VES-13-18-RR:IT:EC 113839 GOB
Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 415
P.O. Box 2450
San Francisco, CA 94126
RE: Vessel Repair Entry No. 110-6461446-1; 19 U.S.C. 1466;
PRESIDENT TYLER, V-137; Protest
Dear Madam:
This is in response to your memorandum dated February 3,
1997, which forwarded the protest submitted by American President
Lines, Ltd. (the "protestant") with respect to the above-referenced vessel repair entry.
FACTS:
The PRESIDENT TYLER (the "vessel") is a U.S.-flag vessel
owned and operated by the applicant. Certain foreign shipyard
work was performed on the vessel in late 1993. The vessel
arrived at the port of Seattle, Washington on December 22, 1993.
The subject entry was timely filed on December 30, 1993.
In Ruling 113122 dated March 20, 1996, the application for
relief with respect to the subject entry was granted in part and
denied in part.
In Ruling 227085 dated August 13, 1996, the petition was
granted in part and denied in part.
ISSUE:
Whether the subject items are dutiable pursuant to 19 U.S.C.
1466.
LAW AND ANALYSIS:
19 U.S.C. 1466 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.
Protestant's Claim re the Scope of the Petition Ruling
The protestant states:
Ruling 227085 did not properly address the referenced
petition for review with the statement:
"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."
...
Customs is respectfully directed to the following
statement in the application:
"On the spread sheet we have segregated the individual
items into two categories, i.e., dutiable and non-dutiable. The spread sheet thus becomes our request
for remission of duty on the non-dutiable category of
items." (Emphasis added [in protest].)
In Ruling 227085, with respect to the petition on the
subject entry, we stated:
In its petition, the petitioner requests relief with
respect to many items which were not the subject of its
application. 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 [in Ruling 227085].)
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.
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. 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 one-page 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.
Accordingly, the position stated in Ruling 227085 in this
respect is the position of the Customs Service. As Ruling
227085 pointed out, 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.
The subject protest indicates that the protestant is
protesting the items which it claims should have been considered
in the petition. Pursuant to 19 CFR 4.14(f), we will rule on all
items contained within the protest.
As indicated above, however, the protestant's claim that
Customs improperly failed to consider certain items in the
petition is without merit.
Pre-Texaco Entry
As the protestant points out, this entry is a "pre-Texaco"
entry, i.e., an entry filed prior to the appellate decision in
Texaco Marine Services, Inc., and Texaco Refining and Marketing,
Inc. v. United States, 44 F.3d 1539 (CAFC 1994), aff'g 815
F.Supp. 1484 (CIT 1993). In Memorandum 113350 dated March 3,
1995, published in the Customs Bulletin and Decisions on April 5,
1995 (Vol. 29, No. 14, p. 24), we stated in pertinent part:
All vessel repair entries filed with Customs on or
after the date of that decision [the CAFC decision in
Texaco, December 29, 1994] are to be liquidated in
accordance with the full weight and effect of the
decision (i.e., costs of post-repair cleaning and
protective coverings incurred pursuant to dutiable
repairs are dutiable and all other foreign expenses
contained within such entries are subject to the "but
for" test). With respect to vessel repair entries
filed prior to December 29, 1994, all costs for post-repair cleaning and protective coverings incurred
pursuant to dutiable repairs are dutiable. In view of
the fact that carriers have relied on Customs rulings
(some of which were based on court cases which the CAFC
in Texaco has now held were incorrectly decided), and
retroactive application would cause both the Government
and the carriers a major administrative burden, we will
not apply Texaco retroactively except as to the two
issues directly decided by the court. All other costs
contained within such entries are to be accorded that
treatment previously accorded them by Customs prior to
the decision of the CAFC in the Texaco case.
Items Protested
Our analysis in this matter is based primarily on the
pertinent invoices. The assertions of the application are not
considered to be 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 A Manual of Customs Law by Ruth F. Sturm, 1974 edition,
p. 173-174, the author states, 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.]
After a consideration of the documentation of record we make
the following determinations. Please note that we have included
the amount charged for the work involved only where it is helpful
for clarity.
Item 1.1-7. General Cleaning. The invoice states: "General
cleaning of main deck and engine room debris." Cleaning is
dutiable if it is related to repairs. The cleaning of the main
deck and engine room debris must have occurred relative to some
process. The protestant has not established that this item is
not related to dutiable repairs. We find that this item is
dutiable.
The protestant states that "the identical item on S/S
President Hoover ... on Entry No. 110-6461445.3, a sister ship,
has already been liquidated as a non-dutiable item ..."
(Emphasis in original.)
However, the invoice description for the cited item in Entry
No. 110-6461445-3 is not identical from the invoice description
cited above. The invoice description for the relevant item on
Entry No. 110-6461445-3 states:
Floating Dock Bottom Cleaning
Final-cleaning up grits and debris of floating dock
bottom areas on completion of contract for inspected
[sic] by port Engineer prior to floating dock sinking.
The invoice description in Entry No. 110-6461445-3 reflects
that such cleaning is akin to a drydock cost or general services
cost. The invoice description of the subject entry, as excerpted
above, does not reflect a "general services" cleaning, but
reflects a cleaning relative to certain specific work. Because,
the protestant has not established that the subject cleaning is
not related to dutiable repairs, it is dutiable.
Item 1.1-19. Temporary Covers. The invoice states:
"Fitting and removing temporary covers on engine room console for
protection." The protestant has not established that this item
is not related to dutiable repairs. The cost of temporary covers
is dutiable if it is related to repairs. We find that this item
is dutiable.
Item 1.2-10. Owner's Spare Parts. The invoice reflects
that this item includes "Providing storekeeper to inventory and
control issue of C-8 class storestock spare for drydock use."
This item is dutiable as it relates to spare parts which are
dutiable.
Item 1.3-2. Sea Trial. The protestant cites Ruling 113200
in support of its claim that this item is nondutiable. However,
in Ruling 113200, we stated:
Item 1.3-2 covers the cost of sea trials which Customs
has long-held to be dutiable (see rulings 107847 and
107106). However, we note that within this item there
is a segregated cost for launch services for
transportation of the workers involved. Inasmuch as
transportation charges have also been long-held to be
non-dutiable [in pre-Texaco context] (see C.D. 1836),
we find this itemized cost to be non-dutiable.
Thus, contrary to the protestant's assertion, Ruling 113200
stands for the proposition that sea trials are dutiable. We find
that the subject item is dutiable. We note that the subject item
includes a transportation cost which is not separately itemized.
If the transportation cost were separately itemized, it would be
nondutiable on this pre-Texaco entry. The entire item is
dutiable.
Item 2.1-1. Services of Diver. In Ruling 113200 dated
November 15, 1994, which also involved a pre-Texaco entry, we
stated:
The petitioner avers that the services of a diver are a
routine drydock operation for the purpose of verifying that
there are no obstructions in the way of the keel and to set
blocks or verify that no debris has become fouled in the way
of the blocks. Upon further review of this cost, we concur
with the petitioner's position that this item is non-dutiable.
In the pre-Texaco context, we find that this item is
nondutiable.
Items 2.1-2, 2.1-3, and 2.1-4. Strut Bearing Weardown, Tube
Shaft Bearing Weardown. These items appear to be survey or
inspection-related items which do not involve and are not related
to repairs. We find that they are nondutiable.
Item 2.1-7. Anchor Chain Locker. The protestant protests
the "cleaning [of the] chain locker and chain locker sump for
inspection by ABS and USCG." We find that this cost is
nondutiable. The invoice reflects that this cost relates to an
ABS/Coast Guard inspection and the cost does not appear to
involve a repair.
Item 2.1-8. Sea Valves. We find that this item is
nondutiable. While there are sea valve repairs in this entry,
they are separately itemized. The invoice reflects that this
item was for "Opening up and cleaning the following valves for
inspection, and closing up same..."
Item 2.1-10. Dye-Checking Propeller Roots and Boss. The
invoice reflects that this item is an ABS/USCG inspection item.
We find that it is nondutiable.
Item 2.1-11. Renewing and Re-erecting Keel Blocks. The
protestant states that this item is "a replacement to a keel
block that has been damaged during an inspection and should be
afforded the same duty-free treatment of the replacement of a
gasket upon R/R a manhole cover." We find that this item is
nondutiable.
Item 2.1-11. Bailing Out Tank. We find that this item is
nondutiable. The invoice states that no repairs were effected.
We believe that this item should be treated in the same manner as
certain of the other sub-items within item 2.1-11, e.g., other
sub-items relating to the bailing out of water, which are
nondutiable.
Item 2.1-17. Cargo Hold and Engine Room Bilge Drainwells
(HK 12,960 and HK 9,790). We find that these two sub-items
within item 2.1-17 are nondutiable because they are non-repair
items which were incident to an inspection.
Item 3.1-1. Hull High Pressure Water Wash. We find that
this item is nondutiable. The invoice reflects that it is an
inspection item. We held similarly in Ruling 113470 dated July
5, 1995.
Item 3.1-17. A' Bracket Crack. The invoice states:
"Carrying out M.P.1 testing A' bracket for interested parties
inspection." The protestant states: "A non-destructive magnetic
partial inspection of a structural member was conducted to
determine whether or not a crack existed. A crack did not exist
and no repairs were required." We find this item to be
nondutiable.
Item 3.1-17. Ultrasonic Thickness Gauging. The invoice
states: "Carrying out ultrasonic thickness gauging main scoop
pipe and condenser discharge pipe and submitting testing report."
The protestant states that this item relates to ABS Requirement
1/3.11.2 with respect to the examination of all openings to the
sea and asserts that this item was a mandatory survey. We find
that it is nondutiable.
Item 3.3-1. Tensile Testing. The invoice reflects that this
item involves testing and does not reflect repairs. We find that
this item is nondutiable.
Item 4.1-1. Port Boiler Inspection. The invoice reflects
that this is an inspection item. We find that it is nondutiable.
As the protestant points out, the sub-item for making and
renewing hinge pins (HK 3,620) is dutiable.
Item 4.4-1. Starboard Boiler Inspection. The invoice
reflects that this is an inspection item. We find that it is
nondutiable. As the protestant points out, the sub-item for
making and renewing hinge pins (HK 3,620) is dutiable.
Items 4.1-3 and 4.1-4. Port and Starboard Boiler
Hydrostatic Tests. The invoices reflect that these are
inspection items and do not involve repairs. We find that these
items are nondutiable.
Item 4.1-5. Main Steam Line Hydrostatic Test. The invoice
reflects that this item is an inspection item and that it does
not involve repairs. We find that it is nondutiable.
Item 4.1-7. D.C. Heater Internal Inspection. The invoice
reflects that this item is an inspection item and that it does
not involve repairs. We find that it is nondutiable.
Item 4.1-8. H.P. and L.P. Turbine Flexible Coupling. The
invoice reflects that this item is an inspection item and that it
does not involve repairs. We find that it is nondutiable.
Item 4.1-9. Main Condenser Tubing. The invoice reflects
that this item is an inspection item and that it does not involve
repairs. We find that it is nondutiable.
Item 4.1-10. Air Pressure Testing of Ballast Pipe System of
D.B. Ballast Tanks. The invoice reflects that this item is an
inspection item and that it does not involve repairs. We find
that it is nondutiable.
Item 4.1-11. L.P. Turbine Inspection, Protection, and
Tests.. The invoice reflects that these sub-items of item 4.1-11
are inspection or inspection-related items and that they do not
involve repairs. We find that they are nondutiable.
Item 4.1-12. Main Turbo Generator, Reduction Gear & Dynamo
Examination (HK 39,822), Checking Thrust Bearing Clearance (HK
5,800), and S.S.T.G. L.O. Sump (HK 2,880). The invoice reflects
that these sub-items of item 4.1-12 are inspection or inspection-related items and that they do not involve repairs. We find that
they are nondutiable.
Item 4.1-14. Port and Starboard Boiler Mount Removal and
Removal and Reinstallation of Insulation. The invoice reflects
that these items are inspection or inspection-related items and
that they do not involve repairs. We find that they are
nondutiable.
Item 4.1-15. Fireside Cleaning Port and Starboard Boilers.
The invoice reflects that this item is an inspection-related item
and that it does not involve repairs. The protestant asserts
that this cost is incident to ABS 1/3.15.2. We find that this
item is nondutiable.
Item 4.1-16. No. 3 Line Shaft Bearings. The invoice
reflects that this item is an inspection-related item and that it
does not involve repairs. We find that this item is nondutiable.
Item 4.1-17. Kings Bury Thrust Bearing. The invoice
reflects that this item is an inspection-related item and that it
does not involve repairs. We find that this item is nondutiable.
Item 5.1-3. Main Condenser Cleaning. The invoice states:
"Cleaning off inlet and outlet water boxes [and] marine growth
and cleaning water boxes & tubes for inspection..." It is our
position, as stated in numerous rulings (e.g., Ruling 112045
dated September 4, 1992; Ruling 111571 dated March 4, 1992;
C.I.E. 429/61), that cleaning which is maintenance in nature, or
which removes rust or deterioration, is dutiable under 19 U.S.C.
1466. The cleaning of marine growth, as stated in the invoice,
is this type of operation. Therefore, it is dutiable.
Item 5.1-9. Megger Testing Engine Room. The invoice
reflects that this item is an inspection item and that it does
not involve repairs. We find that this item is nondutiable.
Item 5.1-31. Port and Starboard Boiler De-Superheater. The
invoice reflects that this item is an inspection-related item and
that it does not involve repairs. We find that this item is
nondutiable.
Item 19 on CF 226. Cargo Hold Cleaning. The protestant
states: "This cleaning is related to the transportation of animal
hides. The hides inevitably leak a rather foul smelling liquid
out of the containers, which collects and solidifies on the tank
tops and sides of the cargo holds. the [sic] cleaning is for the
purpose of removing the noxious sediment. It is not related to
any repair...It was not initiated in anticipation of any repair.
It was accomplished simply as an inspection requirement." The
protestant cites a requirement (1/3.7(d)) of special periodical
line surveys with respect to cargo hold cleaning. We find that
this item is nondutiable. The evidence, taken as a whole,
indicates that this is a cleaning item which does not involve a
repair. We find that it is nondutiable.
HOLDING:
As detailed above, the protest is granted in part and denied
in part.
In accordance with Section 3A(11)(b) of Customs Directive
099 3550-065, dated August 4, 1993, Subject: Revised Protest
Directive, this decision should be mailed by
your office to the protestant no later than 60 days from the date
of this letter. Any reliquidation of the entry in accordance
with the decision must be accomplished prior to mailing of the
decision. Sixty days from the date of the decision the Office of
Regulations and Rulings will take steps to make the decision
available to Customs personnel via the Customs Rulings Module in
ACS and the public via the Diskette Subscription Service, the
Freedom of Information Act and other public access channels.
Sincerely,
Stuart P. Seidel
Assistant Commissioner
Office of Regulations and Rulings