VES-3-18-OT-RR:BSTC:CCI H327273 TNA
Supervisory Liquidation Specialist
C/o Vessel Repair Unit
U.S. Customs and Border Protection
423 Canal Street, Suite 246
New Orleans, LA 70130
RE: 19 U.S.C. §1466(d)(2); Vessel Repair Entry C20-0081926-1; M/V STATES TIDE; Internal Advice on Protest No. 2002-22-100826; Duty Remission
Dear Madame:
This is in response to your memorandum dated September 14, 2022, forwarding for our further review the Protest filed by Richard Bertram of Jones Walker, on behalf of his clients, Tidewater Marine, LLC and Tidewater GOM, Inc. (collectively “Tidewater” or “Protestant”), with respect to Vessel Repair Entry C20-0081926-1. Our decision is set forth below.
FACTS:
The M/V STATES TIDE (the “vessel”) is a U.S.-flag platform supply vessel owned by Tidewater Marine, LLC and Tidewater GOM, Inc, which are subsidiaries of Tidewater, Inc. On April 16, 2021, the vessel arrived in Morgan City, Louisiana from Chaguaramas, Trinidad. The vessel’s agent subsequently filed a CBP Form 226 (Record of Vessel Foreign Repair or Equipment Purchase) with CBP’s Vessel Repair Unit - New Orleans (“VRU”) to document foreign shipyard costs. The entry form states that the vessel underwent dutiable repairs in Trinidad, performed by a number of different vendors.
On July 13, 2021, Protestant filed an Application for Relief of duties. There, Protestant argued that much of the work completed aboard the vessel consisted of regulatory inspections for complying with maritime regulations such as those of the International Maritime Organization’s (“IMO”) regulations, such as an annual regulatory inspection and certification of the vessel’s sold boom pedestal hydraulic crane, among others. Protestant argued that such regulatory inspections are not subject to duty upon entry. Protestant also argued that the repairs at issue were performed using parts that were either made in America, or, if they had been manufactured abroad, they had been previously imported and duties had already been paid on them. In addition, Protestant notes that these parts were sent to the vessel’s regular crew for use and/or installation. As a result, Protestant argues that the subject repairs are not subject to further duties now. In support of these arguments, Protestant submitted an itemized listing of the parts it purchased for the repairs, as well as invoices from American vendors for the parts at issue. Protestant also submitted certifications from the vendors that the parts listed on the invoices were either of American manufacture or that if imported, duties had already been paid on these items.
On April 15, 2022, the VRU issued a Determination of Duty letter granting the application for relief in part, which resulted in a duty consequence of USD $116,285.61. In support of its determination, the VRU provided Tidewater Marine with a listing of reasons why its application had been denied in part, as well as a spreadsheet noting every line item at issue and a reason why those items had been denied. In listing its reasons for denial, the VRU, citing HQ H035597, dated October 28, 2008, stated that Protestant had not established by satisfactory, documentary evidence, that the inspections and surveys at issue were nondutiable surveys- e.g., an annual or periodic survey performed by a regulatory body. In addition, the VRU noted that such evidence should include copies of the invoice and the report by the regulatory body. The VRU also denied a number of line items for being dutiable equipment rather than consumables. Lastly, the VRU denied a number of line items for failure to designate which section of 19 U.S.C 1466(d)(2), (h)(2) and (h)(3) was applicable, and because the submitted documentation does not support a claim under any of these sections.
On July 15, 2022, Tidewater submitted a Protest regarding the VRU’s determination, along with supplemental arguments. Here, again, Protestant argues that the repairs at issue were performed by the vessel’s regular crew, using parts that were either made in America, or, if they had been manufactured abroad, they had been previously imported and duties had already been paid on them. In addition, Protestant cites HQ 111619, dated October 21, 1991, for the proposition that “where a part is purchased from a party unrelated to the vessel owner, a United States bill of sale constitutes sufficient evidence to demonstrate that the part was manufactured in the United States or entered in the United States, duty paid.” Protestant agues that its invoices and vender certifications as to the origin or duty status of the parts at issue therefore constitute sufficient proof that the items at issue are not dutiable now.
Protestant also reiterates its argument that regulatory inspections are not subject to duty upon entry. In support of this argument, Protestant cites 19 U.S.C. §1466(a), 19 C.F.R. §4.14(h)(1), and C.S.D. 79-2, 13 Cust. B. & Dec. 993 (1979). Protestant’s submission did not include an application for further review (“AFR”), as the pages on CBP Form 19 that relate directly to AFR are completely blank, and Protestant’s submission, which only mentions a protest, does not make any arguments as to why Protestant qualifies for AFR.
On September 14, 2022, the VRU forwarded the protest to Regulations and Rulings’ Carriers, Cargo Security and Restricted Merchandise Branch for a decision, requesting guidance as to the resolution of the legal issues that Protestant raises.
ISSUE:
Whether the costs for which the protestant seeks relief are dutiable, non-dutiable, or remissible under 19 U.S.C. § 1466?
LAW AND ANALYSIS:
As an initial matter, we note the protest was timely filed, having been filed within 180 days of the date of duty determination. 19 U.S.C. § 1514(c)(3) and 19 C.F.R. § 174.12(e). The entry was liquidated on April 22, 2022, and the instant protest was filed on July 15, 2022. However, we note that the Protestant did not make a request for further review as required by 19 C.F.R. § 174.24 because it did not provide a statement advising the basis of further review or describing the facts and law justifying its request further review. In fact, the entire second page of CBP Form 19 is blank. Furthermore, Protestant’s arguments on the protest, submitted in a separate document from Form 19, do not make any arguments to justify an Application for Further Review (“AFR”), as required by 19 C.F.R. § 174.25. As a result, Protestant does not qualify for AFR.
However, the Vessel Repair Unit (“VRU”) is requesting guidance as to the resolution of the legal issues at hand. In forwarding the subject protest, the VRU explained that it had denied relief from duty on the U.S. invoices at issue, it was looking for our final determination. Accordingly, this response constitutes internal advice per 19 C.F.R. § 177.11. This conversion to internal advice in the absence of AFR is consistent with prior CBP rulings. See, e.g., HQ H239257, dated July 25, 2013.
19 U.S.C. § 1466(a) requires the payment of a 50% ad valorem duty on the “[t]he equipments, or any part thereof . . . 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 to engage in the foreign or coasting trade, or a vessel intended to be employed in such trade...” This provision is implemented by 19 C.F.R. § 4.14, which also outlines the bond requirements, entry requirements, and deadlines for submitting evidence of the cost of foreign repairs. Pursuant to 19 C.F.R. § 4.14(e), each vessel repair entry “must show all foreign voyage expenditures for equipment, parts of equipment, repair parts, materials and labor.” In addition, 19 C.F.R. § 4.14(h) states the following:
(h) Justifications for relief from duty. Claims for relief from the assessment of vessel repair duties may be submitted to CBP…
(2) Relief from duty under 19 U.S.C. 1466(d). Requests for relief from duty under 19 U.S.C. 1466(d) consist of claims that a foreign shipyard operation or expenditure involves any of the following: …
(ii) U.S. parts installed by regular crew or residents. Relief will be granted if equipment, parts of equipment, repair parts, or materials used on a vessel were manufactured or produced in the United States and were purchased in the United States by the owner of the vessel. It is required under the statute that residents of the United States or members of the regular crew of the vessel perform any necessary labor in connection with such installations.
Furthermore, 19 C.F.R. § 4.14(i)(1)(i) requires that applications for relief from the assessment of a vessel repair duty must include “[i]temized bills, receipts, and invoices.” Lastly, CBP has held that the burden rests on the protestant to establish, by adequate, clear, and satisfactory documentary evidence, that an item is non-dutiable under 19 U.S.C. § 1466. See HQ H035597.
Citing C.S.D. 79-2, 13 Cust. B. & Dec. 993 (1979), Protestant argues that that regulatory inspections are not subject to duty upon entry. Indeed, CBP has held that inspections not resulting in repairs are not dutiable. See HQ H035597, citing American Viking Corp. v. United States, 37 Cust. Ct. 237, 247, C.D. 1830 (1956) and HQ 110395, dated September 7, 1989. Where periodic surveys are undertaken to meet the specific requirements of a classification society or insurance carrier, for example, the cost of the surveys is not dutiable even when dutiable repairs are undertaken as a result of the survey. See HQ H035597, citing C.S.D. 79-277. By contrast, where an inspection or survey is conducted merely to ascertain the extent of damages sustained or whether repairs are deemed necessary, the costs are dutiable as part of the repairs which are accomplished. In addition, C.S.D. 79-277 does not exempt repair work done by a shipyard in preparation of a required survey from duty. See HQ H035597, citing C.S.D. 79-2, 13 Cust. Bull. and Dec. 993 (1979) and C.S.D. 79- 277, 13 Cust. Bull. and Dec. 1395, 1396 (1979).
In the present case, Tidewater has submitted invoices and certifications from the inspection and surveying firms, attesting that their services were associated with annual regulatory inspections pursuant to the requirements of regulatory bodies. These certifications also attested that the firms carrying out these inspections and surveys are accredited by the relevant vessel classification society to perform these inspections and surveys. For example, in a statement dated May 9, 2022, the company A.G. Crane Rigging Inspection Works, located in Trinidad, notes that it had performed an annual inspection and certification of the vessel’s solid boom pedestal hydraulic crane. This certification, which is on A.G. Crane Rigging Inspection Works’ letterhead, notes that it performed this inspection to comply “with relevant regulatory requirements of the vessel’s flag state, classification society and the IMO.” In addition, this certification also notes that the company is “a recognized specialist by the American Bureau of Shipping and other regulatory bodies and is authorized to perform annual inspection and issue certifications.” Invoices showing the work done and its attendant cost were also submitted. As such, we find that this is a periodic survey undertaken to meet the specific requirements of classification societies such as the American Bureau of Shipping and the IMO, and the costs are not dutiable. We note that this certification and its attached invoices apply to item numbers two and three on the spreadsheet that the VRU compiled of potentially dutiable items at issue here.
Similarly, Tidewater submitted similar invoices and certifications for items numbered 10, 11, 168, 192 through 197, 270 and 280 on the VRU’s spreadsheet of potentially dutiable items. Given that these invoices and certifications provide the same information as the A.G. Crane Rigging Inspection Works invoices and certification cited above, we find that these items are also periodic surveys undertaken to meet the specific requirements of classification societies such as the American Bureau of Shipping and the IMO, and the costs are not dutiable.
Next, we examine the items that Tidewater argues were either manufactured in the U.S., or if imported into the U.S., already had duties paid on them. As noted above, 19 C.F.R. § 4.14(h) allows relief from the assessment of vessel repair duties for repairs made in a foreign shipyard if the equipment, parts of equipment, repair parts, or materials used on the vessel were manufactured or produced in the U.S. and were purchased in the U.S. by the owner of the vessel, and U.S. residents or members of the vessel’s regular crew perform any necessary labor in connection with such installations.
Furthermore, 19 C.F.R. § 4.14(i)(l)(i) provides a specific listing of the kinds of documentary evidence which must be filed to support applications for relief from vessel repair duties. This list begins with “itemized bills, receipts, and invoices.” In addition, CBP has consistently found that unlike invoices, purchase orders submitted without corroborating evidence are insufficient to grant relief. See HQ 116525 (Dec. 21, 2005); HQ 111309 (Mar. 5, 1991) (“unlike an invoice, which is a document frequently generated by a third party contemporaneously with delivery, a purchase order is a less certain variable in the delivery chain”). CBP has also consistently held that internally generated documents (e.g., purchase orders, notarized statements of corporate officers), without more evidence, are self-serving statements that do not constitute sufficient proof in support of the position postured. See HQ H252033 (June 18, 2014), HQ H246931 (Apr. 3, 2014), HQ H057909 (March 2, 2010), and HQ 111942 (March 15, 1995).
In the present case, Tidewater claims that all work aboard the vessel was performed by the crew, and has submitted a number of documents to support its claim that the items at issue are not dutiable. They have produced invoices from the companies from which the parts at issue were purchased, as well as affidavits stating that these items were either manufactured in the U.S. or, if they were imported, then the applicable duties have already been paid on them. These affidavits have been on company letterhead and have been signed by officers at the companies selling the purchased parts. As a result, they are unlikely to be the type of self-serving, internally generated documents that CBP has found insufficient in the past. As a result, we find that the subject invoices and certifications for line item numbers 4-9, 12-16, 28, 29, 107-111, 119, 122, 140-148, 200, 202-204, 206, 210, 211-213, 263, and 265-268 in the VRU’s spreadsheet constitute sufficient proof that the items stated therein are not subject to duty.
The affidavit and that does not meet this standard is the affidavit for Line Item 120 (Tidewater’s Exhibit 120). This affidavit states that “we hereby confirm that all parts supplied are stocked and are of European origin, here in Houma, Louisiana for worldwide distribution. They are manufactured to Alfa Laval, GEA, Tranter and IMO specifications, and conform to the units components.” Although the company providing this affidavit is located in the U.S., there is no mention of parts at issue being imported, or duties being paid on them. As a result, we find that this constitutes insufficient proof that these parts are nondutiable items, and they remain subject to duty.
HOLDING:
The evidence presented regarding foreign repairs to the subject vessel is sufficient to warrant remission pursuant to 19 U.S.C. §1466(d)(1) for line items 4-9, 12-16, 28, 29, 107-111, 119, 122, 140-148, 200, 202-204, 206, 210, 211-213, 263, and 265-268. Tidewater’s claim is therefore allowed with respect to these items.
The evidence presented regarding foreign repairs to the subject vessel is insufficient to warrant remission pursuant to 19 U.S.C. §1466(d)(1) for line item number 120. Tidewater’s claim is therefore denied with respect to this item.
Please provide a copy of this ruling to Tidewater. Sixty days from the date of the decision Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
W. Richmond Beevers
Supervisory Attorney-Advisor/Chief
Cargo Security, Carriers and Restricted Merchandise Branch
Office of International Trade, Regulations & Rulings
U.S. Customs and Border Protection