HQ 115835 - Protest and Application for Further Review of Vessel Repair Entry No. C46-0017198-6 (C28-0266431-1); Protest No. 4601-02-101895; SEA-LAND ENDURANCE; V-118; Transportation and Administrative Expenses; 19 U.S.C. § 1466 - United States International Trade Commision Rulings

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HQ 115835

October 28, 2002

VES-13-18-RR:IT:EC 115835 GG

CATEGORY: CARRIER

Supervisory Liquidator
Residual Liquidation and Protest Branch
U.S. Customs Service
1210 Corbin Street
3rd Floor
Elizabeth, NJ 07201

RE: Protest and Application for Further Review of Vessel Repair Entry No. C46-0017198-6 (C28-0266431-1); Protest No. 4601-02-101895; SEA-LAND ENDURANCE; V-118; Transportation and Administrative Expenses; 19 U.S.C. § 1466

Dear Madam:

This is in response to your memorandum dated August 1, 2002, forwarding the above-referenced protest and application for further review. The protestant, U.S. Ship Management, Inc. (“USSM”), is protesting the assessment of certain duties pursuant to 19 U.S.C. § 1466.

FACTS:

The SEA-LAND ENDURANCE is a U.S. flag vessel owned by USSM. Subsequent to the completion of foreign shipyard work, the vessel arrived in Long Beach, California, on December 12, 2001. A vessel repair entry was filed. USSM also filed an application for relief, which was denied on June 7, 2002. The subject protest was timely submitted to Customs on June 20, 2002. The protestant seeks relief from the imposition of vessel repair duties pertaining to transportation expenses and an “administrative fee” associated with the repairs in question. An explanation of the nature of this administrative fee has not been provided.

ISSUE:

Whether the transportation expenses and administrative fee 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 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 . . .”

With regard to the transportation expenses and the administrative fee at issue, the protestant does not dispute the fact that these costs were incurred pursuant to dutiable repairs. However, USSM cites to a number of ruling letters previously issued by Customs in support of the proposition that the transportation expenses in question are not subject to duty. The rulings cited are HQ 112078, HQ 111294, HQ 111789, HQ 112937, HQ 110426, HQ 112726, and HQ 110845.

While the cited rulings at one time reflected Customs position with respect to transportation 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 (Fed. Cir. 1994), they no longer represent Customs position in this matter. (See also Customs memorandum 113308, dated January 18, 1995, published in the Customs Bulletin on April 5, 1995 (Customs Bulletin and Decisions, vol. 29, no. 14, at p. 24)). Furthermore, it should be noted that in post-Texaco vessel repair entries such as the one currently under consideration, Customs has held such charges incurred pursuant to dutiable repair work to be dutiable. See Headquarters Ruling Letters 115231, dated February 20, 2001; 115135, dated November 8, 2000; 115100, dated October 26, 2000; and 113977, dated November 12, 1997.

USSM asserts that reliance on Texaco is misplaced because that decision applied only to post-repair cleaning and protective coverings used in the process of repairs. It further asserts that Customs must seek public notice and comment pursuant to 19 U.S.C. § 1625(c) prior to revoking those rulings. The protestant’s arguments in this regard are without merit. The CAFC in Sea-Land Service, Inc. v. United States, 239 F. 3d 1366 (Fed. Cir. 2001) affirmed a decision of the Court of International Trade granting summary judgment in favor of the United States on the issue of the applicability of 19 U.S.C. § 1625 to interpretive rulings issued under the Texaco “but for” test. Stated simply, the CAFC determined that since the Customs change in the way it approached vessel repair expenses under 19 U.S.C. § 1466(a) was mandated by the court’s decision in Texaco, requiring notice and comment would not serve the purpose and policy behind 19 U.S.C. § 1625(c). Accordingly, the transportation charges in question are dutiable. With respect to the “administrative fee”, the protestant has failed to provide sufficient information on its nature for a determination to be made that it is non-dutiable.

HOLDING:

The transportation expenses and administrative fee are dutiable pursuant to 19 U.S.C. §1466.

Sincerely,

Glen E. Vereb
Acting Chief

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