VES-13-07/18 CO:R:P:C 111204 JBW
Deputy Assistant Regional Commissioner
Commercial Operations
c/o Regional Commissioner
New Orleans, LA 70130-2341
RE: Vessel Repair; Cleaning; Debris; Staging; ULTRAMAR, voyage
90; 19 U.S.C. 1466.
Dear Madam:
This letter is in response to your transmittal of July
25, 1990, forwarded for our review and ruling regarding the
petition for review of application decision HQ 110250, dated May
24, 1990.
FACTS:
The record reflects that the subject vessel, the
ULTRAMAR, a United States flag vessel, arrived in the port of New
Orleans, La., on December 9, 1988. Vessel Repair entry number
C20-0006468-6, Customs Form 226, was filed on December 13, 1988,
indicating work performed on the ship in Livorno, Italy.
The vessel owner timely filed an application for relief
on February 8, 1989. The issues raised in this letter were
addressed in Headquarters Ruling Letter 110250, dated May 24,
1990. The petitioner presents two challenges to this ruling:
First, the petitioner argues that the cost of removing debris
following dutiable repairs is not subject to duty. Second, the
petitioner contends that no duty should be assessed for the use
of staging for the cleaning and inspection of the main emergency
switchboards.
ISSUES:
(1) Whether the cost of removing debris following
repairs is dutiable under 19 U.S.C. 1466 (1988).
(2) Whether the petitioner has submitted adequate
justification or evidence to demonstrate that the cost of
staging for cleaning and inspection of the main emergency
switchboards was necessary.
LAW AND ANALYSIS:
Title 19, United States Code, section 1466, 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 foreign or
coastwise trade, or vessels intended to engage in such trade.
In considering the cost of removing debris following
dutiable repairs, counsel for the petitioner cites a memorandum
issued by this office to the Pacific Region Vessel Repair
Liquidation Unit in which we held that the cost of removing
debris following dutiable repairs is not dutiable. Headquarters
Memorandum 107829, dated April 1, 1986. We do not believe,
however, that this memorandum is dispositive.
The Customs Service has consistently held that cleaning
is not dutiable unless it is performed as part of, in preparation
for, or in conjunction with dutiable repairs or is an integral
part of the overall maintenance of the vessel. E.g., Headquarters
Ruling Letter 110841, dated May 29, 1990 (and cases cited
therein). Removal of debris following repairs is logically
nothing more than a cleaning performed in conjunction with those
repairs. Notwithstanding the one cited statement to the
contrary, we have held in at least one subsequent determination
that removal of debris in conjunction with dutiable repairs is
dutiable. Headquarters Memorandum 109341, dated July 15, 1988
(We note that this determination has been challenged in the
United States Court of International Trade by counsel in this
case). Counsel, however, fails to cite this memorandum, nor does
counsel attempt to justify the distinction between removal of
debris and cleaning that is suggested by the earlier memorandum.
Rather, counsel, without claiming or establishing reliance, urges
us to abandon well established precedent based on a fugitive
memorandum. As stated earlier, we do not distinguish between
removing debris and cleaning under the facts in this case, and we
therefore find that removal of debris is cleaning and is
dutiable if performed in conjunction with dutiable repairs.
The petitioner also argues that the cost of staging for
the cleaning and inspection of the main emergency switchboards
falls within the class of items that are not subject to duty
under 19 U.S.C. 1466. As a general rule, the cost of erecting
and removing staging is not subject to duty. Headquarters Ruling
Letter 106827, dated July 19, 1984. In the present case, we fail
to understand the necessity of erecting and removing staging for
the cleaning and inspection of an item that on most ships is
readily accessible without staging. We thus question the
authenticity of what appears to be an unnecessary or, at best, an
excessive charge. In ruling on the application in this case, we
requested that the petitioner submit further evidence to
demonstrate the necessity for this item. The petitioner has
failed to submit the requested reasonable evidence to support the
claim of nondutiability for the use of the staging. Absent such
proof, the cost of the staging is dutiable.
Furthermore, we held in the application that, with the
exception of the staging, costs contained in Invoice Item No.
401 were nondutiable as costs of cleaning and inspection. Upon
reexamination of this item, we note that the "main circuit T/G
braker [sic]" was overhauled. The invoice breakout suggests that
the overhaul was in the nature of a repair to the switchboard:
"Parts and materials DLS 200; Repairs/renewals DLS 520." We
conclude, therefore, that these two breakout items are also
subject to duty as repairs under 19 U.S.C. 1466.
HOLDINGS:
(1) The cost of removing debris is cleaning and is
dutiable if performed in conjunction with dutiable repairs.
(2) The petitioner has failed to submit adequate
evidence regarding the nondutiability of the cost of staging for
the cleaning and inspection of the main emergency switchboards.
Therefore, that cost is dutiable. The costs relating to parts
and materials and repairs/renewals under Invoice Item No. 401 are
also dutiable.
Sincerely,
Stuart P. Seidel
Director, Regulatory Procedures
and Penalties Division