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 > 1997 HQ Rulings > HQ 113753 - HQ 114005 > HQ 114000

Previous Ruling Next Ruling
HQ 114000





July 8, 1997

VES-13-18-RR:IT:EC 114000 GOB

CATEGORY: CARRIER

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

RE: 19 U.S.C. 1466; PRESIDENT KENNEDY, V-89E; Vessel Repair Entry No. 110- 7994475-4; Application

Dear Madam:

This ruling is in response to your memorandum dated June 18, 1997, which forwarded the application for relief submitted by American President Lines, Inc. with respect to the above-referenced vessel repair entry.

FACTS:

The PRESIDENT KENNEDY (the "vessel"), a U.S.-flag vessel, arrived at the port of Seattle, Washington on March 8, 1997. The subject vessel repair entry was timely filed. Certain foreign shipyard work was performed in Korea, Taiwan, and Japan in February 1997.

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.

We will use the numbering system which you employed in your forwarding memorandum.

1. Hyundai Drydocking. The applicant states:

The M.V. President Kennedy was drydocked at Hyundai MIPO on January 12, 1996 for underwater painting and ABS Special Survey No. 2 inspections, voyage #78. This drydocking was reported on Entry No. 110-6461867-8, February 26, 1996.

Upon completion of the work at Hyundai MIPO on January 28, 1996, the vessel sailed to Kaohsiung, Taiwan. Upon arrival of the vessel at Kaohsiung on February 1, 1996 it was discovered that the under water paint coating system had failed. The vessel reported serious hull friction problems encountered on the transit from MIPO to Kaohsiung. This failure was reported to Hyundai and to the International Paint Co., the supplier of the paint. As to be expected the shipyard blamed the paint and the paint supplier blamed the shipyard for the failure.
...
The severity of the failure is evident in the photographs Enclosure (C). These photographs show the "cold flow" paint surface resulting in a surface resembling an Elephant's hide. The degradation of the ships [sic] performance is reported in Enclosure (D). ...
We have claimed the general services, excluding Item 111 and the paint items 301-306 to be non dutiable. The basis for this claim under ineffective repair" [sic] is the fact that APL exhausted all other avenues [of] relief from this failure before acceding to last resorts i.e. redocking the vessel and completely removing the failed coatings after which the entire system had to be restored.

We find that the subject items are dutiable. The general service items should be prorated.

The applicant has not provided adequate documentary evidence to support its claim. Affidavits of knowledgeable parties (e.g., those individuals with "first hand knowledge" of the relevant facts) are an example of the type of evidence which might be supportive of the applicant's claim. Other types of documentary evidence may also be supportive.

We note further that the applicant must establish that the repairs were completely ineffective and of no value to the vessel. See C.I.E. 1128/60 and Ruling 227199, both of which were cited by the applicant.

Additionally, we note that the work at issue was performed on a voyage subsequent to the voyage on which the purportedly ineffective repairs were performed. Where the doctrine of ineffective repairs is cited by vessel operators, it is generally on the same voyage that the "follow-up" repairs are accomplished. The repairs on the subject vessel repair entry were performed 12 months and eleven voyages after the earlier repairs. No explanation for this has been provided.

2. The applicant states: "We have not prorated item 111 "Chemists" since it relates to a dutiable repair item #203." Accordingly, the applicant is not requesting relief here.

3. No. 2 SWB Tank Modification (201). We find that this is a nondutiable modification.

4. The applicant claims that prefabricated steel used in the hatch coaming top plates (206) is dutiable under 19 U.S.C. 1466(h)(3). We have ruled previously that prefabricated steel is not a "part" which is subject to duty under 19 U.S.C. 1466(h)(3). See Ruling 113883 dated April 1, 1997. 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.

The steel is dutiable under 19 U.S.C. 1466(a).

5. CF 226 Item 1. The applicant states: "The spare part Philips VGA 14' Monitor is reported as a GATT item under (h)(3) on CF 7501-A, duty $25.49." We concur that the monitor is dutiable under 19 U.S.C. 1466(h)(3).

6. CF 226 Item 2 - Hull Paint Inspection. The applicant states: "This item is regarded to be non-dutiable since it was required to verify that the replacement U/W paint was effective and properly applied." We find that this item is dutiable because it relates to the first item, above, which we have found to be dutiable.

7. CF 226 Item 6 - New Sulzer Diesel Japan Ltd. Test Stand for Main Engine Fuel Injectors. The applicant claims duty under 19 U.S.C. 1466(h)(3). We concur that this item is dutiable under 19 U.S.C. 1466(h)(3)..

8. CF 226 Item 7 - Technical Assistance Consulting Services Karl Masanneck. The applicant states: "The services of a specialized naval architect to provide technical assistance to install the structural modifications in the No. 2 SWB deep tank per Herbert Engineering Co. Dwg. No. 970701 is considered to be non-dutiable." We find that this item is nondutiable.

9. CF 226 Item 8 - Photographic Services. The Applicant states: "These are the photographs reported in Enc. C to document the total "ineffective repair". This cost is considered to be non-dutiable." We find that this item is dutiable as an item incident to a dutiable repair. We determined previously that the applicant's claim with respect to ineffective repairs was not sufficiently documented.

10. CF 226 Item 9 - Marine Design & Operations, Inc. Consulting Services. The applicant states: "This service is reported as non-dutiable service supplied by a resident of the United States, 225 First Avenue East, Roselle, New Jersey 07203."

This cost is dutiable. The applicant has not provided sufficient information with respect to its claim of nondutiability. If the applicant is attempting to an exemption from duty under 19 U.S.C. 1466, the applicant must specifically identify the exemption, and must provide adequate documentary evidence in support of its claim that the specific exemption is applicable.

11. CF 226 Item 10. The applicant states: "We report Courtauld Coating Inc. Invoice #IH514205 for the supply of the Anti Fouling Paint manufactured in the United States in the amount of $81,806.55. The paint was supplied to APL at no cost under claim settlement. It is considered to be non-dutiable."

The applicant has provided two Courtaulds Coating Inc. invoices. Invoice # IH512920 reflects a cost of $81,806.55.

The applicant has submitted no documentary evidence supporting its claim that this paint "was supplied to APL at no cost..." Accordingly, this item is dutiable.

12. CF 226 Item 11. The applicant states: "This paint was manufactured in Korea and supplied to APL at no cost under claim settlement. It should be non-dutiable under "Completely Ineffective Repair."

As with item 10 on the CF 226, the applicant has submitted no documentary evidence in support of its claim. Accordingly, this item is dutiable.

HOLDING:

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

Sincerely,

Jerry Laderberg
Acting Chief,

Previous Ruling Next Ruling