VES-13-18-CO:R:IT:C 113187 GEV
Regional Director
Commercial Operations Division
U.S. Customs Service
423 Canal Street
New Orleans, Louisiana 70130-2341
RE: Vessel Repair Entry No. C52-0049904-0; S/S SEMINOLE;
V-517; 19 U.S.C. 1466
Dear Sir:
This is in response to your memorandum dated August 4, 1994,
forwarding an application for relief from duties assessed pursuant
to 19 U.S.C. 1466. Our findings on this matter are set forth
below.
FACTS:
The S/S SEMINOLE is a U.S.-flag vessel owned and operated by
Mobil Oil Corporation. The vessel had foreign shipyard work
performed on her at Astilleros Espanoles Shipyard in Cadiz, Spain
from January 12, 1994 to March 1, 1994. On March 16, 1994, the
vessel arrived in the United States at Port Everglades, Florida.
A vessel repair entry covering the work in question was filed on
the date of arrival.
Pursuant to two extensions of time, an application for relief
with supporting documentation was timely filed on July 6, 1994.
The application proffers several bases on which relief is requested
for numerous items contained within the entry.
ISSUE:
Whether the foreign shipyard work in question for which the
applicant seeks relief is 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 payment of duty in the amount of 50 percent ad valorem of
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 engage in such trade.
Upon reviewing the record in its entirety, we concur with the
applicant's claims with the exception of those items discussed
below.
Invoice 2, Item 13 covers the cost of touch up painting. The
applicant offers no basis on which relief should be granted, nor
is any such basis apparent. Accordingly, the cost of this item
remains dutiable.
Invoice 2, Item 15 covers the cost of cargo tank cleaning
stated to be in preparation for receiving cargo. However, upon
examining the record we note that the invoices submitted are
replete with references to repairs to the cargo tanks. Therefore,
in the absence of evidence to the contrary, it is our position that
the cleaning covered by this particular item was in preparation for
dutiable repairs and is therefore dutiable (see C.I.E.s 429/61 and
698/62).
Invoice 2, Item 25 covers the cost of furnishing a temporary
office facility. This cost is dutiable under the vessel repair
statute. (See Customs rulings 111692, 112243 and 112901 each
citing T.D. 55005(3))
Invoice 2, Item 29.01 covers the cost of a washdown of the
entire hull immediately upon drydocking and is stated to be in
preparation for an ABS survey. However, the invoices submitted
are replete with references to dutiable hull coating and painting.
Therefore, in the absence of evidence to the contrary, it is our
position that the washdown of the hull was in preparation for
dutiable work and is therefore dutiable (see C.I.E.s 429/61 and
698/62).
Invoice 2, Item 31 covers the cost of secretarial services.
This cost is dutiable under the vessel repair statute. (See
Customs rulings 111692, 112243 and 112901 each citing T.D.
55005(3))
Invoice 2, Item 34 covers the cost of sea trials. It has long
been Customs position that sea trials are dutiable if done as a
result of dutiable repairs. (See Customs rulings 107106, 107847,
108858 and 110197) Our review of the record indicates that this
is what occurred in this case. Accordingly, the cost of the sea
trials covered by this item is dutiable.
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Invoice 2, Item 38 covers the cost of furnishing 24-hour
shipyard security and a safety clinic for the vessel and its crew
during the period of time the vessel was in the shipyard. This is
considered a drydocking service, akin to those determined to be
non-dutiable pursuant to C.I.E. 1188/60. This cost is therefore
non-dutiable.
Invoice 2, Item 39 covers the cost of on-site food service
for the shipyard personnel. Inasmuch as travel and lodging
expenses are not dutiable pursuant to C.I.E. 518/63, the cost of
this item, which is akin to charges such as those, is non-dutiable
as well.
Invoice 3, Items 1, 3 and 5 cover the costs of cleaning the
anchor and anchor chain, chain locker, and sea chests and
strainers, respectively, all of which are stated to be in
preparation for an ABS survey. However, upon further review of
the record it appears that this work was done in preparation for
dutiable painting (see Invoice 3, Item 6). These costs are
therefore dutiable.
Invoice 3, Item 10 covers the cost of work done to sea valves
stated to be in preparation for an ABS survey. We note, however,
that certain repairs are detailed within this particular item. In
view of the lack of segregation between dutiable and non-dutiable
work, pursuant to C.I.E.s 1325/58 and 565/55 this entire item is
dutiable.
Invoice 3, Items 12.01 - 12.06 cover work done to the rudder.
Upon reviewing the record in its entirety, it is apparent that this
work was done in conjunction with dutiable repairs referenced in
ABS survey report number CZ 5858-J, item 3 ("Rudder Assembly").
Accordingly, the cost of this item is dutiable.
Invoice 3, Item 15.04 covers the cost of tailshaft repairs.
The applicant has provided no reason why relief should be granted.
The cost of this item is therefore dutiable.
Invoice 6, Item 2 covers the cost of washing the port and
starboard boilers stated to be in preparation for an ABS survey.
However, in view of the references to boiler repairs contained
within the record and in the absence of evidence to the contrary,
we consider such washing to be done in preparation for dutiable
repairs and therefore dutiable (see C.I.E.s 429/61 and 698/62).
Invoice 6, Items 6 and 7.01 cover the cost of various work
done to the boilers and stated to be in preparation for an ABS
survey. However, a review of the record indicates that this work
was performed in conjunction with dutiable repairs (see ABS survey
number CZ 5858-J, item 8 ("Main Boilers")). Accordingly, these
costs are dutiable.
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Invoice 35, Item 1.02 covers the cost of a value added tax
(VAT) on the cost of foreign materials. Pursuant to C.I.E.s 62/60,
94/60, 196/60, 538/62 and T.D. 55005(3), the VAT is dutiable as
part of the dutiable cost of the materials.
Invoice 36, Item 1 covers the costs of labor, hotel, travel
and food expenses of a U.S. technician to perform engineering and
supervisory services during the period of the shipyard work in
question. Customs has long-held hotel, travel and food costs to
be non-dutiable. In regard to the U.S. labor costs involved, the
fact that such labor was performed in conjunction with the
installation of foreign parts renders it dutiable (see T.D. 75-
257).
Invoice 37, Items 1.01 and 1.02 cover the costs of what is
alleged to be the transportation of deck and engine "supplies".
However, it is unclear as to what the "supplies" were and whether
these costs were for transporting parts and materials or for their
actual purchase. Accordingly, in the absence of further evidence
clarifying this matter, these costs are dutiable.
It should be noted that upon reviewing the record in its
entirety, the applicant has only provided U.S. invoices for those
parts which are alleged to be of U.S. manufacture. While this was
all that Customs required for granting relief in light of our
interpretation of 19 U.S.C. 1466(h)(2), since that statutory
provision expired on December 31, 1992 we require verification,
from either the vendor or manufacturer, that the parts were made
in the U.S. rather than imported. Accordingly, the costs of the
parts in question are dutiable. Parenthetically, we note that
should 1466(h)(2) be retroactively re-enacted, the invoices
contained within the record would be sufficient to grant relief.
HOLDING:
The foreign shipyard work for which the applicant seeks relief
is dutiable in part under 19 U.S.C. 1466 as discussed in the Law
and Analysis section of this ruling.
Sincerely,
Arthur P. Schifflin
Chief