HQ 113839 - Vessel Repair Entry No. 110-6461446-1; 19 U.S.C. 1466; PRESIDENT TYLER, V-137; Protest - United States International Trade Commision Rulings

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HQ 113839

March 3, 1997

VES-13-18-RR:IT:EC 113839 GOB

CATEGORY: CARRIER

Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 415 P.O. Box 2450
San Francisco, CA 94126

RE: Vessel Repair Entry No. 110-6461446-1; 19 U.S.C. 1466; PRESIDENT TYLER, V-137; Protest

Dear Madam:

This is in response to your memorandum dated February 3, 1997, which forwarded the protest submitted by American President Lines, Ltd. (the "protestant") with respect to the above-referenced vessel repair entry.

FACTS:

The PRESIDENT TYLER (the "vessel") is a U.S.-flag vessel owned and operated by the applicant. Certain foreign shipyard work was performed on the vessel in late 1993. The vessel arrived at the port of Seattle, Washington on December 22, 1993. The subject entry was timely filed on December 30, 1993.

In Ruling 113122 dated March 20, 1996, the application for relief with respect to the subject entry was granted in part and denied in part.

In Ruling 227085 dated August 13, 1996, the petition was granted in part and denied in part.

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.

Protestant's Claim re the Scope of the Petition Ruling

The protestant states:

Ruling 227085 did not properly address the referenced petition for review with the statement:

"Pursuant to 19 CFR 4.14(d)(2)(i), a party may not petition for relief with respect to vessel repair items which were not included in the application for relief." ...
Customs is respectfully directed to the following statement in the application:

"On the spread sheet we have segregated the individual items into two categories, i.e., dutiable and non-dutiable. The spread sheet thus becomes our request for remission of duty on the non-dutiable category of items." (Emphasis added [in protest].)

In Ruling 227085, with respect to the petition on the subject entry, we stated:

In its petition, the petitioner requests relief with respect to many items which were not the subject of its application. 19 CFR 4.14(d)(2)(i) states, in pertinent part:

(2) Petition for review on a denial of an application for relief-(i) Form. If an applicant is dissatisfied with the decision on its application for relief, the applicant may file a petition for review of that decision. The petition for review need not be in any particular form. The petition for review must identify the decision on the application for relief and must detail the exceptions taken to that decision... (Emphasis supplied [in Ruling 227085].)

Pursuant to 19 CFR 4.14(d)(2)(i), a party may not petition for relief with respect to vessel repair items which were not included in the application for relief.

Vessel repair applications, petitions, and protests come to the Office of Regulations and Rulings for decision. This office does not perform the liquidation of the subject vessel repair entries. The liquidation is performed by the vessel repair liquidation units.

For the purpose of the issuance of rulings of this office with respect to applications, petitions, and protests, it is Customs' position that an item must be identified within the text of the application, petition, and/or protest. The mere inclusion of an item on a spreadsheet is not sufficient for this purpose.

In Ruling 111714 dated January 22, 1992, we stated:

The operator, in seeking relief from the duty provisions of section 466, Tariff Act of 1930, as amended, (19 U.S.C. 1466), filed a one-page cover letter forwarding various invoices and worksheets which reflect proposed dispositions. Although the letter denominates itself an Application for Relief, it does not rise to that level.
...
The regulations governing the submission of evidence and the determination of dutiability of foreign shipyard operations under section 1466 are found in section 4.14, Customs Regulations (19 CFR 4.14). Subsection (d)(1) of section 4.14 (19 CFR 4.14(d)(1)) provides that while an Application for relief need not be submitted in any particular format, it is necessary that it:

...allege that an item or a repair expense covered by the entry is not subject to duty under paragraph (a) of this section, or that the articles purchased or the repair expenses are within the provisions of paragraph (c) of this section, or that both conditions are present.

Our position in Ruling 111714 has been reiterated in numerous other rulings, e.g., Ruling 111746, Ruling 113521, etc.

Thus, as stated above, for the purpose of the issuance of rulings of this office with respect to applications, petitions, and protests, it is Customs' position that an item must be identified within the text of the application, petition, and/or protest. The mere inclusion of an item on a spreadsheet or worksheet, is not sufficient for this purpose.

Accordingly, the position stated in Ruling 227085 in this respect is the position of the Customs Service. As Ruling 227085 pointed out, the items which were not properly the subject of the petition with respect to the subject entry, may be protested. Pursuant to 19 CFR 4.14(f), a party may file a protest:

...against the decision to treat an item or a repair as dutiable under paragraph (a) of this section, or against the decision denying the remission or refund of vessel repair duties under paragraph (c) of this section.

The subject protest indicates that the protestant is protesting the items which it claims should have been considered in the petition. Pursuant to 19 CFR 4.14(f), we will rule on all items contained within the protest.

As indicated above, however, the protestant's claim that Customs improperly failed to consider certain items in the petition is without merit.

Pre-Texaco Entry

As the protestant points out, this entry is a "pre-Texaco" entry, i.e., an entry filed prior to 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). 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 stated in pertinent part:

All vessel repair entries filed with Customs on or after the date of that decision [the CAFC decision in Texaco, December 29, 1994] are to be liquidated in accordance with the full weight and effect of the decision (i.e., costs of post-repair cleaning and protective coverings incurred pursuant to dutiable repairs are dutiable and all other foreign expenses contained within such entries are subject to the "but for" test). With respect to vessel repair entries filed prior to December 29, 1994, all costs for post-repair cleaning and protective coverings incurred pursuant to dutiable repairs are dutiable. In view of the fact that carriers have relied on Customs rulings (some of which were based on court cases which the CAFC in Texaco has now held were incorrectly decided), and retroactive application would cause both the Government and the carriers a major administrative burden, we will not apply Texaco retroactively except as to the two issues directly decided by the court. All other costs contained within such entries are to be accorded that treatment previously accorded them by Customs prior to the decision of the CAFC in the Texaco case.

Items Protested

Our analysis in this matter is based primarily on the pertinent invoices. The assertions of the application are not considered to be documentary evidence. In this regard, we note the statement of the court in Bar Bea Truck Leasing Co., Inc. v. United States, 5 CIT 124, 126 (1983):

Again, plaintiff has presented no affidavit or other evidence in support of its counsel's bald assertion...

If we are unable to determine the precise nature of certain work because of the lack of clear and probative documentary evidence, and are thus unable to determine that it is nondutiable, such work will be found dutiable. In this regard, we note the statement of the Customs Court in Admiral Oriental Line v. United States, T.D. 43585 (1929):

The evidence is conflicting upon that point, and the plaintiff has not proved the collector's classification to be wrong. The burden is upon the plaintiff to show not only that the collector was wrong in his classification but that the plaintiff was right.

In A Manual of Customs Law by Ruth F. Sturm, 1974 edition, p. 173-174, the author states, in pertinent part:

Where Congress has carved out special privileges or exemptions from the general provisions levying duties upon imported articles, the courts have strictly construed such exceptions and have resolved any doubt in favor of the government. Swan & Finch Company v. United States, 190 U.S. 143, 23 SCR 702, 47 L. Ed. 984 (1903); Pelz-Greenstein Co. v. United States, 17 CCPA 305, T.D. 43718 (1929)...
...
An exception which carves out something which would otherwise be included must be strictly construed. Goat & Sheepskin Import Co., et al. v. United States, 5 Ct. Cust. Appls. 178, T.D. 34254 (1914); [et al.]

After a consideration of the documentation of record we make the following determinations. Please note that we have included the amount charged for the work involved only where it is helpful for clarity.

Item 1.1-7. General Cleaning. The invoice states: "General cleaning of main deck and engine room debris." Cleaning is dutiable if it is related to repairs. The cleaning of the main deck and engine room debris must have occurred relative to some process. The protestant has not established that this item is not related to dutiable repairs. We find that this item is dutiable.

The protestant states that "the identical item on S/S President Hoover ... on Entry No. 110-6461445.3, a sister ship, has already been liquidated as a non-dutiable item ..." (Emphasis in original.)

However, the invoice description for the cited item in Entry No. 110-6461445-3 is not identical from the invoice description cited above. The invoice description for the relevant item on Entry No. 110-6461445-3 states:

Floating Dock Bottom Cleaning

Final-cleaning up grits and debris of floating dock bottom areas on completion of contract for inspected [sic] by port Engineer prior to floating dock sinking.

The invoice description in Entry No. 110-6461445-3 reflects that such cleaning is akin to a drydock cost or general services cost. The invoice description of the subject entry, as excerpted above, does not reflect a "general services" cleaning, but reflects a cleaning relative to certain specific work. Because, the protestant has not established that the subject cleaning is not related to dutiable repairs, it is dutiable.

Item 1.1-19. Temporary Covers. The invoice states: "Fitting and removing temporary covers on engine room console for protection." The protestant has not established that this item is not related to dutiable repairs. The cost of temporary covers is dutiable if it is related to repairs. We find that this item is dutiable.

Item 1.2-10. Owner's Spare Parts. The invoice reflects that this item includes "Providing storekeeper to inventory and control issue of C-8 class storestock spare for drydock use." This item is dutiable as it relates to spare parts which are dutiable.

Item 1.3-2. Sea Trial. The protestant cites Ruling 113200 in support of its claim that this item is nondutiable. However, in Ruling 113200, we stated:

Item 1.3-2 covers the cost of sea trials which Customs has long-held to be dutiable (see rulings 107847 and 107106). However, we note that within this item there is a segregated cost for launch services for transportation of the workers involved. Inasmuch as transportation charges have also been long-held to be non-dutiable [in pre-Texaco context] (see C.D. 1836), we find this itemized cost to be non-dutiable.

Thus, contrary to the protestant's assertion, Ruling 113200 stands for the proposition that sea trials are dutiable. We find that the subject item is dutiable. We note that the subject item includes a transportation cost which is not separately itemized. If the transportation cost were separately itemized, it would be nondutiable on this pre-Texaco entry. The entire item is dutiable.

Item 2.1-1. Services of Diver. In Ruling 113200 dated November 15, 1994, which also involved a pre-Texaco entry, we stated:

The petitioner avers that the services of a diver are a routine drydock operation for the purpose of verifying that there are no obstructions in the way of the keel and to set blocks or verify that no debris has become fouled in the way of the blocks. Upon further review of this cost, we concur with the petitioner's position that this item is non-dutiable.

In the pre-Texaco context, we find that this item is nondutiable.

Items 2.1-2, 2.1-3, and 2.1-4. Strut Bearing Weardown, Tube Shaft Bearing Weardown. These items appear to be survey or inspection-related items which do not involve and are not related to repairs. We find that they are nondutiable.

Item 2.1-7. Anchor Chain Locker. The protestant protests the "cleaning [of the] chain locker and chain locker sump for inspection by ABS and USCG." We find that this cost is nondutiable. The invoice reflects that this cost relates to an ABS/Coast Guard inspection and the cost does not appear to involve a repair.

Item 2.1-8. Sea Valves. We find that this item is nondutiable. While there are sea valve repairs in this entry, they are separately itemized. The invoice reflects that this item was for "Opening up and cleaning the following valves for inspection, and closing up same..."

Item 2.1-10. Dye-Checking Propeller Roots and Boss. The invoice reflects that this item is an ABS/USCG inspection item. We find that it is nondutiable.

Item 2.1-11. Renewing and Re-erecting Keel Blocks. The protestant states that this item is "a replacement to a keel block that has been damaged during an inspection and should be afforded the same duty-free treatment of the replacement of a gasket upon R/R a manhole cover." We find that this item is nondutiable.

Item 2.1-11. Bailing Out Tank. We find that this item is nondutiable. The invoice states that no repairs were effected. We believe that this item should be treated in the same manner as certain of the other sub-items within item 2.1-11, e.g., other sub-items relating to the bailing out of water, which are nondutiable.

Item 2.1-17. Cargo Hold and Engine Room Bilge Drainwells (HK 12,960 and HK 9,790). We find that these two sub-items within item 2.1-17 are nondutiable because they are non-repair items which were incident to an inspection.

Item 3.1-1. Hull High Pressure Water Wash. We find that this item is nondutiable. The invoice reflects that it is an inspection item. We held similarly in Ruling 113470 dated July 5, 1995.

Item 3.1-17. A' Bracket Crack. The invoice states: "Carrying out M.P.1 testing A' bracket for interested parties inspection." The protestant states: "A non-destructive magnetic partial inspection of a structural member was conducted to determine whether or not a crack existed. A crack did not exist and no repairs were required." We find this item to be nondutiable.

Item 3.1-17. Ultrasonic Thickness Gauging. The invoice states: "Carrying out ultrasonic thickness gauging main scoop pipe and condenser discharge pipe and submitting testing report." The protestant states that this item relates to ABS Requirement 1/3.11.2 with respect to the examination of all openings to the sea and asserts that this item was a mandatory survey. We find that it is nondutiable.

Item 3.3-1. Tensile Testing. The invoice reflects that this item involves testing and does not reflect repairs. We find that this item is nondutiable.

Item 4.1-1. Port Boiler Inspection. The invoice reflects that this is an inspection item. We find that it is nondutiable. As the protestant points out, the sub-item for making and renewing hinge pins (HK 3,620) is dutiable.

Item 4.4-1. Starboard Boiler Inspection. The invoice reflects that this is an inspection item. We find that it is nondutiable. As the protestant points out, the sub-item for making and renewing hinge pins (HK 3,620) is dutiable.

Items 4.1-3 and 4.1-4. Port and Starboard Boiler Hydrostatic Tests. The invoices reflect that these are inspection items and do not involve repairs. We find that these items are nondutiable.

Item 4.1-5. Main Steam Line Hydrostatic Test. The invoice reflects that this item is an inspection item and that it does not involve repairs. We find that it is nondutiable.

Item 4.1-7. D.C. Heater Internal Inspection. The invoice reflects that this item is an inspection item and that it does not involve repairs. We find that it is nondutiable.

Item 4.1-8. H.P. and L.P. Turbine Flexible Coupling. The invoice reflects that this item is an inspection item and that it does not involve repairs. We find that it is nondutiable.

Item 4.1-9. Main Condenser Tubing. The invoice reflects that this item is an inspection item and that it does not involve repairs. We find that it is nondutiable.

Item 4.1-10. Air Pressure Testing of Ballast Pipe System of D.B. Ballast Tanks. The invoice reflects that this item is an inspection item and that it does not involve repairs. We find that it is nondutiable.

Item 4.1-11. L.P. Turbine Inspection, Protection, and Tests.. The invoice reflects that these sub-items of item 4.1-11 are inspection or inspection-related items and that they do not involve repairs. We find that they are nondutiable.

Item 4.1-12. Main Turbo Generator, Reduction Gear & Dynamo Examination (HK 39,822), Checking Thrust Bearing Clearance (HK 5,800), and S.S.T.G. L.O. Sump (HK 2,880). The invoice reflects that these sub-items of item 4.1-12 are inspection or inspection-related items and that they do not involve repairs. We find that they are nondutiable.

Item 4.1-14. Port and Starboard Boiler Mount Removal and Removal and Reinstallation of Insulation. The invoice reflects that these items are inspection or inspection-related items and that they do not involve repairs. We find that they are nondutiable.

Item 4.1-15. Fireside Cleaning Port and Starboard Boilers. The invoice reflects that this item is an inspection-related item and that it does not involve repairs. The protestant asserts that this cost is incident to ABS 1/3.15.2. We find that this item is nondutiable.

Item 4.1-16. No. 3 Line Shaft Bearings. The invoice reflects that this item is an inspection-related item and that it does not involve repairs. We find that this item is nondutiable.

Item 4.1-17. Kings Bury Thrust Bearing. The invoice reflects that this item is an inspection-related item and that it does not involve repairs. We find that this item is nondutiable.

Item 5.1-3. Main Condenser Cleaning. The invoice states: "Cleaning off inlet and outlet water boxes [and] marine growth and cleaning water boxes & tubes for inspection..." It is our position, as stated in numerous rulings (e.g., Ruling 112045 dated September 4, 1992; Ruling 111571 dated March 4, 1992; C.I.E. 429/61), that cleaning which is maintenance in nature, or which removes rust or deterioration, is dutiable under 19 U.S.C. 1466. The cleaning of marine growth, as stated in the invoice, is this type of operation. Therefore, it is dutiable.

Item 5.1-9. Megger Testing Engine Room. The invoice reflects that this item is an inspection item and that it does not involve repairs. We find that this item is nondutiable.

Item 5.1-31. Port and Starboard Boiler De-Superheater. The invoice reflects that this item is an inspection-related item and that it does not involve repairs. We find that this item is nondutiable.

Item 19 on CF 226. Cargo Hold Cleaning. The protestant states: "This cleaning is related to the transportation of animal hides. The hides inevitably leak a rather foul smelling liquid out of the containers, which collects and solidifies on the tank tops and sides of the cargo holds. the [sic] cleaning is for the purpose of removing the noxious sediment. It is not related to any repair...It was not initiated in anticipation of any repair. It was accomplished simply as an inspection requirement." The protestant cites a requirement (1/3.7(d)) of special periodical line surveys with respect to cargo hold cleaning. We find that this item is nondutiable. The evidence, taken as a whole, indicates that this is a cleaning item which does not involve a repair. We find that it is nondutiable.

HOLDING:

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

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, the Freedom of Information Act and other public access channels.

Sincerely,

Stuart P. Seidel
Assistant Commissioner
Office of Regulations and Rulings

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