VES-13-18-CO:R:P:C 110661 KVS
Deputy Assistant Regional Commissioner
Commercial Operations Division
423 Canal Street
New Orleans, LA 70130-2341
RE: Vessel repair; cleaning; casualty
Vessel: S/S GOLDEN ENDEAVOR
Date of Arrival: August 20, 1989
Port of Arrival: New Orleans, Louisiana
Vessel Repair Entry No. C20-0024662-2
Dear Sir:
This is in response to your memorandum of November 27, 1989,
which forwards for our consideration an Application for Relief
filed in connection with the GOLDEN ENDEAVOR, vessel repair entry
no. C20-0024662-2. Our findings are set forth below.
FACTS:
The GOLDEN ENDEAVOR (owned by Irving Trust Co. and operated
by American Maritime Transport Inc.) underwent foreign shipyard
operations at Athens, Greece, from July 4, 1989, to July 31,
1989. The vessel arrived in the United States on August 20,
1989, at New Orleans, Louisiana. On October 11, 1989, American
Maritime Transport (hereinafter referred to as "applicant")
requested an extension for the time in which to file an
application for relief from vessel repair duties. The request
was granted and the application for relief was timely filed on
November 17, 1989.
In support of its application for relief, the applicant has
submitted Hellenic Shipyards Co. invoice no. 275, dated October
11, 1989. Of the items listed on this invoice, thirteen have
been submitted for our review.
ISSUE:
Whether the foreign shipyard work performed on the subject
vessel for which the applicant seeks relief is dutiable under 19
U.S.C. 1466.
- 2 -
LAW AND ANALYSIS:
Title 19, United States Code, section 1466(a), 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 the foreign or
coastwise trade, or vessels intended to be employed in such
trade.
In its application of 19 U.S.C. 1466(a), the Customs Service
has held that certain shipyard operations should not be
classified as dutiable repairs within the meaning of the vessel
repair statute. With regard to Item 204 - Hull Painting, the
invoice lists staging in the amount of $2,500.00. In C.I.E.
1822/58, Customs held that the cost of staging is not dutiable.
Accordingly, we find the staging cost to be non-dutiable.
Item 225 Anchor Chains - A.B.S. Inspection, and Item 501
Port and Starboard Boilers -Inspection - U.S.C.G., both list
cleaning costs which are claimed to be non-dutiable as incident
to a classification survey. The facts before us indicate that,
in addition to inspections, both of these areas were the site of
dutiable repairs. We have held that cleaning operations are not
subject to duty unless performed in preparation for, or as an
integral part of repairs. (C.I.E. 51/61; see also Customs Letter
Rulings 109789 GV (dated November 4, 1988) and 109306 BEW (dated
November 7, 1988)). Here, although the cleaning under
consideration may have been necessary for an A.B.S. and U.S.
Coast Guard inspections, it was also an integral part of the
repairs carried out. Therefore, we find these costs to be
dutiable.
Item 227 - Anchor Replacement, is claimed to be non-dutiable
by reason of casualty. Title 19, United States Code, section
1466(d)(1) provides that the duty levied by section 1466(a) may
be remitted if good and sufficient evidence is furnished
establishing that the vessel was compelled by stress of weather
or other casualty to put into a foreign port to make repairs to
secure the safety and seaworthiness of the vessel to enable her
to reach her port of destination. In order to qualify for duty
remission, the party seeking relief must show both the occurrence
of a casualty and that the repair was necessary for safety and
seaworthiness.
In the case under consideration, the applicant has not
demonstrated that the vessel was unseaworthy. To the contrary,
following the alleged casualty which occurred on June 13, 1989,
the vessel sailed from Port Said, Egypt (which has adequate
repair facilites and where the damage was surveyed by A.B.S. in
report no. PD1928, dated June 17, 1989) to the Greek shipyard
for a scheduled drydocking before making this repair on July 31,
- 3 -
1989. Accordingly, we find that the cost of the replacement is
dutiable. However, the amount listed for rigging is non-
dutiable.
Additionally, we note that neither A.B.S. report no. PD1928,
datd June 17, 1989, relating to anchor damage and A.B.S. report
no. PD 1929, also dated June 17, 1989, relating to hull damage,
has been submitted by the applicant). Previously, we have held
that the cost of obtaining damage surveys is dutiable.
Therefore, we require that the applicant submit the missing
reports. If the A.B.S. reports are in the nature of damage
surveys, please liquidate accordingly.
Item 303 - Port Sideshell Repair (Tanks 2 and 3); Item 350
Starboard Sideshell Repair (Tank 4); Item 408 Evaporator; Item
409 Evaporator Deck - Scale and Paint Prior to Doubling; Item 504
Superheater Tube Renewal Port and Starboard Boilers; and Item 505
Boiler Valve Inspection all include a charge for cleaning. The
applicant, in asserting that these charges are not dutiable,
contends that the cleaning costs were not related to any repairs
but were done in preparation for future cargo. In Northern
Steamship Co. v. United States, C.D. 2514, the Customs Service
held that cleaning undertaken for the purpose of readying the
ship for future cargo is not dutiable. That case can be
distinguished from the present situation in that no repairs were
made to the areas cleaned in Northern Steamship, supra. Here, as
a letter from the Port Engineer (Exhibit I(f)) indicates, the
cleaning was necessary to remove the debris resulting from
repairs. Therefore, under the facts before us, the cleaning
undertaken was an integral part of repairs within the meaning of
C.I.E. 51/61, and as such, these costs are dutiable.
Item 330 Incinerator Hookup, is claimed by the applicant to
be a non-dutiable permanent modification to the vessel's hull and
fittings. However, examination of the shipyard invoice reveals
that repairs were also included in the cost listed. In C.I.E.
1325/58, the Customs Service held that the entire cost of an item
is dutiable where non-dutiable charges are not itemized from
dutiable items. Here, the invoice under consideration does not
segregate the costs of the alleged modification from the cost of
the repairs completed. Accordingly, we find that the entire
amount is dutiable.
Item 406 Megger Readings - Service includes maintenance and
servicing functions as well as inspection. Here, as above, there
is no segregation of maintenance and inspection costs.
Accordingly, the entire amount is dutiable.
Item 412 Fire and Butterworth Connection to Sea Chest
Modification is claimed by the applicant to be a non-dutiable
permanent modification to the hull and fittings. However,
- 4 -
examination of the shipyard invoice reveals that this alleged
modification utilizes valves which were overhauled by the
shipyard. Since the invoice does not itemize between
modification and repair costs, we find the entire amount to be
dutiable, less the itemized amounts for rigging and ventilation.
HOLDING:
After thorough review of the evidence submitted, and as
detailed in the Law and Analysis portion of this ruling, we
recommend that the application for relief be granted in part and
denied in part.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch