HQ 115276 - Vessel Repair Entry No. C27-0171454-8, M/V SEA-LAND ENDURANCE, V-0006, 19 U.S.C. §1466; Rental and Travel Allowances; Cleaning - United States International Trade Commision Rulings

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HQ 115276

April 27, 2001

VES-13-18 RR:IT:EC 115276 RSD

CATEGORY: CARRIER

Chief Residual Liquidation and Protest Branch U.S. Customs Service
555 Battery Street, Room 107
San Francisco, California 94111

RE: Vessel Repair Entry No. C27-0171454-8, M/V SEA-LAND ENDURANCE, V-0006, 19 U.S.C. §1466; Rental and Travel Allowances; Cleaning

Dear Sir:

This is in response to your memorandum dated January 9, 2001, forwarding a petition for review from United States Ship Management, Inc. of your ruling on an application for relief from duties assessed pursuant to 19 U.S.C. § 1466. Our findings are set forth below.

FACTS:

The SEA-LAND ENDURANCE is a U.S. flag vessel owned by the UNITED STATES SHIP MANAGEMENT. Subsequent to completion of foreign shipyard work, the vessel arrived in Los Angeles, California on September 20, 2000.

An application for relief with supporting documentation was timely filed. Pursuant to a letter dated December 21, 2000, the Chief, Residual Liquidation and Protest Branch, San Francisco, California issued a decision on the application for relief from duty on various repairs performed on the vessel. A petition for review of this decision was timely filed seeking relief with respect to travel and rental expense charges listed on various invoices, incurred pursuant to repair work carried out on board the SEA-LAND ENDURANCE. In addition, the petitioner also raises the issue of whether engine room and scavenging spaces cleaning in Shanghai should be dutiable.

ISSUE:

Whether the travel, rental and allowance charges for which the petitioner seeks relief are dutiable pursuant to 19 U.S.C. § 1466.

Whether the engine room and scavenging spaces cleaning for which petitioner seeks relief are dutiable pursuant to 19 U.S.C. § 1466.

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 costs of “ equipments, or any part thereof, including boats, purchased for or the repair parts or materials to be used, or expenses of repairs made in a foreign country upon a vessel document under the laws of the United States”

Petitioner contends that travel and rental expenses allowances are not actually labor performed on or materials used on the vessel and should be excluded from Customs duties. You have also pointed out that the petitioner is also seeking relief from duty for the use of a generator in the 7th item because it claims that it is a rental.

While the petitioner’s position at one time reflected Customs position with respect such charges, pursuant to the decision of the U.S. Court of Appeals for the Federal Circuit (CAFC) in Texaco Marine Services, Inc., and Texaco Refining and Marketing Inc. v. United States, 44 F.3d 1539 (1994), it no longer represents Customs position in this matter. (See also Customs memorandum 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), as clarified in Customs memorandum 113350, dated March 3, 1995, published in the Customs Bulletin on April 5, 1995 (Customs Bulletin and Decisions, vol. 29, no. 14, at p. 24)). It should be noted that in post-Texaco vessel repair entries such as the one currently under consideration, Customs has held travel and allowance charges to be dutiable (Customs ruling letter 115100 dated October 26, 2000). In Headquarters Ruling 113977, dated November 12, 1997, we ruled that travel expenses, transportation, equipment rental and living expenses that were incurred pursuant to dutiable repairs, were dutiable pursuant to the Texaco decision. Furthermore, the petitioner has not pointed to which particular items on the submitted invoices should be exempted from duty. Accordingly, the travel, rental and allowance charges in question are dutiable.

With respect to cleaning, the U.S. Customs Service has consistently held that the cost of cleaning is not dutiable unless it is performed as part of, in preparation for, or in conjunction with dutiable repairs or is an integral part of the overall maintenance of the vessel. (See Headquarters ruling letter 110841, dated May 29, 1990 (and cases cited therein); see also Texaco Marine Services, Inc, 44 F.3d 1539 (1994), Customs considers work performed to restore a part to good condition following deterioration or decay to be maintenance operations within the meaning of the term “repair” as used in the vessel repair statute. (See Headquarters ruling letter 106543, dated February 27, 1984; C.I.E. 142/61, dated February 10, 1961).

The United States Customs Court examined whether the scraping and cleaning of Rose Boxes constituted dutiable repairs. Northern Steamship Company v. United States, 54 Cust. Ct. 92, C.D. 1735 (1965). Rose Boxes are parts fitted at the ends of the bilge suction to prevent the suction pipes from being obstructed by debris. In arriving at its decision, the court focused on whether the cleaning operation was simply the removal of dirt and foreign matter from the boxes or whether it resulted in the restoration of the part to good condition after deterioration or decay. Id. at 98. The court determined that the cleaning did not result in the restoration of the boxes to good condition following deterioration and consequently held that the work was not subject to vessel repair duties. Id. at 99. Further in this regard, the Customs Service has ruled that the regular cleaning of filters in most instances does not result in liability for duty. (See Headquarters ruling letter 107323, dated May 21, 1985).

Second item in dispute is the cleaning of the engine room and the scavenging spaces covered by invoice No. 2. The scavenging spaces of a diesel engine are steel chambers that are permanently attached to the cylinders of the engine. The scavenging spaces serve two functions. First, the scavenging spaces receive the discharge from the turbo-chargers and deliver the charged air to each cylinder via reed valves and intake ports. Second, air from the piston underside is pumped into the scavenging space via reed valves to supplement turbo-charger- delivered air. This air enters the cylinders via inlet ports uncovered when the piston gets to the bottom end of its stroke and serves to "scavenge" the burnt gasses out of the cylinder. This process cleans the cylinders of spent energy and provides a clean air discharge for the next fuel injection. As a result of this process, some gasses containing unburnt carbon may be left and deposited in the scavenging spaces.

These carbon deposits and other oily deposits in the scavenger spaces may result in fire or explosion. They also reduce the efficient operation of the engine. Diesel engine maintenance manuals therefore require periodic cleaning of the scavenger spaces to permit the safe and efficient operation of the vessel. The maintenance of a scavenger space involves removing access plates and scraping, wire brushing, and wiping the inside of the space. This operation is labor intensive and would take a single worker up to two working days to clean a single cylinder.

In analyzing the dutiability of foreign vessel work, the Customs Service has consistently held that cleaning is not dutiable unless it is performed as part of, in preparation for, or in conjunction with dutiable repairs or is an integral part of the overall maintenance of the vessel. E.g., Headquarters Ruling Letter 110841, dated May 29, 1990 (and cases cited therein). The Customs Service considers work performed to restore a part to good condition following deterioration or decay to be maintenance operations within the meaning of the term repair as used in the vessel repair statute. See generally, Headquarters Ruling Letter 106543, dated February 27, 1984; C.I.E. 142/61, dated February 10, 1961.

As stated in our previous rulings, the collection of carbon and oil deposits results in deterioration--as manifested in the safety and efficiency problems--of the air scavenger spaces that may only be corrected by cleaning the air scavenger spaces. As such, we have consistently held that cleaning of scavenger spaces is subject to duty. See generally Headquarters Ruling Letter 111700, dated November 19, 1991 and Headquarters Ruling Letter 112454 dated March 31, 1993. Based on the information submitted, we find no evidence to contradict that the cleaning of the engine room and scavenger spaces was related to a dutiable repair or if it was done as part of routine maintenance for the purpose of maintaining good condition to prevent deterioration. We therefore reaffirm our position that cleaning the engine room and air scavenger spaces is a maintenance operation that is subject to duty under 19 U.S.C. 1466.

HOLDING:

The rental/meals/travel expenses and cleaning of the engine room and scavenger spaces for which the petitioner seeks relief are dutiable pursuant 19 U.S.C. § 1466. Consequently, the petition is denied in full.

Sincerely,

Larry L. Burton

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