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HQ 113907





April 29, 1997

VES-13-18-RR:IT:EC 113907 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. C31-0015282-7; 19 U.S.C. 1466; ARCO SPIRIT, CF- 160; Petition

Dear Madam:

This is in response to your memorandum dated April 9, 1997, which forwarded the petition submitted by ARCO Marine, Inc. (the "petitioner") with respect to the above-referenced vessel repair entry.

FACTS:

The ARCO SPIRIT (the "vessel"), a U.S.-flag vessel owned and operated by the petitioner, arrived at the port of Valdez, Alaska on July 29, 1996. The subject vessel repair entry was timely filed. The vessel underwent certain foreign shipyard work in Korea in June and July of 1996.

In Ruling 113798 dated January 9, 1997, the application for relief with respect to the subject entry 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.

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.

The petitioner reiterates its claim of the application and previous submissions of its other vessel repair entries with respect to the non-applicability of the Texaco decision to entries filed after the date of the appellate decision in Texaco.

As we have stated on numerous occasions, this claim is without merit.

The petition pertains to five items.

002.C.3. Potable water. The petitioner emphasizes, and the record reflects, that this water was "for the purpose of cooking, bathing, and personal hygiene." The petitioner distinguishes this use of water (i.e., personal use) from other non-personal uses of water during the vessel's drydocking. However, we do not believe that this distinction establishes that the water should be found nondutiable. Drydock or general services costs such as electricity involve some personal use, i.e., an individual will frequently stay on board a vessel in the evening after the day's work has been completed and will use electricity during that non-work period. Further, during the day some electricity is used for personal purposes. Accordingly, we affirm the finding of Ruling 113798 that this item should be treated as a drydock or general services cost and therefore prorated.

005.A. Removal of sludge. The petitioner states: "In this item, the removal of sludge is not a repair, nor is it work in anticipation of a repair or coating. It is removal of debris to permit required visual inspection by regulatory authorities." The pertinent part of the invoice states: "Remove approximately 50 tons of sludge to allow for inspection of hull structure and plating details." Because the invoice reflects that this item is related to an inspection and there is no indication of a repair on the pertinent section of the invoice, we find that this item is nondutiable as an item incident to an inspection.

006. Inspection and Survey Record. The invoice reflects that this item is an "inspection and repair record." (Emphasis supplied.) Further, certain of the enumerated items on the record are repairs. Accordingly, this item is dutiable.

439. IGS Scrubber Modification. The petitioner has submitted a statement from Kevin M. McPherson, whom it states is a marine consultant familiar with the vessel. Mr. McPherson's statement describes the work performed in this item. It also states:

The inert gas scrubber fitted to the above vessels in the 1970's was a very basic early design with performance to match. Although it was functioning properly and in good order, vessel operation efficiency dictated an upgrade of the system.

Based upon the documentation of record (i.e., the invoice and the statement supplied by the petitioner's consultant), we find that this item is a nondutiable modification.

Mi Sung Corp. Removal of sludge. The petitioner states:

The Mi Sung Corporation Ltd. invoice covers work that is not a repair, nor in anticipation of a repair...The removal of sludge is an ongoing process, comparable to removal of any debris that would accumulate in the hold of a cargo ship. The subject sludge was all removed from #5 center tank. To make tanks "gas free, safe for entry" for regulatory inspection purposes, the removal of the solid cargo residues is a normal process. It was necessary at this time in order to have the areas involved available for required ABS/USCG survey and/or inspection.

In Ruling 113798, we stated:

The invoice reflects that this item is for "sludge mucking" and "sludge disposal." ... We find that this cost appears to be a drydock cost or general cost which would relate to both dutiable and nondutiable items. Accordingly, it should be prorated between dutiable and nondutiable items.

The pertinent invoice provides no information or indication that the sludge removal related solely to a regulatory inspection. In fact, the pertinent invoice provides no information or indication that the sludge removal related in any way to a regulatory inspection. Therefore, we determine that our decision to prorate this item is the correct and appropriate manner of treatment.

HOLDING:

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

Sincerely,

Jerry Laderberg
Acting Chief,
Entry and Carrier Rulings Branch

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