HQ 114034 - Vessel Repair Entry No. C27-0158637-5; CHIEF GADAO; V-008B; Modification; Survey; Prefabricated Steel; Cleaning; 19 U.S.C. ? 1466 - United States International Trade Commision Rulings

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HQ 114034

October 16, 1998

VES-13-18-RR:IT:EC 114034 GEV

CATEGORY: CARRIER

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

RE: Vessel Repair Entry No. C27-0158637-5; CHIEF GADAO; V-008B; Modification; Survey; Prefabricated Steel; Cleaning; 19 U.S.C. ? 1466

Dear Sir:

This is in response to your memorandum dated July 7, 1997, forwarding an application for relief from duties assessed pursuant to 19 U.S.C. ? 1466 with supporting documentation. 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 underwent foreign shipyard work in Ulsan, Korea, during January-February of 1997. Subsequent to the completion of the work the vessel arrived in the United States at San Pedro, California, on February 18, 1997. A vessel repair entry was timely filed the following day.

Pursuant to an authorized extension of time, an application for relief, dated June 18, 1997, with supporting documentation was timely filed. Relief is requested for 58 items contained within the subject entry. Our findings in this matter are as follows.

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..."

In regard to requests for relief pursuant to 19 U.S.C. ? 1466(h)(3), we note that 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 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.

With respect to surveys or inspections, the general rule is that a survey undertaken to meet the specific requirements of a governmental entity, classification society, or insurance carrier is not dutiable even when dutiable repairs are effected as a result of a survey. When an inspection or survey is conducted to ascertain the extent of damage sustained or whether repairs are necessary, the survey cost is dutiable as part of the repairs which are accomplished.

In its application of the vessel repair statute, Customs has held that modifications, alterations, or additions to the hull and fittings of a vessel are not subject to vessel repair duties. The identification of work constituting modifications vis-a-vis work constituting repairs has evolved from judicial and administrative precedent. (See Otte v. United States, 7 Ct. Cust. Appls. 166, T.D. 36489 (1916); United States v. Admiral Oriental Line et al., 18 C.C.P.A. 137, T.D. 44359 (1930); and Customs Bulletin and Decisions, Vol. 31, Number 40, published October 1, 1997.) The factors discussed within the aforementioned authority are not by themselves necessarily determinative, nor are they the only factors which may be relevant in a given case. However, in a given case, these factors may be illustrative, illuminating, or relevant with respect to the issue of whether certain work may be a modification of a vessel which is nondutiable under 19 U.S.C. ? 1466.

In Texaco Marine Services, Inc., and Texaco Refining and Marketing, Inc. v. United States, 815 F.Supp. 1484 (1993), the issue before the U.S. Court of International Trade (CIT) was whether costs for post-repair cleaning and protective coverings incurred pursuant to dutiable repairs constituted "expenses of repairs" as that term is used in 19 U.S.C. ? 1466. In holding that
the costs at issue were dutiable as "expenses of repairs" the court adopted the "but for" test proffered by Customs; that is, these costs were an integral part of the dutiable repair process and would not have been necessary "but for" the dutiable repairs.

On appeal, the CAFC issued a watershed decision which not only affirmed the opinion of the CIT regarding the specific expenses at issue, but also provided clear guidance with respect to the interpretation of 19 U.S.C. ? 1466, hence, Customs administration of that statute. In upholding the "but for" test adopted by the CIT, the CAFC stated:

"...the language expenses of repairs' is broad and unqualified.
As such, we interpret expenses of repairs' as covering all expenses (not specifically excepted in the statute) which, but for dutiable repair work, would not have been incurred.
Conversely, expenses of repairs' does not cover expenses that would have been incurred even without the occurrence of dutiable repair work. As will be more clearly illustrated below...the but for' interpretation accords with what is commonly understood to be an expense of repair." 44 F.3d 1539, 1544.

In reaching the above determination, the CAFC steadfastly rejected the non-binding judicial authority relied upon by the plaintiff/appellant. Specifically, the court addressed the following: Mount Washington Tanker Co. v. United States, 505 F.Supp. 209 (CIT 1980) which held that transportation compensation for members of a foreign repair crew performing dutiable repairs was not dutiable as an expense of repairs; American Viking Corp. v. United States, 150 F.Supp. 746 (Cust.Ct. 1956) which held that the expense of providing lighting needed to perform a dutiable repair was not dutiable as an expense of the repair; and International Navigation Co. v. United States, 148 F.Supp. 448 (Cust.Ct. 1957) which held that transportation expenses for a foreign repair crew to travel to and from an anchored vessel being repaired was not dutiable as expenses of repairs. With regard to these three cases, the CAFC stated, "Seemingly, these expenses too would have been viewed as coming within the [vessel repair] statute if the court had used a "but for" approach." 44 F.3d 1539, 1547. The CAFC concluded, "Thus Mount Washington Tanker, like American Viking and International Navigation, was incorrectly decided." Id.

In addition to the above judicial authority, the CAFC discussed at length the case of United States v. George Hall Coal Co., 142 F. 1039 (1939), heavily relied upon by the plaintiff/ appellant, which held dry-docking expenses were not an expense of repair and therefore were not dutiable. Although this decision seemingly supported the position that the expenses at issue were dutiable, the CAFC examined the rationale provided in a December 31, 1903, unpublished decision of the Department of Treasury Board of General Appraisers (Board) upon which the court's decision was based. It noted that, "...the Board held the dry-docking expense was not subject to the vessel repair duty because the Board found that the expense would have been
incurred irrespective of whether or not dutiable repairs were performed." 44 F.3d 1539, 1546 The CAFC went on to state, "George Hall Coal simply stands for the proposition that expenses that would have been incurred irrespective of whether or not dutiable repairs are performed are not dutiable as an expense of repairs." Id. It therefore concluded, "...George Hall Coal is entirely consistent with the but for' interpretation of the statute." Id.

Recognizing that the decision of the CAFC was not only dispositive of the expenses at issue, but also instructive as to Customs administration of the vessel repair statute with respect to the interpretation of the term "expenses of repairs" contained therein, the Assistant
Commissioner, Office of Regulations and Rulings, issued a memorandum to the Regional Director, Commercial Operations, New Orleans (file no. 113308) dated January 18, 1995, published in the Customs Bulletin on February 8, 1995 (Customs Bulletin and Decisions, vol. 29, no. 6, at p. 59) In that memorandum, copies of which were disseminated to two other Customs field offices charged with the liquidation of vessel repair entries, it was stated that pursuant to the decision of the CAFC, a myriad of foreign repair expenses previously accorded duty-free treatment would, under certain circumstances, no longer receive such treatment. The memorandum further provided that any such affected costs contained in vessel repair entries not finally liquidated as of the date of the CAFC decision (December 29, 1994) should be liquidated as dutiable "expenses of repairs" provided they pass the "but for" test discussed above.

Subsequent to the publication of the above memorandum, on February 22, 1995, various representatives of U.S.-flag vessel owners/operators met with the Assistant Commissioner, Office of Regulations and Rulings, and members of his staff. It was the collective opinion of the vessel owners/operators that the memorandum be rescinded, contending, inter alia, that it was violative of 19 U.S.C. ? 1625(c)(1) and 19 CFR Part 177. Upon further review of this matter, the Assistant Commissioner, Office of Regulations and Rulings, again issued a memorandum to the Regional Director, Commercial Operations Division, New Orleans (file no. 113350), dated March 3, 1995, published in the Customs Bulletin on April 5, 1995 (see Customs Bulletin and Decisions, vol. 29, no. 14, at p. 24) clarifying the January 18 memorandum with respect to Customs implementation of the CAFC decision. It provided that all vessel repair entries filed with Customs on or after the date of that decision 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. It further provided that 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 held were incorrectly decided), and retroactive application would cause both the Government and the carriers a major administrative burden, Customs 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.

Parenthetically, we note that the CAFC decision was published in its entirety in the Customs Bulletin on March 8, 1995 (See Customs Bulletin and Decisions, vol. 29, no. 10, at p. 19).

The applicant contends that the CAFC decision should not be applicable to the subject vessel repair entry and by doing so Customs has violated 19 U.S.C. ? 1625(c) as amended by Implementation Act (Pub.L. 103-182, 107 Stat. 2057 (the "Mod Act"). Title 19, United States Code, ? 1625(c) provides, in pertinent part, as follows:

A proposed interpretive ruling or decision which would--

(1) modify...or revoke a prior interpretive ruling or decision which has been in effect for at least 60 days; or

(2) have the effect of modifying the treatment previously accorded by the Customs Service to substantially identical transactions;
shall be published in the Customs Bulletin. The Secretary shall give interested parties an opportunity to submit...comments on the correctness of the proposed ruling or decision.

Specifically, the applicant contends that the publication in the Customs Bulletin of memorandum 113308, subsequently clarified by memorandum 113350, without the solicitation of public comments, constitutes a violation of 19 U.S.C. ? 1625(c). The underlying rationale of the applicant's position is that, "The letter by the Customs Service was clearly an interpretive ruling' within the meaning of the Mod Act." It is further contended that this "interpretive ruling" modified or revoked "a host of interpretive rulings or decisions that have been in effect for more than sixty days." We do not agree.

At the outset, notwithstanding the applicant's claim that the aforementioned memoranda published in the Customs Bulletin constitute an "interpretive ruling", we note that the applicant readily acknowledges, "...the Mod Act does not define the term interpretive ruling,' and to date no court has interpreted the term in the context of the Mod Act..." (See p. 1 of the attachment to the protest). Consequently, by his own admission the applicant's contention with respect to an "interpretive ruling" within the meaning of 19 U.S.C. ? 1625 is without legislative or judicial support.

The applicant, citing Flagstaff Medical Center, Inc., v. Sullivan, 962 F.2d 879, 886 (1992), Linoz v. Heckler, 800 F.2d 871, 877 (1986), and Powderly v. Schweiker, 704 F.2d 1092, 1098 (1983), nonetheless argues that although the term "interpretive ruling" has not been defined for purposes of the 19 U.S.C. ? 1625(c), it has been defined for purposes of the Administrative Procedures Act ("APA" 5 U.S.C. ? 553(b)-(c)). The applicant's rationale, however, is antithetic.

Assuming, arguendo, the Customs memoranda in question collectively constitute an interpretive ruling for purposes of the APA, such rulings are exempt from the notice and comment provisions of the APA pursuant to 5 U.S.C. ? 553(b)(A).

Furthermore, the aforementioned memoranda did not modify or revoke any prior interpretive ruling or decision or have the effect of modifying the treatment Customs previously accorded certain foreign expenses under 19 U.S.C. ? 1466. Rather, the memoranda, in conjunction with the publication of the CAFC decision in the Customs Bulletin, merely provided notice to the public that the impetus behind any change in Customs interpretation of the term "expenses of repairs" within the meaning of the vessel repair statute is the CAFC itself, not Customs.

The applicant further alleges that Customs did not comply with its own regulations set forth in 19 CFR Part 177, entitled "Administrative Rulings." The applicant cites to numerous Customs vessel repair rulings issued prior to the CAFC decision (again, based in large measure on the court cases stated to have been incorrectly decided by the CAFC, and George Hall Coal which is in accord with the CAFC decision), some of which were published in the Customs Bulletin, stating that pursuant to 19 CFR ? 177.10(b) they established a uniform practice that certain foreign expenses are not dutiable under the vessel repair statute. Consequently, the Customs memoranda in question are alleged to have constituted a "ruling" which has the effect of changing a practice thereby necessitating its publication in the Federal Register giving interested parties an opportunity to submit written comments with respect to the correctness of the contemplated change (19 CFR ? 177.10(c)(1)).

With respect to the applicability of 19 CFR Part 177, we note that neither of the two Headquarters memoranda published in the Custom Bulletin are "rulings" within the meaning of that part. Pursuant to ? 177.1(d)(1), Customs Regulations, a "ruling" is defined as a "...written statement issued by the Headquarters Office or the appropriate office of Customs as provided in this part that interprets and applies the provisions of the Customs and related laws to a specific set of facts." (Emphasis added) Neither memorandum applied 19 U.S.C. ? 1466 or 19 CFR ? 4.14 (the applicable Customs regulations promulgated pursuant to ? 1466) to a specific set of facts (i.e., no single vessel repair entry containing foreign expenses was discussed). Rather, they provided notice to the public that Customs will administer 19 U.S.C. ? 1466 in accordance with the explicit guidelines set by the CAFC in interpreting the term "expenses of repairs" within the meaning of the statute as determined by the "but for" test. Such guidelines, prior to the date of that decision, were non-existent.

Further in regard to the applicability of 19 CFR Part 177, it is noteworthy that since neither memorandum was a "ruling" as defined in 19 CFR ? 177.1(d), the mere fact that they were published in the Customs Bulletin does not, as the applicant suggests, render either a "published ruling" within the meaning of 19 CFR ? 177.1(d). Furthermore, in view of the fact that 19 CFR ? 177.1(d) also defines a "ruling letter" as "a ruling issued in response to a written request therefor and set forth in a letter addressed to the person making the request or his
designee", neither memoranda, which were issued at the behest of the Assistant Commissioner, Office of Regulations and Rulings to the Regional Director, Commercial Operations Division, New Orleans, constituted a "ruling letter" for purposes of 19 CFR Part 177. The delayed effective date provisions of 19 CFR ? 177.9(d)(3), applicable to a "ruling letter" are therefore of no consequence.

Accordingly, the provisions of 19 U.S.C. ? 1625 and 19 CFR Part 177 are inapplicable to the subject application.

We now turn to consideration of the items presented, and will utilize the numbering system which the Liquidation Unit used in forwarding the application.

1. General Services. The claim is made that all of the general service items (nos. 101 through 119 on Hyundai Mipo Dockyard Co., Ltd. invoice no. 962961) are considered to be duty-free with the exception of item 114 (Gas Free Certificate which the applicant agrees should be pro-rated). The applicant further states that Item no. 118 (Steam Heat for Modification (Portable Boiler)) was required to carry out the modifications outlined in Item no. 227 and is therefore nondutiable.

As explained in ample precedent, Customs considers the types of expenses associated with these costs to be prorated under the terms of the Court opinion in Texaco, supra. We therefore find that with the exception of Item no. 118 (which we agree was done pursuant to the nondutiable modification work in Item no. 227), the expenses of General Services should be prorated between dutiable and nondutiable costs as reflected on the vessel repair entry.

2. Item No. 121 - Dock Trial. The applicant states that the dock trial was done to prove the performance and correct operation of the vessel's auxiliary systems that were opened and inspected during this drydocking. Upon reviewing the record, however, we find no documentation to corroborate the applicant's claim that the dock trial was related solely to a nondutiable ABS inspection. Furthermore, we note the existence of dutiable repairs covered by this vessel repair entry, as well as an ABS repair survey. Consequently, in the absence of evidence to the contrary, it appears that the Dock Trial expense covered by Item no. 121 is attributed to both dutiable and nondutiable costs and should be prorated.

3. Item No. 201 - Drydock Vessel. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.2.1a "Drydocking Surveys"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 201 is therefore nondutiable.

4. Item No. 202 - Strut Bearing & Tube Shaft Weardowns. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.13.2 "Survey Details"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 202 is therefore nondutiable.

5. Item No. 203 - Rudder Pintle Clearances. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.2.1c "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 203 is therefore nondutiable.

6. Item No. 203.1 - Rudder Pintle Nut Access Plate Removal. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.2.1c "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 203.1 is therefore nondutiable.

7. Item No. 203.6 - Rudder Stock Packing Gland Fairwater Plates. The applicant claims that the cost of prefabricated steel under this item is subject to 19 U.S.C. ? 1466(h)(3). We disagree. We have previously discussed our position regarding such claims of the applicant (see Customs ruling letters 113883, dated April 1, 1997, and 114010, dated October 3, 1997). In each of those cases we have held that since the applicant has not established that the prefabricated steel is a "part" under 19 U.S.C. ? 1466(h)(3), it is dutiable under 19 U.S.C. ? 1466(a). The same result is reached with respect to this item. It is our view that prefabricated steel is not a spare part or part, and thus is not eligible for treatment under 19 U.S.C. ? 1466(h)(3). Item 203.6 is therefore dutiable.

8. Item No. 204 - Anchor Chains & Chain Lockers. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.7.1n "Special Periodic Survey - Hull"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 204 is therefore nondutiable.

9. Item No. 205 - Sea Valve Inspection. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.2.1c "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 205 is therefore nondutiable.

10. Item No. 206 - Chain Locker & Eductor Piping. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.11.2a "Parts to be

Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 206 is therefore nondutiable.

11. Item No. 207 - Sea Chests & Strainers. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.1c "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 207 is therefore nondutiable.

12. Item No. 208 - Propeller Inspection. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.13.2a "Survey Details"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 208 is therefore nondutiable.

13. Item No. 210 - Propeller Removal & Tailshaft Inspection. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.13.2b3 "Survey Details"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 210 is therefore nondutiable.

14. Item No. 211 - Intermediate Shaft Removal/Inspection. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.13.2b3 "Survey Details"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 211 is therefore nondutiable.

15. Item No. 213 - Stern Tube Shaft Removal/Inspection. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.13.2b3 "Survey Details"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 213 is therefore nondutiable.

16. Item No. 214 - Stern Tube Shaft Installation. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.13.2b3 "Survey Details"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 214 is therefore nondutiable.

17. Item No. 215 - Tailshaft Removal & Reinstallation. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.13.2b3 "Survey

Details"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 215 is therefore nondutiable.

18. Item No. 220 - Rudder Inspection and Air Test. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.2.1c "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 220 is therefore nondutiable.

19. Item No. 222 - Void & Cofferdam Inspection & Survey. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.7.4d "Special Periodic Survey-Hull"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 222 is therefore nondutiable.

20. Item No. 223 - Ballast Tank Inspection & Survey. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.7.4d "Special Periodic Survey-Hull"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 223 is therefore nondutiable.

21. Item No. 224 - Fuel Oil Tank Inspection & Survey. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.7.4d "Special Periodic Survey-Hull"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 224 is therefore nondutiable.

22. Item No. 227 - Vent Line Modifications. The applicant claims this work constitutes a nondutiable modification. It involves the re-routing of double bottom ballast tank vent lines from within fuel oil tanks to within ballast wing tanks. This work was done to the existing vent lines to prevent the accidental discharge of fuel oil from the vessel, thus eliminating the possibility of an environmental hazard. The record supports the applicant's modification claim. Item no. 227 is therefore nondutiable.

23. Item No. 228 - Hatch Cover Survey. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.3.1a3 "Annual Surveys-Hull"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 228 is therefore nondutiable.

24. Item No. 228.1 - Hatch Cover Repairs. While conceding the dutiability of labor costs under this item, the applicant claims that the cost of prefabricated steel under this item is subject to 19 U.S.C. ? 1466(h)(3). We disagree. We have previously discussed our position regarding such
claims of the applicant (see Customs ruling letters 113883, dated April 1, 1997, and 114010, dated October 3, 1997). In each of those cases we have held that since the applicant has not established that the prefabricated steel is a "part" under 19 U.S.C. ? 1466(h)(3), it is dutiable under 19 U.S.C. ? 1466(a). The same result is reached with respect to this item. It is our view that prefabricated steel is not a spare part or part, and thus is not eligible for treatment under 19 U.S.C. ? 1466(h)(3). Item no. 228.1 is therefore dutiable.

25. Item No. 229 - Port & Stbd Boiler Cleaning for Inspections. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.15.2a "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 229 is therefore nondutiable.

26. Item No. 230 - Port & Stbd Boiler Firesides & Watersides. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.15.2a "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 230 is therefore nondutiable.

27. Item No. 230.4 - Port & Stbd Boiler Sliding Feet. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.9.1g "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 230.4 is therefore nondutiable.

28. Item No. 231 - Port & Stbd Hydrostatic Test. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.15.2d "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 231 is therefore nondutiable.

29. Item No. 232 - Port & Stbd Boiler Mount Opening. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.15.2b "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 232 is therefore nondutiable.

30. Item No. 232.1 - Additional Port Boiler Mount Openings. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.15.2b "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 232.1 is therefore nondutiable.

31. Item No. 232.2 - Additional Port Boiler Mount Openings. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.15.2b "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 232.2 is therefore nondutiable.

32. Item No. 233 - Main Steam Inlet Strainer. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.15.2b "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 233 is therefore nondutiable.

33. Item No. 234 - H.P. Turbine Inspection. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.11.3 "Steam Turbines"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 234 is therefore nondutiable.

34. Item No. 235 - Main Gear Inspection. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.11.2g "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 235 is therefore nondutiable.

35. Item No. 236 - Kingsbury Thrust Bearing. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.11.3 "Steam Turbines"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 236 is therefore nondutiable.

36. Item No. 237 - First Stage Heater Inspection. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.11.2.e "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 237 is therefore nondutiable.

37. Item No. 238 - D.C. Heater Internal Inspection. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.11.2.e "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 238 is therefore nondutiable.

38. Item No. 239.1 - D.C. Heater Atomizing Valve Stem Renewal. The applicant claims that the cost of prefabricated steel under this item is subject to 19 U.S.C. ? 1466(h)(3). We disagree. We have previously discussed our position regarding such claims of the applicant (see Customs ruling letters 113883, dated April 1, 1997, and 114010, dated October 3, 1997). In each of those cases we have held that since the applicant has not established that the prefabricated steel is a "part" under 19 U.S.C. ? 1466(h)(3), it is dutiable under 19 U.S.C. ? 1466(a). The same result is reached with respect to this item. It is our view that prefabricated steel is not a spare part or part, and thus is not eligible for treatment under 19 U.S.C. ? 1466(h)(3). Item no. 239.1 is therefore dutiable.

39. Item No. 241 - Main Condenser Inspection. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.11.2l "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 241 is therefore nondutiable.

40. Item No. 243 - Bilge & Ballast Line Air Testing. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.11.2b "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 243 is therefore nondutiable.

41. Item No. 246 - Bilge & Ballast Suction/Discharge Manifolds. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.11.2b "Parts to be Examined"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 246 is therefore nondutiable.

42. Item No. 247 - P/S Boiler Forced Draft Fan Cleanings. The work under this item constituted cleaning unrelated to dutiable repairs. Item no. 247 is therefore nondutiable.

43. Item No. 251 - Main & Emergency Switchboards. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.17.2a "Auxiliary Apparatus"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 251 is therefore nondutiable.

44. Item No. 253 - Cargo Hold & Engineering Bilge Wells. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.7.1d "Special Periodic Surveys-Hull"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 253 is therefore nondutiable.

45. Item No. 256 - Hull Painting Preparation. The cost of repainting the loadline marks, stated by the applicant to be $200, is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.7.1r "Special Periodic Surveys-Hull"). Upon reviewing the record we note that the shipyard invoice contains no breakdown as to the cost of repainting the loadline (the applicant concedes that the remainder of the work done under this item is dutiable) but rather lists one price for the entire item. Pursuant to C.I.E.s 1325/58 and 565/55, duties may not be remitted in cases where invoices fail to segregate dutiable from nondutiable expenditures. Item no. 256 is therefore dutiable in its entirety.

46. Item No. 260 - Hatch Cover Gasket Modifications. The applicant states that this work involved "...the relocation of the hatch cover gasket retaining angle to eliminate damage to the angle and hatch cover gasket material which occurred during the normal removal and refitting of hatch covers during cargo operations." (Emphasis added) It appears that notwithstanding the improvement to the vessel from this new installation, this work also constituted repairs to a damaged existing portion of the vessel. Item no. 260 is therefore dutiable.

47. Item No. 301 - Hull Gaugings. This cost is alleged to be pursuant to a mandatory regulatory requirement. In support of this allegation the applicant has submitted the shipyard invoice as well as documentation from the ABS (see ABS Rule 1/3.21.3 "Special Periodic Surveys-Hull"). Upon reviewing the record we conclude that it supports the applicants's position regarding this cost. Item no. 301 is therefore nondutiable.

48. Item No. 303 - FWD S.W. Ballast Tank Repairs. While conceding the dutiability of the labor costs under this item, the applicant claims that the cost of prefabricated steel under this item is subject to 19 U.S.C. ? 1466(h)(3). We disagree. We have previously discussed our position regarding such claims of the applicant (see Customs ruling letters 113883, dated April 1, 1997, and 114010, dated October 3, 1997). In each of those cases we have held that since the applicant has not established that the prefabricated steel is a "part" under 19 U.S.C. ? 1466(h)(3), it is dutiable under 19 U.S.C. ? 1466(a). The same result is reached with respect to this item. It is our view that prefabricated steel is not a spare part or part, and thus is not eligible for treatment under 19 U.S.C. ? 1466(h)(3). Item no. 303 is therefore dutiable.

49. Item No. 304 - No. 2A Port Wing Ballast Tank Repairs. While conceding the dutiability of the labor costs under this item, the applicant claims that the cost of prefabricated steel under this item is subject to 19 U.S.C. ? 1466(h)(3). We disagree. We have previously discussed our position regarding such claims of the applicant (see Customs ruling letters 113883, dated April 1, 1997, and 114010, dated October 3, 1997). In each of those cases we have held that since the applicant has not established that the prefabricated steel is a "part" under 19 U.S.C. ? 1466(h)(3), it is dutiable under 19 U.S.C. ? 1466(a). The same result is reached with respect to this item. It is our view that prefabricated steel is not a spare part or part, and thus is not eligible for treatment under 19 U.S.C. ? 1466(h)(3). Item no. 304 is therefore dutiable.

50. Item No. 305 - No. 2A Stbd Wing Ballast Tank Repairs. While conceding the dutiability of the labor costs under this item, the applicant claims that the cost of prefabricated steel under this item is subject to 19 U.S.C. ? 1466(h)(3). We disagree. We have previously discussed our position regarding such claims of the applicant (see Customs ruling letters 113883, dated April 1, 1997, and 114010, dated October 3, 1997). In each of those cases we have held that since the applicant has not established that the prefabricated steel is a "part" under 19 U.S.C. ? 1466(h)(3), it is dutiable under 19 U.S.C. ? 1466(a). The same result is reached with respect to this item. It is our view that prefabricated steel is not a spare part or part, and thus is not eligible for treatment under 19 U.S.C. ? 1466(h)(3). Item no. 305 is therefore dutiable.

51. Item No. 306 - Aft Flume Tank Steel Repairs. While conceding the dutiability of the labor costs under this item, the applicant claims that the cost of prefabricated steel under this item is subject to 19 U.S.C. ? 1466(h)(3). We disagree. We have previously discussed our position regarding such claims of the applicant (see Customs ruling letters 113883, dated April 1, 1997, and 114010, dated October 3, 1997). In each of those cases we have held that since the applicant has not established that the prefabricated steel is a "part" under 19 U.S.C. ? 1466(h)(3), it is dutiable under 19 U.S.C. ? 1466(a). The same result is reached with respect to this item. It is our view that prefabricated steel is not a spare part or part, and thus is not eligible for treatment under 19 U.S.C. ? 1466(h)(3). Item no. 306 is therefore dutiable.

52. Item No. 314 - Remove Three (3) Forty Foot Containers. This item covered the removal of three (3) containers from the vessel on arrival and reloading same on deck prior to departure using the yard crane. Spares from a container were removed and crane service was also provided for this removal. The applicant contends that this item is a General Service item. We agree. Accordingly, pursuant to our discussion of General Services contained within this ruling, Item no. 314 should be prorated between dutiable and nondutiable costs as reflected on the vessel repair entry.

53. Item No. 318 - Transom Shell Insert. While conceding the dutiability of the labor costs under this item, the applicant claims that the cost of prefabricated steel under this item is subject to 19 U.S.C. ? 1466(h)(3). We disagree. We have previously discussed our position regarding such claims of the applicant (see Customs ruling letters 113883, dated April 1, 1997, and 114010, dated October 3, 1997). In each of those cases we have held that since the applicant has not established that the prefabricated steel is a "part" under 19 U.S.C. ? 1466(h)(3), it is dutiable under 19 U.S.C. ? 1466(a). The same result is reached with respect to this item. It is our view that prefabricated steel is not a spare part or part, and thus is not eligible for treatment under 19 U.S.C. ? 1466(h)(3). Item no. 318 is therefore dutiable.

54. Item No. 335 - Removal of Spares from Container. The applicant contends that this item is a General Service item. We agree. Accordingly, pursuant to our discussion of General Services contained within this ruling, Item no. 335 should be prorated between dutiable and nondutiable costs as reflected on the vessel repair entry.

55. Item No. 337 - Deck Repair List. While conceding the dutiability of the labor costs under this item, the applicant claims that the cost of prefabricated steel under this item is subject to 19 U.S.C. ? 1466(h)(3). We disagree. We have previously discussed our position regarding such claims of the applicant (see Customs ruling letters 113883, dated April 1, 1997, and 114010, dated October 3, 1997). In each of those cases we have held that since the applicant has not established that the prefabricated steel is a "part" under 19 U.S.C. ? 1466(h)(3), it is dutiable under 19 U.S.C. ? 1466(a). The same result is reached with respect to this item. It is our view that prefabricated steel is not a spare part or part, and thus is not eligible for treatment under 19 U.S.C. ? 1466(h)(3). Item no. 337 is therefore dutiable.

56. Item No. 338 - No. 6 Ballast Tank Repairs. While conceding the dutiability of the labor costs under this item, the applicant claims that the cost of prefabricated steel under this item is subject to 19 U.S.C. ? 1466(h)(3). We disagree. We have previously discussed our position regarding such claims of the applicant (see Customs ruling letters 113883, dated April 1, 1997, and 114010, dated October 3, 1997). In each of those cases we have held that since the applicant has not established that the prefabricated steel is a "part" under 19 U.S.C. ? 1466(h)(3), it is dutiable under 19 U.S.C. ? 1466(a). The same result is reached with respect to this item. It is our view that prefabricated steel is not a spare part or part, and thus is not eligible for treatment under 19 U.S.C. ? 1466(h)(3). Item no. 338 is therefore dutiable.

57. Item No. 340 - Cargo Hold Work List. While conceding the dutiability of the labor costs under this item, the applicant claims that the cost of prefabricated steel under this item is subject to 19 U.S.C. ? 1466(h)(3). We disagree. We have previously discussed our position regarding such claims of the applicant (see Customs ruling letters 113883, dated April 1, 1997, and 114010, dated October 3, 1997). In each of those cases we have held that since the applicant has not established that the prefabricated steel is a "part" under 19 U.S.C. ? 1466(h)(3), it is dutiable under 19 U.S.C. ? 1466(a). The same result is reached with respect to this item. It is our view that prefabricated steel is not a spare part or part, and thus is not eligible for treatment under 19 U.S.C. ? 1466(h)(3). Item no. 340 is therefore dutiable.

58. Item No. 342-2 - Purchase Jacking Gear Bearings. While conceding the dutiability of the labor costs under this item, the applicant claims that the cost of prefabricated steel under this item is subject to 19 U.S.C. ? 1466(h)(3). We disagree. We have previously discussed our position regarding such claims of the applicant (see Customs ruling letters 113883, dated April 1, 1997, and 114010, dated October 3, 1997). In each of those cases we have held that since the applicant has not established that the prefabricated steel is a "part" under 19 U.S.C. ? 1466(h)(3), it is dutiable under 19 U.S.C. ? 1466(a). The same result is reached with respect to this item. It is our view that prefabricated steel is not a spare part or part, and thus is not eligible for treatment under 19 U.S.C. ? 1466(h)(3). Item no. 342-2 is therefore dutiable.

HOLDING:

The foreign costs contained within the subject entry for which our review is sought are dutiable in part 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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