevent the suction pipes from being obstructed by debris. In arriving at its decision, the court focused on whether the cleaning operation was simply the removal of dirt and foreign matter from the boxes or whether it resulted in the restoration of the part to good condition after deterioration or decay. Id. at 98. The court determined that the cleaning did not result in the restoration of the boxes to good condition following deterioration and consequently held that the work was not subject to vessel repair duties. Id. at 99. The Customs Service has ruled that the regular cleaning of filters in most instances does not result in liability for duty. See Headquarters Ruling Letter 107323, dated May 21, 1985.

From these authorities, we determine that the cost of cleaning the air scavenger spaces is subject to duty under 19 U.S.C. ?1466. The term deterioration is defined to mean degeneration, which in turn denotes declined function from a former or original state. See The American Heritage Dictionary of the English Language 376, 387 (2d ed. 1985). The principal function of the air scavenger spaces is to either deliver turbo-charged air to the cylinders or receive spent gasses from the cylinders. The collection of carbon and other oily deposits poses a fire or explosion hazard and results in a diminished engine function. The removal of the carbon deposits through scraping, wire brushing, and wiping results in a restoration of the scavenger spaces to good condition following a decline in function of the scavenger spaces. Such an operation can be distinguished from cleaning a Rose Box or other filter, for the collection of debris by these parts results not in a diminution of function, but alternatively demonstrates the proper function of the part.
(All emphasis in original.)

In States Steamship v. United States, T.D. 45001 (Cust. Ct., 1931), the court stated in pertinent part as follows:

Considering first the question whether the cleaning of deep tanks constitutes a repair, it is observed that the testimony does not show precisely the nature of the cleaning. It does not appear whether the cleaning process was simply the removal of accumulated dirt, or whether it was a restoration of the inner portion of the tanks to a good condition after deterioration. It is clear, however, that the process, whatever it may have been, was quite elaborate. The cost as shown by the bill of the foreign contractor, amounted to yen 650, and from this fact it is safe to assume that such cleaning process included more than removing foreign substances in the tanks such as would be necessary to prevent the bean-oil cargo from becoming impure.

We are of the opinion that the plaintiff has failed to establish that the cleaning of the deep tanks of the steamer Illinois did not constitute a repair.

In respect to the work of chipping, scaling, cleaning, and wire brushing it was testified that such work became necessary on account of rust and corrosion, which of course is a deterioration and damage to the vessel upon which it occurs. Even although the work of chipping, scaling, and wire brushing is considered an independent act from painting it is a necessary factor in order to have the work of restoration of the vessel to its former state of preservation become effective.

In H.C. Gibbs v. United States, 28 Cust. Ct. 318, C.D. 1430 (1952), the court stated in pertinent part as follows:

Relative to painting the hull of the vessel black between the decks and repainting the ship's name thereon, as well as the expenses of cartage of materials and labor, this court is of the opinion that the cost thereof is properly dutiable under the provisions of section 466 as "repairs." Although it is contended that the painting in question was strictly ornamental and in no sense performed for the preservation of the vessel and, therefore, cannot be considered "maintenance painting," it remains a fact that, irrespective of the intention behind the act, the painting of the ship black in order to present a better appearance to the public had the effect of restoring the old and rusted surfaces, and since the repainting of the hull covered the ship's name, it became necessary thereafter to paint the name Gretna Victory over the new black paint.

In its letter of October 17, 1995, the applicant states that "cleaning is not a repair and that the cleaning was not done in connection with any repairs to the vessel." In its letter of December 5, 1995, the applicant states that "merely cleaning the hull is not a repair within the intention of the statute since there was no further work done in the nature of a repair such as painting or renewing the hull."

The pertinent invoice states that the hull cleaning was to remove salt deposits and marine growth from the hull of the vessel and that hand scraping of marine growth
was performed. It seems clear that this work will enhance the operation of the vessel in terms of speed, efficiency of the hull, fuel efficiency, etc.

After a consideration of this matter, we determine that the hull cleaning is more akin to a restoration and/or maintenance item than it is akin to an item that involves no restoration or maintenance. The description of the work, including the removal of "salt deposits and marine growth" and "hand scraping marine growth," indicate to us that the work goes beyond "mere cleaning." The work performed is closer to a restoration of the hull to its former state and is an integral part in the overall maintenance of the vessel.

Accordingly, the hull cleaning is dutiable pursuant to 19 U.S.C. 1466.

The applicant has cited the telegram in file 104943 in support of its position. We decline to follow 104943 because it is clearly inconsistent with numerous court decisions and Customs rulings, including the court decisions and Customs rulings cited supra. Telegram 104943 is not a Customs ruling, nor was it in ruling format.

HOLDING:

The hull cleaning is dutiable pursuant to 19 U.S.C. 1466.

Sincerely,

William G. Rosoff
Chief, Entry and Carrier Rulings

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