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HQ 114165

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October 7, 1998

VES-13-18-RR:IT:EC 114165 GOB

CATEGORY: CARRIER

Port Director of Customs
Attn: Vessel Repair Liquidation Unit
423 Canal Street, Room 303
New Orleans, LA 70130-2341

RE: Vessel Repair Entry No. C16-0012107-8; SEA-LAND ATLANTIC, V-606/607; 19 U.S.C. 1466; Protest

Dear Sir:

This is in response to your memorandum dated November 5, 1997, which forwarded the protest submitted on behalf of Sea-Land Service, Inc. (the "protestant" or "Sea-Land") with respect to the above-referenced vessel repair entry.

FACTS:

The SEA-LAND ATLANTIC (the "vessel") is a U.S.-flag vessel owned and operated by the applicant. In 1996, certain foreign shipyard work was performed on the vessel. On August 14, 1996, the vessel arrived in the United States. The subject vessel repair entry was subsequently filed.

Sea-Land protests the dutiability of certain costs. It states that transportation, administration, and telephone costs are nondutiable. Sea-Land claims that the costs associated with a Sperry Marine Limited technician are nondutiable because the technician did not perform any repairs. Sea-Land further contends that interest was charged erroneously upon liquidation of the entry.

ISSUE:

Whether the subject costs 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, and equipment purchased in a foreign country for, 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.

In Texaco, the Court of Appeals for the Federal Circuit stated in pertinent part:

Texaco urges us to reject the Court of International Trade's "but for" approach and to interpret "expenses of repairs" so as to exclude those expenses (e.g., expenses for clean-up and protective covering work) not incurred for work directly involved in the actual making of repairs. Such a reading has no basis in the plain language of the statute, however. Aside from the inapplicable statutory exceptions, the language "expenses of repairs" is broad and unqualified. As such, we interpret "expenses of repairs" as covering all expenses (not specifically exempted in the statute) which, but for dutiable repair work, would not have been incurred. (Emphases supplied.)

We find that the costs of the Sperry Marine Limited technician are dutiable under 19 U.S.C. 1466. Such costs were occasioned by the state of disrepair of the vessel and were incurred by Sea-Land with a view to repair the vessel. Accordingly, we find that such costs are dutiable foreign repair costs. The transportation costs which pertain to the Sperry Marine Limited technician are dutiable as costs incident to dutiable repairs.

Administrative costs which are directly attributable to dutiable repairs are dutiable. They are costs which, but for dutiable repair work, would not have been incurred. See the last sentence of the excerpt from the Texaco case, above.

The record reflects that certain interest was inadvertently collected in connection with the subject entry. This interest should be refunded to Sea-Land.

HOLDING:

As detailed above, the protest is denied with respect to the costs associated with the Sperry Marine Limited technician and administrative costs. The interest which was inadvertently collected should be refunded to Sea-Land.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, the Freedom of Information Act and other public access channels.

Sincerely,

Jerry Laderberg
Chief,

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