HQ 113673 - Vessel Repair Entry No. 110-6461860-3; 19 U.S.C. 1466; PRESIDENT TRUMAN, V-82; Application - United States International Trade Commision Rulings

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HQ 113673

July 7, 1997

VES-13-18-RR:IT:EC 113673 GOB

CATEGORY: CARRIER

Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 107 P.O. Box 2450
San Francisco, CA 94126

RE: Vessel Repair Entry No. 110-6461860-3; 19 U.S.C. 1466; PRESIDENT TRUMAN, V-82; Application

Dear Madam:

This is in response to your memorandum dated September 13, 1996, which forwarded the application submitted by American President Lines, Ltd. (the "applicant") with respect to the above-referenced vessel repair entry.

FACTS:

The PRESIDENT TRUMAN (the "vessel"), a U.S.-flag vessel owned and operated by the applicant, arrived at the port of Seattle, Washington on April 11, 1996. The subject vessel repair entry was subsequently filed. The vessel underwent certain foreign shipyard work in Korea, Taiwan, and Hong Kong in March and April of 1996.

ISSUE:

Whether the subject items 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.

The subject entry is a "post-Texaco" entry, i.e., an entry filed after the appellate decision in Texaco Marine Services, Inc., and Texaco Refining and Marketing, Inc. v. United States, 44 F.3d 1539 (CAFC 1994), aff'g 815 F.Supp. 1484 (CIT 1993). Accordingly, the Texaco decision applies to this entry. Our position with respect to post-Texaco entries has been stated in detail in many rulings, as well as in Memorandum 113350 dated March 3, 1995, published in the Customs Bulletin and Decisions on April 5, 1995 (Vol. 29, No. 14, p. 24).

We will use the numbering system which you used in working on the application.

1. General Services. These costs should be prorated between dutiable and nondutiable costs.

2. H.P. Hull Water Wash (205). The invoice reflects that this item was incident to a nondutiable American Bureau of Shipping ("ABS")/U.S. Coast Guard ("USCG") inspection and that no repairs were performed. Accordingly, it is nondutiable.

3. Anchor Chain Inspection (209). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

4. Bilge Well Cleaning. (215). The invoice states: "...muck out and wipe clean cargo hold bilge drainwells and roseboxes." We find that this item is nondutiable.

5. Pintle Pin & Bush Survey (217). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

6. Carrier Bearing Inspection (219). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

7. Stock Nut Survey (220). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

8. Chain Locker P/S Survey (223). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

9. Ballast Deep Tank #1 Survey (226). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

10. HFO Wing Tank Surveys (229). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

11. MELO Sump Tank C Survey (230). The invoice reflects that this item was a nondutiable ABS/USCG inspection or survey and that no repairs were performed. Accordingly, it is nondutiable.

12. Bow Thruster Inspection (302). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

13. Emergency and Independent Bilge Valve Inspection (304). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

14. Propeller Inspection (307). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

15. Tailshaft Survey (309). The invoice reflects that this item was a nondutiable ABS/USCG inspection or survey and that no repairs were performed. Accordingly, it is nondutiable.

16. Propeller Removal for Inspection (310). The invoice reflects that this item was incident to a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

17. Cooler, Central FCW #1 Survey, Scoop Cooler Inspection (313). The invoice reflects that this item was a nondutiable ABS/USCG inspection or survey and that no repairs were performed. Accordingly, it is nondutiable.

18. Cooler, Central FCW #2 Survey, Scoop Cooler Inspection (314). The invoice reflects that this item was a nondutiable ABS/USCG inspection or survey and that no repairs were performed. Accordingly, it is nondutiable.

19. Boiler, Exhaust Gas Clean for Inspection (315). The invoice reflects that this item was incident to a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

20. Boiler, Oil-Fired Clean for Inspection (316). The invoice reflects that this item was incident to a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

21. Shafting and Bearing Survey (317). The invoice reflects that this item was a nondutiable ABS/USCG inspection or survey and that no repairs were performed. Accordingly, it is nondutiable.

22. Sea Valves, Chests, etc. Survey (318). The invoice reflects that this item was a nondutiable ABS/USCG inspection or survey and that no repairs were performed. Accordingly, it is nondutiable.

23. Sea Cooling Water System Inspection (320). The invoice reflects that this item was a nondutiable inspection or survey and that no repairs were performed. Accordingly, it is nondutiable.

24. Bow Thruster Inspection and Cleaning (401). The invoice reflects that this item was a nondutiable inspection or survey and that no repairs were performed. Accordingly, it is nondutiable.

25. Corrugated Bulkhead FR271 Modification (501). The applicant states that "the requirement for this modification was a design defect' in the original construction of the vessel. The original construction created a hard spot' which lead [sic] to bulkhead cracking." Work performed to remedy "bulkhead cracking" is dutiable. Accordingly, this item is a dutiable repair under 19 U.S.C. 1466.

26. No. 3 Cargo Hold Structural Modifications (502). The applicant states: "This again is a modification to correct an original design defect. The P/S corner of the #3 cargo hold at level 10790 above base line as originally designed was leading to structural failure problems. This modification was initiated to first strengthen the deficiency in the structure (the new insert plate is 12mm in lieu of 8mm plate thickness), but more importantly, to more evenly distribute the structural stresses by increasing the inside corner radius..."

We find that this item is a dutiable repair. Based upon the information provided, we are unable to draw a meaningful distinction between this item and item 501, above, and item 503, below. Those items involved a bulkhead cracking (item 501) and a fracture (item 503). This item involves "structural failure problems."

27. Slim-Guide Bracket to Platform Modifications (503). The applicant states: "The existing brackets connecting the stantion to the container "slim-guide" fractured. Rather than just rewelding the fracture, a new design bracket was engineered, fabricated, and installed..." This item is a dutiable repair under 19 U.S.C. 1466. The fact that a new design bracket was engineered, etc. does not change this result that is mandated by a repair of a fracture.

28. Hatch Coaming Stays Modification (504). The applicant states: "A new toe piece' was designed to correct this design defect to better distribute the stresses by way of the 160mm radius of the toe piece and the 30mm radius toe with a wrap-around weld." We find that this item is a nondutiable modification.

29. Web Frame 310 Bracket Modifications (505). The applicant states: "It is two new permanently installed by welding previously non-existent web frame brackets..." We find that this item is a nondutiable modification.

30. High (Aux) Sea Chest Vent Modification (506). The applicant states: "The initial location of the 80mm vent line in the bay between frames 99-100 was not removing the entrapped air generated in the bay between frames 98-99. This entrapped air was causing operational problems in the sea water circulator pump. To correct this design defect problem, it was necessary to make this modification for efficient operation of the vessel." We find that this item is a nondutiable modification.

31. Anchor Pocket Modification (507). The applicant states: "... there has [sic] been problems with the anchor stowage...Enc. (L) details to [sic] structural modifications engineered to correct this deficiency and to improve the existing anchor stowage system." We find that this item is a nondutiable modification.

32. Web Frame Lug/Clip Modifications (508). The applicant states: "This is a new, previously non-existent 15mm steel plate bracket permanently installed by welding with a 6mm fillet weld wrapped around all ends." We find that this item is a nondutiable modification.

33. M.E. Charge Air Cooler Clean System (510). The invoice reflects, and the applicant states, that this item is a "new, previously non-existent system." We find that this item is a nondutiable modification.

34. Category B Items - General Services. These costs are to be prorated between dutiable and nondutiable costs.

35. C.O. #1 Bow Thruster Service Engineer. This cost is dutiable. The applicant states that the bow thruster service representative is a U.S. citizen and resident, and that the cost associated with the engineer should be nondutiable. The applicant has not provided sufficient information with respect to its claim of nondutiability. For example, if the applicant is attempting to claim that the subject cost is subject to remission pursuant to 19 U.S.C. 1466(d)(2), complete information with respect to that claim must be provided. The pertinent invoice reflects that the engineer performed services with respect to the "MV President Adams item #302 and 303." However the subject work was performed on the PRESIDENT TRUMAN, not the PRESIDENT ADAMS. Further, while item 302 has been found to be nondutiable in this ruling, item 303 is listed as dutiable on the spreadsheet, and that item is not involved in this application. Thus, the engineer was involved in dutiable work.

36. C.O.#2 No. 1 Deep Tank Modifications. The applicant claims that prefabricated steel is dutiable under 19 U.S.C. 1466(h)(3), which provides:

The duty imposed by section (a) of this section shall not apply to -
...
(3) the cost of spare parts necessarily installed before the first entry into the United states, but only if duty is paid under appropriate commodity classifications of the Harmonized Tariff Schedules of the United States upon first entry into the United States of each such spare part purchased in, or imported from, a foreign country.

For the purpose of 19 U.S.C. 1466(h), we have defined a "part" as follows:

A part is determined to be something which does not lose its essential character or its identity as a distinct entity but which, like materials, is incorporated into a larger whole. It would be possible to disassemble an apparatus and still be able to identify a part. The term part does not mean part of a vessel, which practically speaking would encompass all elements necessary for a vessel to operate in its designed trade. Examples of parts as defined are seen in such items as piston rings and pre-formed gaskets, as opposed to gaskets which are cut at the work site from gasket material.

There is no indication or statement as to what "spare parts" the applicant seeks relief for pursuant to 19 U.S.C. 1466(h)(3). The applicant has not established that the prefabricated steel is a part under 19 U.S.C. 1466(h)(3). Therefore, the steel is dutiable under 19 U.S.C. 1466(a).

Our determination and analysis is the same here as in Ruling 113883 dated April 1, 1997.

37. C.O.#3 Main Switchboards. The applicant states that this is a mandatory regulatory requirement. We find that this item is nondutiable.

38. Low Level Alarm Float Switch in M/E Lube Oil Sump Tanks. The invoice reflects the removal and refitting of the alarm switch. We find that this item is nondutiable.

39. Hull Thickness Gauging. The invoice reflects that this item was an ABS requirement. We find that this item is nondutiable.

40. Item No. 4 (CF 226) International U/W Paint. The applicant claims dutiability under 19 U.S.C. 1466(h)(2), which provides:

The duty imposed by subsection (a) of this section shall not apply to-
...
(2) the cost of spare repair parts or materials (other than nets or nettings) which the owner or master of the vessel certifies are intended for use aboard a cargo vessel, documented under the laws of the United States and engaged in the foreign or coasting trade, for installation or use on such vessel, as needed, in the United States, at sea, or in a foreign country, but only if duty is paid under appropriate commodity classifications of the Harmonized Tariff Schedule of the United States upon first entry into the United States of each such spare part purchased in, or imported from, a foreign country, or
...

19 U.S.C. 1466(h)(2) contemplates entry of the pertinent part or material, and the payment of duty under the appropriate commodity classification of the HTSUS, prior to the use of the pertinent part or material in the foreign shipyard.

The applicant has provided no information which would support a claim that the subject paint was entered and duty-paid prior to its use in the foreign shipyard. Accordingly, the applicant's claim for treatment under 19 U.S.C. 1466(h)(2) is denied. The paint is dutiable under 19 U.S.C. 1466(a).

HOLDING:

As detailed above, the application is granted in part and denied in part.

Sincerely,

Jerry Laderberg
Acting Chief,

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