VES-13-18-RR:IT:EC 113678 LLB
Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 107
P.O. Box 2450
San Francisco, CA 94126
RE: Vessel Repair Entry No.110-6461872-8; 19 U.S.C. 1466;
PRESIDENT ADAMS, V-77; Application for Relief; Port of
Arrival, Seattle, Washington
Dear Madam:
This is in response to your memorandum dated August 13,
1996, which forwarded the application submitted by American
President Lines, Ltd., with respect to the above-referenced
vessel repair entry.
FACTS:
The PRESIDENT ADAMS, a U.S.-flag vessel owned and operated
by the applicant, arrived at the port of Seattle, Washington on
March 28, 1996. The subject vessel repair entry was subsequently
filed. The vessel underwent certain foreign shipyard work in
Korea, Taiwan, Japan, and Hong Kong in February and March of
1996.
ISSUE:
Whether the subject items are dutiable pursuant to 19 U.S.C.
1466.
LAW AND ANALYSIS:
Section 466, Tariff Act of 1930, as amended (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.
The subject entry is a "post-Texaco" entry, i.e., an entry
filed after 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).
Accordingly, the Texaco decision applies to this entry. Our
position with respect to post-Texaco entries has been stated in
detail in many rulings, as well as 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 will use the numbering system which the Liquidation Unit
used in forwarding the application:
1. General Services. The claim is made that all of the costs
associated with this category have traditionally been held to be
free of duty. As explained in ample precedent, Customs considers
the types of expenses associated with these costs to be
proratable under the terms of the Court opinion in Texaco, supra.
We find that the expenses of General Services should be prorated
between dutiable and nondutiable costs as reflected on the vessel
repair entry.
2. Anchor Chain Inspection (209). The invoice reflects that this
item was a nondutiable ABS/USCG inspection and that no repairs
were performed. Accordingly, it is nondutiable.
3. Pintle Pin & Bush Survey (217). The invoice reflects that
this item was a nondutiable ABS/USCG inspection and that no
repairs were performed. Accordingly, it is nondutiable.
4.Tailshaft Survey (309). The invoice reflects that this item was
a nondutiable ABS/USCG inspection or survey and that no repairs
were performed. Accordingly, it is nondutiable.
5. Boiler, Oil-Fired Clean for Inspection (316). The invoice
reflects that this item was incident to a nondutiable ABS/USCG
inspection and that no repairs were performed. Accordingly, it is
nondutiable.
6. Sea Valves, Chests, etc. Survey (318). The invoice reflects
that this item was a nondutiable ABS/USCG inspection or survey and
that no repairs were performed. Accordingly, it is nondutiable.
7. Sea Cooling Water System Inspection (320). The invoice reflects
that this item was a nondutiable inspection or survey and that no
repairs were performed. Accordingly, it is nondutiable.
8. Corrugated Bulkhead FR271 Modification (501). The applicant
states that "the requirement for this modification was a 'design
defect' in the original construction of the vessel. The original
construction created a 'hard spot' which lead to bulkhead
cracking." Work performed to remedy present "bulkhead cracking" is
dutiable, but there is no evidence of any need for repair at the
time the modification work was performed. Accordingly, this item
is not dutiable as a repair under 19 U.S.C. 1466.
9.No. 3 Cargo Hold Structural Modifications (502). The applicant
states: "This again is a modification to correct an original design
defect. The P/S corner of the #3 cargo hold at level 10790 above
base line as originally designed was leading to structural failure
problems. This modification was initiated to first strengthen the
deficiency in the structure (the new insert plate is 12mm in lieu
of 8mm plate thickness), but more importantly, to more evenly
distribute the structural stresses by increasing the inside corner
radius..." Most significantly, we find evidence in the repair yard
invoice of "fractures at both Port and Stbd locations." As such,
we find that this item is a dutiable repair. Based upon the
information provided, we are unable to draw a meaningful
distinction between this item and item 503, below.
10. Slim-Guide Bracket to Platform Modifications (503). The
applicant states: "The existing brackets connecting the stantion to
the container "slim-guide" fractured. Rather than just rewelding
the fracture, a new design bracket was engineered, fabricated, and
installed..." This item is a dutiable repair under 19 U.S.C. 1466.
The fact that a new design bracket was engineered does not change
this result since it was also necessary to repair a fracture as
part of the process.
11. Hatch Coaming Stays Modification (504). The applicant states:
"A new 'toe piece' was designed to correct this design defect to
better distribute the stresses by way of the 160mm radius of the
toe piece and the 30mm radius toe with a wrap-around weld." We
find that this item is a nondutiable modification.
12. High (Aux) Sea Chest Vent Modification (506). The applicant
states: "The initial location of the 80mm vent line in the bay
between frames 99-100 was not removing the entrapped air generated
in the bay between frames 98-99. This entrapped air was causing
operational problems in the sea water circulator pump. To correct
this design defect problem, it was necessary to make this
modification for efficient operation of the vessel." We find that
this item is a nondutiable modification.
13. Anchor Pocket Modification (507). The applicant states: "...
there has [sic] been problems with the anchor stowage...Enc. (L)
details to [sic] structural modifications engineered to correct
this deficiency and to improve the existing anchor stowage system."
We find that this item is a nondutiable modification.
14. Web Frame Lug/Clip Modifications (508). The applicant states:
"This is a new, previously non-existent 15mm steel plate bracket
permanently installed by welding with a 6mm fillet weld wrapped
around all ends." We find that this item is a nondutiable
modification.
15. Main Engine Turbocharger Soft Blast System (509). This is a
new feature which does not replace any existing structure. It is
permanently installed. We find the cost of this item to be duty-free as a modification.
16.Main Engine Charge Air Cooler Clean System (510). The invoice
reflects, and the applicant states, that this item is a "new,
previously non-existent system." We find that this item is a
nondutiable modification.
17.C.O. #1 Bow Thruster Service Engineer. This cost is dutiable.
The applicant states that the bow thruster service representative
is a U.S. citizen and resident, and that the cost associated with
the engineer should be nondutiable. The applicant has not provided
sufficient information with respect to its claim of nondutiability.
For example, if the applicant is attempting to claim that the
subject cost is subject to remission pursuant to 19 U.S.C.
1466(d)(2), complete information with respect to that claim must be
provided. The pertinent invoice reflects that the engineer
performed services with respect to the "MV President Adams item
#302 and 303." While item 302 has been found by the Liquidation
Unit to be nondutiable, item 303 is listed as dutiable on the
spreadsheet, and that item is not involved in this application.
18. C.O.#2 No. I Deep Tank Modifications. The applicant claims
that prefabricated steel is non- dutiable under 19 U.S.C.
1466(h)(3), which provides:
The duty imposed by section (a) of this section
shall not apply to -
(3) the cost of spare parts necessarily installed
before the first entry into the United states,
but only if duty is paid under appropriate
commodity classifications of the Harmonized
Tariff Schedules of the United States upon first
entry into the United States of each such spare
part purchased in, or imported from, a foreign
country.
For the purpose of 19 U.S.C. 1466(h), we have found that a
part is determined to be something which does not lose its
essential character or its identity as a distinct entity but which,
like materials, is incorporated into a larger whole. It would be
possible to disassemble an apparatus and still be able to identify
a part. The term part does not mean part of a vessel, which
practically speaking would encompass all elements necessary for a
vessel to operate in its designed trade. Examples of parts as
defined are seen in such items as piston rings and pre-formed
gaskets, as opposed to gaskets which are cut at the work site from
gasket material.
There is no indication or statement as to which "spare parts"
the applicant seeks relief for pursuant to 19 U.S.C. 1466(h)(3).
The applicant has not established that the prefabricated steel is
a part under 19 U.S.C. 1466(h)(3). Therefore, the steel is
dutiable under 19 U.S.C. 1466(a). Our determination and analysis
is the same here as in Ruling 113883 dated April 1, 1997.
19. C.0.#6 Examination of Main and Emergency Switchboards. The
applicant states that this is a mandatory regulatory requirement.
We find that this item is nondutiable.
20.C.O. #15 Hotel Costs for Crew. The reason for the need for
hotel accommodations for crewmembers while the vessel was in a
foreign shipyard has not been established, and in the absence of
any supporting documentation for the claim of duty-free treatment,
we find the cost to be dutiable.
21. Item No. 2a (CF 226) International U/W Paint. The applicant
claims non-dutiability under 19 U.S.C. 1466(h)(2), which provides:
The duty imposed by subsection (a) of this section shall
not apply to-
... (2) the cost of spare repair parts or materials
(other than nets or nettings)
which the owner or master of the vessel certifies are
intended for use aboard a cargo vessel, documented under
the laws of the United States and engaged in the foreign
or coasting trade, for installation or use on such
vessel, as needed, in the United States, at sea, or in a
foreign country, but only if duty is paid under
appropriate commodity classifications of the Harmonized
Tariff Schedule of the United States upon first entry
into the United States of each such spare part purchased
in, or imported from, a foreign country...
Section 1466(h)(2) contemplates consumption entry of the
pertinent part or material, and the payment of duty under the
appropriate commodity classification of the HTSUS prior to the use
of the pertinent part or material in the foreign shipyard. The
applicant has provided no information which would support a claim
that the subject paint was entered and duty-paid prior to its use
in the foreign shipyard. Accordingly, the applicant's claim for
treatment under 19 U.S.C. 1466(h)(2) is denied. The paint is
dutiable under 19 U.S.C. 1466(a).
HOLDING:
Following a thorough analysis of the facts as well as of the
law and applicable precedents, we have determined that the
Application for Relief should be granted in part and denied in part
as specified in the Law and Analysis portion of this ruling.
Sincerely,
Jerry Laderberg
Chief,
Entry Procedures and Carriers Branch