VES-13-18-CO:R:P:C 110717 KVS
Deputy Assistant Regional Commissioner
Classification and Value Division
ATTN: Regional Vessel Repair Liquidation Unit
6 World Trade Center
New York, New York 10048-0945
Re: Vessel repair; modification; heating coil
Vessel Repair Entry No. C10-4904285-1
Vessel: S.S. POMEROL V-79
Date of Arrival: July 22, 1987 at New York, New York
Dear Sir:
This is in response to your memorandum dated December 18,
1989, which transmits for our advice a petition for review for
the vessel S.S. POMEROL. Our findings are set forth below.
FACTS:
The record reflects that the vessel arrived at the port of
New York on July 22, 1987 after having undergone foreign shipyard
work at Setubal, Portugal and Antwerp, Belgium. By letter of
September 20, 1987, the ship's owner (hereinafter referred to as
"petitioner") requested a 30-day extension of the time in which
to file an application for relief. By letter of October 20,
1987, the petitioner requested and received a second 30-day
extension of time in which to file an application for relief.
The application for relief was ultimately filed in a letter dated
November 23, 1987. The application was granted in part and
denied in part by Customs Letter Ruling 110291 RAH (dated July
12, 1989). The current case involves a petition for relief filed
by the applicant on August 17, 1989.
ISSUE:
Whether the work performed on the subject vessel constitutes
dutiable repairs within the meaning of 19 U.S.C. 1466.
LAW AND ANALYSIS:
Title 19, United States Code, section 1466, provides, in
pertinent part, that the equipment purchased for and the 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
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or intended to be employed in those trades shall be subject to
the payment of an ad valorem duty of 50 percent of the cost of
that equipment and those repairs.
Regarding Setenave invoice number 1/70/093, order 72.337,
our decision on the application for relief filed by the applicant
allowed as non-dutiable several charges for staging removal where
the cost was segregated from the cost of other work performed.
Therefore, item 114 in the amount of $550.00 for staging is also
non-dutiable, by reason of its segregation from other costs. The
cost of obtaining a gas free certificate is an ordinary and
necessary expense incident to repair operations and, accordingly,
is dutiable. Upon liquidation, however, this charge should be
apportioned between dutiable and non-dutiable items.
Regarding Gatni Ship Repairs & Marine Services, Ltd. invoice
number 029/87, our decision on the application for relief filed
by the applicant held the cost listed for installation of heating
coils dutiable by reason of insufficient evidence - no proof was
offered to indicate that the coils constituted a new design
feature. We find the evidence submitted with this petition
equally unacceptable. The new submission contains no statement
by the shipyard as to the condition of the vessel prior to the
commencement of the work or exact nature of the work performed.
The only proof offered is a set of barely-intelligible, hand-
drawn sketches and a self-serving statement as to the nature of
the work signed by an employee of the petitioner. The Customs
Service has held that internally-generated documents, without
more, do not constitute sufficient proof of cost (see Customs
Letter Ruling 110788 KVS (dated March 28, 1990)). In this case,
although the shipyard invoice was also submitted, it provides
only a single sentence description of the work performed.
Therefore, lacking any definitive proof that the work performed
constitutes a new design feature rather than a replacement or
restoration, we find the installation of heating coils to be
dutiable.
Likewise, as to the Surtest Marine Ltd. invoice number 8710
for ultrasonic gauging, the only evidence offered to demonstrate
that the inspection was not part of the repairs performed is the
same signed statement by the employee of the petitioner. As we
have indicated, such proof is unacceptable and we hold the costs
to be dutiable.
Coast Guard invoice number 03773109 in the amount of
$1752.54 and Coast Guard invoice number 03773110 in the amount
of $2755.13 for inspections we hold to be non-dutiable. Although
Customs has previously held survey costs to be dutiable where no
proof is offered as to the nature of the survey, the invoices
presented here include only costs assessed for the transportation
of, and per diem for, Coast Guard personnel. As neither of these
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charges is dutiable, we hold both invoices to be non-dutiable.
"Consumable supplies" are generally defined as "supplies
for the consumption, sustenance, and medical needs of the crew
and passengers during the voyage." H.E. Warner, Trustee v.
United States, 28 CCPA 143, at 150, C.A.D. 136 (1940), quoting
Southwestern Shipping Co. v. United States, 13 Cust. Ct. App. 74,
T.D. 40934 (1925). Consumable supplies generally are not subject
to vessel repair duties, unless used in effecting dutiable
repairs (C.I.E. 196/60). Therefore,in regards to the Vanas
invoices from F. VAN ASSCHE & Zonen p.v.b.a., Titan Supply
Division, we find the following to be non-dutiable:
invoice #5190 - for foodstuffs in the amount of 41.900 BFR;
invoice #5191 - for foodstuffs, in the amount of 19.854 BFR;
invoice #5195 - for foodstuffs, in the amount of 17.208 BFR;
invoice #5196 - for toilet paper, in the amount of 2.160 BFR;
invoice #5192 - for a total amount of 20.860 BFR, for the
following items:
item 1: styrofoam cups, in the amount of 5.440 BFR;
item 3: aluminum foil, in the amount of 1.190 BFR;
item 5: plastic wrap, in the amount of 1.750 BFR;
item 6: laundry detergent in the amount of 12.480 BFR
The applicant asserts that the diesel oil listed on Vanas
invoice 15240 is also a consumable supply and thus entitled to
duty-free status. We have determined, however, that the ultimate
dutiability of a "consumable supply" depends upon its ultimate
usage. In C.I.E. 196/60, we held that sulphuric acid, if
purchased to be used by the crew to remove scales from the
evaporator, would constitute a consumable supply. We also held
that the sulphuric acid, if used in effecting dutiable repairs,
would be dutiable as a part of the repairs. While diesel oil
might be considered a consumable supply in certain circumstances,
we are unable to reach that conclusion on the basis of the
evidence submitted. In the absence of certificate by the master
or other responsible officer of the vessel concerning the
purchase and ultimate use of the diesel oil, we find the cost to
be dutiable. A mere statement by the petitioner without
supporting documentary evidence will not establish its status as
a non-dutiable consumable supply.
In response to requests for advice regarding the
dutiability under 19 U.S.C.1466 of equipments, parts, repair
materials, etc., which have been manufactured and purchased in
the United States for installation abroad on U.S.-documented
vessels, Customs, by memorandum dated April 19, 1989, published
in the United States Customs Bulletin and Decisions, Vol. 23, No.
19, dated May 10, 1989, held that the use of foreign labor to
install U.S. parts subjects both the parts and the labor to
duty.
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The petitioner, in contesting the dutiability of the
invoices listed on Schedule A, contends that the Customs position
set forth above is not supported by 1466, is a departure from
Customs long-standing position as established in T.D. 75-257),
and that notice should have been given before its implementation.
Notwithstanding counsel's argument as to the applicability
of section 1466, we note that upon further review of this matter,
it appears that the implementation of Customs policy as set forth
in the May 10, 1989, Customs Bulletin should have been preceded
by publication of a notice in the Federal Register soliciting
comments from interested parties. Accordingly, until such time
as said notice is published, Customs will uphold its position as
delineated in T.D. 75-257, which held that where equipment,
parts, repair materials, etc., which have been manufactured and
purchased in the United States are installed abroad on U.S.-
documented vessels by other than U.S. residents or regular crew,
the labor alone is dutiable.
In our adherence to the policy set forth in T.D. 75-257,
however, it has come to our attention that documents have been
submitted which misrepresent the place of manufacture of various
articles. Inasmuch as we have come to learn of this
misrepresentation, it is our policy to require evidence beyond an
affidavit from an interested party to establish direct evidence.
Therefore, we require direct evidence of U.S. manufacture as well
as U.S. purchase for remission to be granted.
In the petition for review currently under consideration,
the petitioner has submitted invoices for the contested articles
which indicate only purchase in the United States. Since no
direct evidence of U.S. manufacture has been submitted, we find
the following invoices to be dutiable:
1) Maritime Power Corp. invoice # 87-6-24
Dated: 6/16/87
2) Goodall Rubber Co. invoice # 100773
Dated: 6/19/87
3) Raytheon Service Co. invoice # B7282-52051
Dated: 5/29/87
4) Electrocatalytic, Inc. invoice # 612901
Dated: 6/18/87
5) Williams & Wells Co. invoice #134307
Dated: 6/12/87
6) Williams & Wells Co. invoice # 134985
Dated: 6/30/87
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Regarding item 7 on Schedule A, we find that Molner Service
invoice # 3674 (dated 7/22/87) which lists charges for
transportation from Seattle to Lisbon and back, meals, and per
diem for a repairman incurred in connection with the repair of
the turbine generator was erroneously held to be dutiable in
Customs Letter Ruling 110291 RAH (dated 7/12/89). We find these
charges to be non-dutiable.
The petitioner also requests relief for two other items
listed on Schedule A:
7) Jotun Valspar invoice # 9210133 (dated 5/22/87)
8) Jotun Valspar invoice # 5415047 (dated 5/21/87)
Although the petitioner requests relief for these items, the
invoices were not submitted with the application for relief nor
with the petition for review currently under consideration.
Therefore, we find these charges to be dutiable.
HOLDING:
Following a thorough review of the evidence submitted, and
as detailed in the "Law and Analysis" portion of this ruling, we
recommend that the petition for review be granted in part and
denied in part.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch