VES-13-18-RR:IT:EC 114599 GEV
Chief, Liquidation Branch
U.S. Customs Service
Post Office Box 2450
San Francisco, California 94126
RE: Vessel Repair Entry No. C31-0005037-7; MARINE COLUMBIA; V-9811;
19 U.S.C. § 1466; General Services; Drydocking; Proration; Modifications;
Repairs; Inspections
Dear Sir:
This is in response to your memorandum dated January 22, 1999, forwarding an application for relief regarding duties assessed pursuant to 19 U.S.C. § 1466. Our findings are set forth below.
FACTS:
The MARINE COLUMBIA is a U.S.-flag vessel owned by Argosy Ventures, Ltd. Subsequent to the completion of various foreign shipyard work, the vessel arrived at Valdez, Alaska, on September 12, 1998. A vessel repair entry was timely filed.
Pursuant to an authorized extension of time, an application for relief with supporting documentation was timely filed. The applicant seeks relief with respect to numerous items contained within the above-referenced vessel repair entry and listed on worksheets included with the documentation submitted. The aforementioned worksheets, which cover all of the costs on the invoices in question, were annotated by your office with respect to the dutiability of the costs for which relief is sought. At the request of the applicant, the application was forwarded to this office for review.
ISSUE:
Whether the costs contained within the subject entry for which the applicant seeks relief are dutiable under 19 U.S.C. § 1466.
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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..."
In its application of the vessel repair statute, Customs has held that modifications, alterations, or additions to the hull and fittings of a vessel are not subject to vessel repair duties. The identification of work constituting modifications vis-a-vis work constituting repairs has evolved from judicial and administrative precedent. (See Otte v. United States, 7 Ct. Cust. Appls. 166, T.D. 36489 (1916); United States v. Admiral Oriental Line et al., 18 C.C.P.A. 137, T.D. 44359 (1930); and Customs Bulletin and Decisions, Vol. 31, Number 40, published October 1, 1997.) The factors discussed within the aforementioned authority are not by themselves necessarily determinative, nor are they the only factors which may be relevant in a given case. However, in a given case, these factors may be illustrative, illuminating, or relevant with respect to the issue of whether certain work may be a modification of a vessel which is nondutiable under 19 U.S.C. § 1466.
With respect to surveys or inspections, the general rule is that a survey undertaken to meet the specific requirements of a governmental entity, classification society, or insurance carrier is not dutiable even when dutiable repairs are effected as a result of a survey. When an inspection or survey is conducted to ascertain the extent of damage sustained or whether repairs are necessary, the survey cost is dutiable as part of the repairs which are accomplished.
In regard to those costs appearing on Keppel Shipyard invoice no. 98/H/Y/012, we note the following. On pp. 1-2 of the worksheets, which include General Services and certain of the Drydock items in question (Item Nos. 0100 (drydocking), 0103 (tug hire), 0104 (pilotage), 0229 (comp air for winches), 0110 (docking plugs), 0109 (ballast water), 1200 (ov’bd discharges)), note that the evidence submitted is insufficient to support a claim that any of those costs were attributed solely to nondutiable work. Accordingly, since the subject entry contains both dutiable and non-dutiable costs, the General Services and Drydocking costs at issue are to be prorated pursuant to Customs ruling letter 113474 and memorandum 113350 both of which addressed Customs implementation of the decision of the U.S. Court of Appeals for the Federal Circuit in Texaco Marine Services, Inc., and Texaco Refining and Marketing, Inc. v. United States, 44 F.3d 1539 (CAFC 1994).
The remainder of the Drydock items listed on p. 2 constitute dutiable costs with the exception of Item Nos. 1201, 1400 and 1706 (broken down between dutiable and nondutiable costs as reflected on the worksheets) and the following item nos. which constitute nondutiable inspection costs, modifications, etc.: 1703; 1704; 1300; 1301; 1302; 1012(a)(b)(c); 4000; and 1202.
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Machinery items are listed on pp. 3-4 of the worksheets. These items are dutiable with the exception of the following nondutiable inspection/testing costs: 6001; 6003; 6004; 6006; 6007; 6008; 6009; 3000; 3001; 3002; 3003; 3004; 3005; 3009; 6200(a)(b)(c)(d)(e); 3401; 3500; 4400; 1602; 3501; 3502; 3503; 3504; 3703; and 1901.
Deck, Hull and Tanks items are listed on pp. 4-6 of the worksheets and are dutiable with the exception of the following item nos. which constitute nondutiable inspection/testing costs, removals, or modifications: 4401; 3600; 3601; 4402; 2112; 4005; 2117; 2118; 5401; and 2135.
Pumproom items are listed on pp. 6-7 of the worksheets. All of the costs covered by these item nos. are dutiable with the exception of the following inspection costs: 3505; 3506; and 3507.
Electrical items are listed on p. 7 of the worksheets. All of these costs are dutiable with the exception of the following item nos. covering nondutiable inspection costs: 5300; 5000; and 5301.
The only safety item at issue (Item no. 5800, listed on p. 7 of the worksheets) is dutiable in its entirety.
All of the optional items listed on p. 7 of the worksheets are dutiable with the exception of the inspection cost covered by Item no. 4409.
Additional items covered by the Keppel Shipyard invoice are listed on pp. 7-8 of the worksheets. These items are dutiable with the exception of the following item nos.: 4026; 2141; 2144; 2051; 0253; 2153; 5402; 0255; 0115.
With respect to those invoices other than that of Keppel Shipyard, the costs of which are listed on pp. 9-10 of the worksheets, we note the following. Sanki Marine Pte Ltd. invoice no. SMI/978/277 listed on p. 9 of the worksheet is nondutiable in its entirety. However, International Paint invoice no. IH597900 is dutiable in its entirety. Finally, the costs listed on American Bureau of Shipping invoice no. 6410889966 and the Richfield Marine Agencies documentation are dutiable in part as reflected on the worksheet annotated by your office.
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HOLDING:
The costs contained within the subject entry for which the applicant seeks relief are dutiable in part under 19 U.S.C. § 1466 as discussed in the Law and Analysis portion of this ruling.
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers Branch