VES-13-07/18 CO:R:P:C 111204 JBW

Deputy Assistant Regional Commissioner
Commercial Operations
c/o Regional Commissioner
New Orleans, LA 70130-2341

RE: Vessel Repair; Cleaning; Debris; Staging; ULTRAMAR, voyage 90; 19 U.S.C. 1466.

Dear Madam:

This letter is in response to your transmittal of July 25, 1990, forwarded for our review and ruling regarding the petition for review of application decision HQ 110250, dated May 24, 1990.

FACTS:

The record reflects that the subject vessel, the ULTRAMAR, a United States flag vessel, arrived in the port of New Orleans, La., on December 9, 1988. Vessel Repair entry number C20-0006468-6, Customs Form 226, was filed on December 13, 1988, indicating work performed on the ship in Livorno, Italy.

The vessel owner timely filed an application for relief on February 8, 1989. The issues raised in this letter were addressed in Headquarters Ruling Letter 110250, dated May 24, 1990. The petitioner presents two challenges to this ruling: First, the petitioner argues that the cost of removing debris following dutiable repairs is not subject to duty. Second, the petitioner contends that no duty should be assessed for the use of staging for the cleaning and inspection of the main emergency switchboards.

ISSUES:

(1) Whether the cost of removing debris following repairs is dutiable under 19 U.S.C. 1466 (1988).

(2) Whether the petitioner has submitted adequate justification or evidence to demonstrate that the cost of staging for cleaning and inspection of the main emergency switchboards was necessary.

LAW AND ANALYSIS:

Title 19, United States Code, section 1466, provides in pertinent part for payment of duty in the amount of 50 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 engage in such trade.

In considering the cost of removing debris following dutiable repairs, counsel for the petitioner cites a memorandum issued by this office to the Pacific Region Vessel Repair Liquidation Unit in which we held that the cost of removing debris following dutiable repairs is not dutiable. Headquarters Memorandum 107829, dated April 1, 1986. We do not believe, however, that this memorandum is dispositive.

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). Removal of debris following repairs is logically nothing more than a cleaning performed in conjunction with those repairs. Notwithstanding the one cited statement to the contrary, we have held in at least one subsequent determination that removal of debris in conjunction with dutiable repairs is dutiable. Headquarters Memorandum 109341, dated July 15, 1988 (We note that this determination has been challenged in the United States Court of International Trade by counsel in this case). Counsel, however, fails to cite this memorandum, nor does counsel attempt to justify the distinction between removal of debris and cleaning that is suggested by the earlier memorandum. Rather, counsel, without claiming or establishing reliance, urges us to abandon well established precedent based on a fugitive memorandum. As stated earlier, we do not distinguish between removing debris and cleaning under the facts in this case, and we therefore find that removal of debris is cleaning and is dutiable if performed in conjunction with dutiable repairs.

The petitioner also argues that the cost of staging for the cleaning and inspection of the main emergency switchboards falls within the class of items that are not subject to duty under 19 U.S.C. 1466. As a general rule, the cost of erecting and removing staging is not subject to duty. Headquarters Ruling Letter 106827, dated July 19, 1984. In the present case, we fail to understand the necessity of erecting and removing staging for the cleaning and inspection of an item that on most ships is readily accessible without staging. We thus question the authenticity of what appears to be an unnecessary or, at best, an excessive charge. In ruling on the application in this case, we requested that the petitioner submit further evidence to demonstrate the necessity for this item. The petitioner has failed to submit the requested reasonable evidence to support the claim of nondutiability for the use of the staging. Absent such proof, the cost of the staging is dutiable.

Furthermore, we held in the application that, with the exception of the staging, costs contained in Invoice Item No. 401 were nondutiable as costs of cleaning and inspection. Upon reexamination of this item, we note that the "main circuit T/G braker [sic]" was overhauled. The invoice breakout suggests that the overhaul was in the nature of a repair to the switchboard: "Parts and materials DLS 200; Repairs/renewals DLS 520." We conclude, therefore, that these two breakout items are also subject to duty as repairs under 19 U.S.C. 1466.

HOLDINGS:

(1) The cost of removing debris is cleaning and is dutiable if performed in conjunction with dutiable repairs.

(2) The petitioner has failed to submit adequate evidence regarding the nondutiability of the cost of staging for the cleaning and inspection of the main emergency switchboards. Therefore, that cost is dutiable. The costs relating to parts and materials and repairs/renewals under Invoice Item No. 401 are also dutiable.

Sincerely,

Stuart P. Seidel
Director, Regulatory Procedures
and Penalties Division