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HQ 114984

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April 10, 2000
VES-13-18-RR:IT:EC 114984 GOB

CATEGORY: CARRIER

Port Director of Customs
Attn.: Residual Liquidation and Protest Branch, Room 761 Six World Trade Center
New York, N.Y. 10048

RE: Vessel Repair Entry No. 514-3005457-0; 19 U.S.C. 1466; Petition; M/V MARGARET LYKES

Dear Madam:

This is in response to your memorandum of February 29, 2000, which forwarded the petition submitted by American Ship Management, LLC, as vessel operating agents for the American President Lines, Ltd. (“petitioner”) with respect to the above-referenced vessel repair entry.

FACTS:

The M/V MARGARET LYKES (the “vessel”), a U.S.-flag vessel, arrived at the port of Newark, New Jersey on June 29, 1996. The subject vessel repair entry was subsequently filed.

By letter of July 30, 1999, your office granted the application in part and denied the application in part.

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.

In its application of 19 U.S.C. 1466, Customs has held that (contrary to the treatment of vessel repairs and vessel equipment) modifications, alterations, and additions to the hull of a vessel are not subject to duty under the vessel repair statute. The identification of work constituting modifications vis-a-vis work constituting repairs has evolved from judicial and administrative precedent. See, for example, Otte v. U.S., 7 Ct. Cust. Appls. 166, T.D. 36489 (1916); U.S. v. Admiral Oriental Line et al., 18 C.C.P.A. 137, T.D. 44359 (1930), and Customs Bulletin and Decisions of June 18, 1997 (Vol. 31, No. 24/25, p. 23) and October 1, 1997 (Vol. 31, No. 40, p. 13). The various factors discussed within those authorities are not by themselves necessarily determinative, nor are they the only factors which may be relevant in a given case.

Our analysis in this matter is based primarily on the pertinent invoices. The assertions of the protest, by themselves, are not considered to be satisfactory documentary evidence. In this regard, we note the statement of the court in Bar Bea Truck Leasing Co., Inc. v. United States, 5 CIT 124, 126 (1983):

Again, plaintiff has presented no affidavit or other evidence in support of its counsel’s bald assertion...

If we are unable to determine the precise nature of certain work because of the lack of clear and probative documentary evidence, and are thus unable to determine that it is nondutiable, such work will be found dutiable. In this regard, we note the statement of the Customs Court in Admiral Oriental Line v. United States, T.D. 43585 (1929):

The evidence is conflicting upon that point, and the plaintiff has not proved the collector’s classification to be wrong. The burden is upon the plaintiff to show not only that the collector was wrong in his classification but that the plaintiff was right.

In Sturm, A Manual of Customs Law (1974 ed.), p. 173-174, the author stated, in pertinent part:

Where Congress has carved out special privileges or exemptions from the general provisions levying duties upon imported articles, the courts have strictly construed such exceptions and have resolved any doubt in favor of the government. Swan & Finch Company v. United States, 190 U.S. 143, 23 SCR 702, 47 L. Ed. 984 (1903); Pelz-Greenstein Co. v. United States, 17 CCPA 305, T.D. 43718 (1929)... ...
An exception which carves out something which would otherwise be included must be strictly construed. Goat & Sheepskin Import Co., et al. v. United States, 5 Ct. Cust. Appls. 178, T.D. 34254 (1914); [et al.]

Scope of Petition Ruling

In its petition, the petitioner requests relief with respect to many items which were not included in the text of its application submission. 19 CFR 4.14(d)(2)(i) states, in pertinent part:

(2) Petition for review on a denial of an application for relief-(i) Form. If an applicant is dissatisfied with the decision on its application for relief, the applicant may file a petition for review of that decision. The petition for review need not be in any particular form. The petition for review must identify the decision on the application for relief and must detail the exceptions taken to that decision... [Emphasis supplied.]

Thus, pursuant to 19 CFR 4.14(d)(2)(i), a party may not petition for relief with respect to vessel repair items which were not included in the application for relief.

We note, however, that pursuant to 19 CFR 4.14(f), a party may file a protest:

...against the decision to treat an item or a repair as dutiable under paragraph (a) of this section, or against the decision denying the remission or refund of vessel repair duties under paragraph (c) of this section.

Many vessel repair applications, petitions, and protests come to the Office of Regulations and Rulings for decision. This office does not perform the liquidation of the subject vessel repair entries. The liquidation is performed by the vessel repair liquidation units.

For the purpose of the issuance of rulings of this office with respect to applications, petitions, and protests, it is Customs’ position that an item must be identified within the text of the application, petition, and/or protest submission. The mere inclusion of an item on a spreadsheet is not sufficient for this purpose.

In Ruling 111714 dated January 22, 1992, we stated:

The operator, in seeking relief from the duty provisions of section 466, Tariff Act of 1930, as amended, (19 U.S.C. 1466), filed a onepage cover letter forwarding various invoices and worksheets which reflect proposed dispositions. Although the letter denominates itself an application for Relief, it does not rise to that level. ...
The regulations governing the submission of evidence and the determination of dutiability of foreign shipyard operations under section 1466 are found in section 4.14, Customs Regulations (19 CFR 4.14). Subsection (d)(1) of section 4.14 (19 CFR 4.14(d)(1)) provides that while an Application for relief need not be submitted in any particular format, it is necessary that it:

...allege that an item or a repair expense covered by the entry is not subject to duty under paragraph (a) of this section, or that the articles purchased or the repair expenses are within the provisions of paragraph (c) of this section, or that both conditions are present.

Our position in Ruling 111714 has been reiterated in numerous other rulings, e.g., Ruling 111746, Ruling 113521, etc.

Thus, as stated above, for the purpose of the issuance of rulings of this office with respect to applications, petitions, and protests, it is Customs’ position that an item must be identified within the text of the application, petition, and/or protest. The mere inclusion of an item on a spreadsheet or worksheet, is not sufficient for this purpose.

As indicated above, the items which were not properly the subject of the petition with respect to the subject entry, may be protested. Pursuant to 19 CFR 4.14(f), a party may file a protest:

...against the decision to treat an item or a repair as dutiable under paragraph (a) of this section, or against the decision denying the remission or refund of vessel repair duties under paragraph (c) of this section.

After a consideration of the documentation of record we make the following determinations.

To denote the items ruled upon, we will use the first number used in the petition, which is the same number which you have used in your forwarding memorandum, e.g., in voyage 21, “No. 2/21-109/A” will be referred to as item 2.

Voyage 21 – Items 2, 6, 12, 16, and 18.

We find that the cylinder cover tool (item 2), periscope (item 6), oil mist detector (16), and main engine camshaft articles (item 18) are dutiable under 19 U.S.C. 1466(a) as vessel equipment or repairs.

We find that the engine room lighting – flood lights (item 12) is a nondutiable modification.

Voyage 22 – Items 1, 14, 16, and 18.

We find that the micron lube oil filter (necessary piping; item 1) is dutiable. The petitioner has not provided satisfactory documentary evidence establishing its nondutiability.

We find that the paint locker shelves (item 14) are a nondutiable modification.

We find that the “stores van reefer transformer” (item 16) is dutiable as equipment.

We find that the engine room lighting (item 18) is a nondutiable modification.

Voyage 23 – Items 4, 8, 9, 26, 36, 41, and 49.

We find that the M.E. instruments – pyrometers (item 4), purifier control unit – new cooling fans and filters (item 8) are dutiable as equipment.

We find that the work performed on the main engine shaft generator (item 9) is a dutiable repair, as reflected on the job control form (“modify and repair devices”) and invoice (“modify fan failure relay 563/02 for normal function”). The use of the word “modify” on a document is not sufficient to qualify the underlying work for nondutiable treatment where the work appears to be a repair. Work performed to remedy a situation of “failure” or disrepair is typically dutiable under 19 U.S.C. 1466.

We find that the engine room crane platform (item 26) is dutiable because it was incident to dutiable repairs. The job control form provides: “No work platform exists for maintenance/repair of the Luff Motor and Brake.”

We find that the machining of the oil operating cylinder of the main engine exhaust valves (item 36) is nondutiable because it does not appear to involve a repair.

We find that the alarm system installed in the gyro compass (item 41) is dutiable as vessel equipment. This finding is consistent with findings of past rulings that radar systems and the like are dutiable as vessel equipment.

We find that the work performed with respect to the container access ladders (item 49) is dutiable because the invoice reflects repairs, i.e., “replace damage [sic] ladder guards ”

HOLDING:

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

Sincerely,

Acting Chief,
Entry Procedures and Carriers Branch

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