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HQ 113914

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October 15, 1998

VES-13-18-RR:IT:EC 113914 GEV

CATEGORY: CARRIER

Chief, Liquidation Branch
U.S. Customs Service
Post Office Box 2450
San Francisco, California 94126

RE: Vessel Repair Entry No. C27-0147654-4; Painting; Modification; Services;
CHIEF GADAO; V-162; 19 U.S.C. ? 1466

Dear Sir:

This is in response to your memorandum dated April 9, 1997, forwarding a petition for review of our decision on an application for relief from duties assessed pursuant to 19 U.S.C. listed on Hyundai Mipo Dockyard Co., Ltd. ("Hyundai") invoice no. 960013-A, as well as Item no. 6 listed on the CF 226. Our findings are set forth below.

FACTS:

The CHIEF GADAO is a U.S.-flag vessel, formerly owned by American President Lines, Inc. ("APL"), and known as the PRESIDENT GRANT, now owned by Matson Navigation Company ("Matson"). The vessel was sold by APL to Matson on January 2, 1996, and underwent foreign shipyard work during March of 1996. Subsequent to the completion of the work the vessel arrived in the United States at San Pedro, California, on March 26, 1996. A vessel repair entry was untimely filed on April 10, 1996, and referred to the Fines, Penalties & Forfeitures Officer in the Port of Los Angeles for appropriate penalty action (see 19 CFR

An application for relief, dated May 20, 1996, was timely filed. Included with the application was the following supporting documentation: shipyard invoices; drawings; an Entry Summary Continuation Sheet (CF 7501-A); a spreadsheet prepared by the applicant; and documentation from the American Bureau of Shipping (ABS).

By letter dated February 21, 1997, your office denied the application in part and granted it in part based on Headquarters ruling letter 113681 and informed the applicant of the right to file a petition for review of this decision pursuant to ? 4.14(d)(2) of the Customs Regulations (19 CFR documentation was timely filed seeking relief for the aforementioned expenses.

ISSUE:

Whether the foreign costs contained within the subject entry for which our review is sought are dutiable under 19 U.S.C. ? 1466.

LAW AND ANALYSIS:

Title 19, United States Code, ? 1466 (19 U.S.C. ? 1466), provides in pertinent part for the payment of an ad valorem duty of 50 percent of the cost of "...equipments, or any part thereof, including boats, purchased for, or the repair parts or materials to be used, or the expenses of repairs made in a foreign country upon a vessel documented under the laws of the United States..."

Item no. 6 on Hyundai invoice no. 960013-A (Hull Painting) involved work done in preparation of that covered by Item no. 7 (Color Coating) on the same invoice. It is the petitioner's contention that the costs of both of these items were incurred not for purposes of maintenance or restoration but rather because of the change of the vessel's ownership from APL to Matson thereby necessitating the use of the latter's special fleet colors. In support of this contention the petitioner has submitted a letter dated March 12, 1997, from the Senior Account Executive, International Paint Co. The petitioner further states (and cites to the applicable vessel repair entry) that in January of 1995 the vessel had previously undergone dutiable painting to the areas in question and these areas therefore would not have required coating renewals within the limited interval between January of 1995 and February of 1996.

Accordingly, upon further review of Item nos. 6 and 7 and the supporting documentation, we are in accord with the petitioner's contention and find both items to be nondutiable.

Item nos. 11 and 12 cover costs alleged by the petitioner to be related solely to nondutiable modification work. Item no. 11 of Hyundai invoice 960013-A covers what is described as "General Service for Modification" and includes costs for the following services: wharfage; tuggage and mooring/unmooring; fire main service; fire patrol; and garbage disposal. Item 12 on the same invoice covers additional work stated to be modification-related. Upon further review of the record, we have determined that the relevant Hyundai invoices reflect sufficient segregation between dutiable and nondutiable costs as to justify the petitioners claim. Item nos. 11 and 12 are therefore nondutiable.

Item no. 6 listed on the CF 226 covers the services of a German resident as reflected on Petrochem Marine Consultants, Inc. (PMC), invoice no. 95-2900-7A. The petitioner contends that these services were for the purpose of supervising the nondutiable hatch cover conversion/modification work contained within this entry (see Hyundai invoice no. 960013-A). Upon further review of the aforementioned Hyundai and PMC invoices, we are in accord with the petitioner's claim. Item no. 6 on the CF 226 is therefore nondutiable.

HOLDING:

The foreign costs contained within the subject entry for which our review is sought are nondutiable under 19 U.S.C. ? 1466 as discussed in the Law and Analysis portion of this ruling.

Sincerely,

Jerry Laderberg
Chief
Entry Procedures and Carriers

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