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HQ 114928





January 27, 2000

VES-13-18-RR:IT:EC 114928 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; Application; MAERSK ALASKA, V-65; Vessel Repair Entry No. AC1-2192146-7

Dear Madam:

This is in response to your memorandum dated January 13, 2000, which forwarded the application for relief submitted on behalf of Maersk Lines Ltd. (the “applicant”) with respect to the above-referenced vessel repair entry.

FACTS:

The MAERSK ALASKA (the “vessel”), a U.S.-flag vessel owned and operated by the applicant, arrived at the port of Portland, Oregon on August 7, 1999. The subject vessel repair entry was subsequently filed. The vessel underwent certain foreign shipyard work in the People’s Republic of China.

ISSUE:

Whether the subject items are dutiable pursuant to 19 U.S.C. 1466(a)?

LAW AND ANALYSIS:

19 U.S.C. 1466(a) 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.

You request our determination with respect to items one through six and item 71 on the spreadsheet. These items are for the following – tug, wharfage, safety (watchman), garbage, telephone (items five and 71), and gangway. The subject items are general service costs and/or drydock costs.

It is Customs oft-repeated position that general services costs and drydock costs are to be prorated between dutiable and nondutiable costs. Our position remains in full force and effect. Accordingly, the claim of the applicant with respect to these items is denied.

As we have stated previously, the proration concept is an attempt to administer the vessel repair statute in as fair a manner as possible.

The method of proration was explained in Ruling 226873 dated October 29, 1996, wherein we stated :

In accordance with Ruling 113474 and Memorandum 113350, and as your forwarding memorandum states, the drydocking charges should be prorated between the dutiable and nondutiable costs associated with the drydocking. The method of prorating was described in Ruling 113474, supra: the drydocking costs “should be apportioned to reflect the dutiable and non-dutiable foreign costs in this entry.” For example, if, aside from the subject “drydocking costs,” as described supra, fifty percent of the costs of that particular drydocking were dutiable and fifty percent were nondutiable, then fifty percent of the subject “drydocking costs,” as described supra, would be dutiable and fifty percent would be nondutiable.

The costs of general services and/or drydock costs to be prorated are not involved in the calculation of what portion of the costs is dutiable and what portion is nondutiable.

HOLDING:

As detailed above, the application is denied with respect to items one through six and item 71. Those items are general service costs and/or drydock costs which are to be prorated as described above.

Sincerely,

Jerry Laderberg
Chief,

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