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HQ 114047

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January 27, 1998

VES-13-18-RR:IT:EC 114047 GEV

CATEGORY: CARRIER

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

RE: Vessel Repair Entry No. 110-6461890-0; PRESIDENT POLK; V-80; 19 U.S.C. ? 1466

Dear Sir:

This is in response to your memorandum dated September 27, 1996, forwarding an application for relief from duties assessed pursuant to 19 U.S.C. ? 1466. You request our review of numerous expenditures contained within the above-referenced entry. Our findings are set forth below.

FACTS:

The PRESIDENT POLK is a U.S.-flag vessel owned and operated by American President Lines, Ltd. Subsequent to the completion of various foreign shipyard work, the vessel arrived at Seattle, Washington, on May 9, 1996. A vessel repair entry was timely filed.

An application for relief with supporting documentation was timely filed. The applicant seeks relief with respect to numerous items listed within the above-referenced vessel repair entry.

ISSUE:

Whether the costs for which the applicant seeks relief are dutiable under 19 U.S.C.

LAW AND ANALYSIS:

Title 19, United States Code, ? 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..."

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), affirmed 815 F.Supp. 1484 (CIT 1993). Accordingly, the Texaco decision applies to this entry. Our position with respect to post-Texaco entries has been stated in detail in many rulings, as well as 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 will use the numbering system which you used in working on the application.

1. General Services. These costs should be prorated between dutiable and nondutiable costs.

2. H.P. Hull Water Wash (Item No. 205). The invoice reflects that this item was incident to a nondutiable American Bureau of Shipping (ABS)/U.S. Coast Guard (USCG) inspection and that no repairs were performed. Accordingly, it is nondutiable.

3. Shell Connection Pipe Gauging (Item No. 208). The invoice reflects that this item was incident to a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

4. Anchor Chain Inspection (Item No. 209). The invoice reflects that this item was incident to a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

5. Cargo Hold Cleaning (Item No. 214). The invoice states, "sweep clean and dispose of debris from the [sic] all levels of each of the eight cargo holds." We find this item to be a nondutiable cleaning.

6. Bilge Well Cleaning (Item No. 215). The invoice states, "...muck out and wipe clean cargo hold bilge drainwells and roseboxes." We find this item to be nondutiable.

7. Pintle Pin & Bush Survey (Item No. 217). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

8. Rudder Survey (Item No. 218). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

9. Carrier Bearing Inspection (Item No. 219). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

10. Stock Nut Survey (Item No. 220). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

11. Chain Locker P/S Survey (Item No. 223). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

12. Ballast Deep Tank #1 Survey (Item No. 226). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

13. H.F.O. Wing Tank Surveys (Item No. 229). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

14. M.E.L.O. Sump Tank C Survey (Item 230). The invoice reflects that this item was a nondutiable ABS/USCG inspection or survey and that no repairs were performed. Accordingly, it is nondutiable.

15. Bow Thruster Inspection (Item No. 302). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

16. Emergency and Independent Bilge Valve Inspection (Item No. 304). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

17. Propeller Inspection (Item No. 307). The invoice reflects that this item was a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

18. Tailshaft Survey (Item No. 309). The invoice reflects that this item was a nondutiable ABS/USCG inspection or survey and that no repairs were performed. Accordingly, it is nondutiable.

19. Propeller Removal for Inspection (Item No. 310). The invoice reflects that this item was incident to a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

20. Cooler, Central FCW #1 Survey, Scoop Cooler Inspection (Item No. 313). The invoice reflects that this item was a nondutiable ABS/USCG inspection or survey and that no repairs were performed. Accordingly, it is nondutiable.

21. Cooler, Central FCW #2 Survey, Scoop Cooler Inspection (Item No. 314). The invoice reflects that this item was a nondutiable ABS/USCG inspection or survey and that no repairs were performed. Accordingly, it is nondutiable.

22. Boiler, Exhaust Gas Clean for Inspection (Item No. 315). The invoice reflects that this item was incident to a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

23. Boiler, Oil-Fired Clean for Inspection (Item No. 316). The invoice reflects that this item was incident to a nondutiable ABS/USCG inspection and that no repairs were performed. Accordingly, it is nondutiable.

24. Shafting & Bearing Survey (Item No. 317). The invoice reflects that this item was a nondutiable ABS/USCG inspection or survey and that no repairs were performed. Accordingly, it is nondutiable.

25. Sea Valves, Chests, Etc. Survey (Item No. 318). The invoice reflects that this item was a nondutiable ABS/USCG inspection or survey and that no repairs were performed. Accordingly, it is nondutiable.

26. Sea Cooling Water System Inspection (Item No. 320). The invoice reflects that this item was a nondutiable inspection or survey and that no repairs were performed. Accordingly, it is nondutiable.

27. Bow Thruster Inspection and Cleaning (Item No. 401). The invoice reflects that this item was a nondutiable inspection or survey and that no repairs were performed. Accordingly, it is nondutiable.

28. Corrugated Bulkhead FR 271 Modification (Item No. 501). The applicant states that "[t]he requirement for this modification was a design defect' in the original construction of the vessel. The original construction created a hard spot' which lead [sic] to bulkhead cracking." Work performed to remedy "bulkhead cracking" is dutiable. Accordingly, this item is a dutiable repair under 19 U.S.C. ? 1466.

29. No. 3 Cargo Hold Structural Modification (Item No. 502). The applicant states, "This again is a modification to correct an original design defect. The P/S corner of the #3 cargo hold at level 10790 above base line as originally designed was leading to structural failure problems. This modification was initiated to first strengthen the deficiency in the structure (the new insert plate is 12mm in lieu of 8mm plate thickness), but more importantly, to more evenly distribute the structural stresses by increasing the inside corner radius..."

We find that this item is a dutiable repair. Based upon the information provided, we are unable to draw a meaningful distinction between the item and Item No. 501, above, and Item No. 503, below. Those items involved a bulkhead cracking (Item No. 501) and a fracture (Item No. 503). This item involves "structural failure problems."

30. Slim-Guide Bracket to Platform Modifications (Item No. 503). The applicant states, "The existing brackets connecting the stantion to the container slim-guide' fractured. Rather than just rewelding the fracture, a new design bracket was engineered, fabricated, and installed..." This item is a dutiable repair under 19 U.S.C. ? 1466. The fact that a new design bracket was engineered, etc. does not change this result that is mandated by a repair of a fracture.

31. Hatch Coaming Stays Modification (Item No. 504). The applicant states, "A new toe piece' was designed to correct this design defect to better distribute the stresses by way of the 160mm radius of the toe piece and the 30mm radius toe with a wrap-around weld." We find that this item is a nondutiable modification.

32. Web Frame 310 Bracket Modifications (Item No. 505). The applicant states, "It is two new permanently installed by welding previously non-existent web frame brackets..." We find that this item is a nondutiable modification.

33. High (Aux) Sea Chest Vent Modification (Item No. 506). The applicant states, "The initial location of the 80mm vent line in the bay between frames 99-100 was not removing the entrapped air generated in the bay between frames 98-99. This entrapped air was causing operational problems in the sea water circulator pump. To correct this design defect problem, it was necessary to make this modification for efficient operation of the vessel." We find that this item is a nondutiable modification.

34. Anchor Pocket Modification (Item No. 507). The applicant states, "...there has [sic] been problems with the anchor stowage...Enc. (L) details to [sic] structural modifications engineered to correct this deficiency and to improve the existing anchor stowage system." We find that this item is a nondutiable modification.

35. Web Frame Lug/Clip Modification (Item No. 508). The applicant states, "This is a new, previously non-existent 15mm steel plate bracket permanently installed by welding with a 6mm fillet weld wrapped around all ends." We find that this item is a nondutiable modification.

36. M.E. Charge Air Cooler Clean System (Item No. 510). The invoice reflects, and the applicant states, that this item is a "new, previously non-existent system." We find that this item is a nondutiable modification.

37. Category B Items - General Services. These costs are to be prorated between dutiable and nondutiable costs.

38. C.O. #1 Bow Thruster Service Engineer. This cost is dutiable. The applicant states that the bow thruster service representative is a U.S. citizen and resident, and that the cost associated with the engineer should be nondutiable. The applicant has not provided sufficient information with respect to its claim of nondutiability. For example, if the applicant is attempting to claim that the subject cost is subject to remission pursuant to 19 U.S.C. ? 1466(d)(2), complete information with respect to that claim must be provided. The pertinent invoice reflects that the engineer performed services with respect to the "MV President Polk item #302 and 303." However, while item 302 has been found to be nondutiable in this ruling, item 303 is listed as dutiable on the spreadsheet, and that item is not involved in this application. Thus, the engineer was involved in dutiable work.

39. C.O. #2 No. 1 Deep Tank Modifications. The applicant claims that prefabricated steel is dutiable under 19 U.S.C. ? 1466(h)(3), which provides:

The duty imposed by section (a) of this section shall not 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 Schedules of the United States upon first entry into the United States of each such spare part purchased in, or imported from, a foreign country.

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 designated 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.

There is no indication or statement as to what "spare parts" the applicant seeks relief for pursuant to 19 U.S.C. ? 1466(h)(3). The applicant has not established that the prefabricated steel is a part under 19 U.S.C. ? 1466(h)(3). Therefore, the steel is dutiable under 19 U.S.C.

Our determination and analysis is the same here as in Rulings 113883, dated April 1, 1997, and 113673, dated July 7, 1997.

40. C.O. #3 Main Switchboards. The applicant states that this is a mandatory regulatory requirement. We agree and therefore find the item to be nondutiable.

41. C.O. #6 Hull Thickness Gauging ABS Survey Requirements. The invoice reflects that this is a mandatory ABS requirement. We agree and therefore find this item to be nondutiable.

42. C.O. #21 No. 7A Cargo Hold Bracket Modification. The record reflects that this work done to the lower bracket to the forward bulkhead on the portside of the #7A cargo hold is a nondutiable modification.

43. C.O. #24 5th Deck Ladder Way Access Modification. The record reflects that this work done to the radius of the 5th deck ladder is a nondutiable modification.

44. C.O. #29 Reefer Transformer Cleaning. The invoice supports that applicant's assertion that this is a nondutiable cleaning.

45. Item No. 3 (CF 226) International U/W Paint. The applicant claims dutiability under 19 U.S.C. ? 1466(h)(2), which provides:

The duty imposed by subsection (a) of this section shall not apply to-

(2) the cost of spare repair parts or materials (other than nets or nettings) which the owner or master of the vessel certifies are intended for use aboard a cargo vessel, documented under the laws of the United States and engaged in the foreign or coasting trade, for installation or use on such vessel, as needed, in the United States, at sea, or in a foreign country, but only if duty is paid under appropriate commodity clas- sifications 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, or

19 U.S.C. ? 1466(h)(2) contemplates entry of the pertinent part or material, and the payment of duty under the appropriate commodity classification of the HTSUS, prior to the use of the pertinent part or material in the foreign shipyard.

The applicant has provided no information which would support a claim that the subject paint was entered and duty-paid prior to its use in the foreign shipyard. Accordingly, the applicant's claim for treatment under 19 U.S.C. ? 1466(h)(2) is denied. The paint is dutiable under 19 U.S.C. ? 1466(a).

HOLDING:

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

Sincerely,

Jerry Laderberg

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