VES-13-18-RR:IT:EC 113673 GOB
Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 107
P.O. Box 2450
San Francisco, CA 94126
RE: Vessel Repair Entry No. 110-6461860-3; 19 U.S.C. 1466;
PRESIDENT TRUMAN, V-82; Application
Dear Madam:
This is in response to your memorandum dated September 13,
1996, which forwarded the application submitted by American
President Lines, Ltd. (the "applicant") with respect to the
above-referenced vessel repair entry.
FACTS:
The PRESIDENT TRUMAN (the "vessel"), a U.S.-flag vessel
owned and operated by the applicant, arrived at the port of
Seattle, Washington on April 11, 1996. The subject vessel repair
entry was subsequently filed. The vessel underwent certain
foreign shipyard work in Korea, Taiwan, and Hong Kong in March
and April of 1996.
ISSUE:
Whether the subject items are dutiable pursuant to 19 U.S.C.
1466.
LAW AND ANALYSIS:
19 U.S.C. 1466 provides for the payment of duty at a rate of
fifty 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 be employed
in such trade.
The subject entry is a "post-Texaco" entry, i.e., an entry
filed after the appellate decision in Texaco Marine Services,
Inc., and Texaco Refining and Marketing, Inc. v. United States,
44 F.3d 1539 (CAFC 1994), aff'g 815 F.Supp. 1484 (CIT 1993).
Accordingly, the Texaco decision applies to this entry. Our
position with respect to post-Texaco entries has been stated in
detail in many rulings, as well as in Memorandum 113350 dated
March 3, 1995, published in the Customs Bulletin and Decisions on
April 5, 1995 (Vol. 29, No. 14, p. 24).
We will use the numbering system which you used in working
on the application.
1. General Services. These costs should be prorated between
dutiable and nondutiable costs.
2. H.P. Hull Water Wash (205). The invoice reflects that
this item was incident to a nondutiable American Bureau of
Shipping ("ABS")/U.S. Coast Guard ("USCG") inspection and that no
repairs were performed. Accordingly, it is nondutiable.
3. Anchor Chain Inspection (209). The invoice reflects
that this item was a nondutiable ABS/USCG inspection and that no
repairs were performed. Accordingly, it is nondutiable.
4. Bilge Well Cleaning. (215). The invoice states:
"...muck out and wipe clean cargo hold bilge drainwells and
roseboxes." We find that this item is nondutiable.
5. Pintle Pin & Bush Survey (217). The invoice reflects
that this item was a nondutiable ABS/USCG inspection and that no
repairs were performed. Accordingly, it is nondutiable.
6. Carrier Bearing Inspection (219). The invoice reflects
that this item was a nondutiable ABS/USCG inspection and that no
repairs were performed. Accordingly, it is nondutiable.
7. Stock Nut Survey (220). The invoice reflects that this
item was a nondutiable ABS/USCG inspection and that no repairs
were performed. Accordingly, it is nondutiable.
8. Chain Locker P/S Survey (223). The invoice reflects
that this item was a nondutiable ABS/USCG inspection and that no
repairs were performed. Accordingly, it is nondutiable.
9. Ballast Deep Tank #1 Survey (226). The invoice reflects
that this item was a nondutiable ABS/USCG inspection and that no
repairs were performed. Accordingly, it is nondutiable.
10. HFO Wing Tank Surveys (229). The invoice reflects that
this item was a nondutiable ABS/USCG inspection and that no
repairs were performed. Accordingly, it is nondutiable.
11. MELO Sump Tank C Survey (230). The invoice reflects
that this item was a nondutiable ABS/USCG inspection or survey
and that no repairs were performed. Accordingly, it is
nondutiable.
12. Bow Thruster Inspection (302). The invoice reflects
that this item was a nondutiable ABS/USCG inspection and that no
repairs were performed. Accordingly, it is nondutiable.
13. Emergency and Independent Bilge Valve Inspection (304).
The invoice reflects that this item was a nondutiable ABS/USCG
inspection and that no repairs were performed. Accordingly, it
is nondutiable.
14. Propeller Inspection (307). The invoice reflects that
this item was a nondutiable ABS/USCG inspection and that no
repairs were performed. Accordingly, it is nondutiable.
15. Tailshaft Survey (309). The invoice reflects that this
item was a nondutiable ABS/USCG inspection or survey and that no
repairs were performed. Accordingly, it is nondutiable.
16. Propeller Removal for Inspection (310). The invoice
reflects that this item was incident to a nondutiable ABS/USCG
inspection and that no repairs were performed. Accordingly, it
is nondutiable.
17. Cooler, Central FCW #1 Survey, Scoop Cooler Inspection
(313). The invoice reflects that this item was a nondutiable
ABS/USCG inspection or survey and that no repairs were performed.
Accordingly, it is nondutiable.
18. Cooler, Central FCW #2 Survey, Scoop Cooler Inspection
(314). The invoice reflects that this item was a nondutiable
ABS/USCG inspection or survey and that no repairs were performed.
Accordingly, it is nondutiable.
19. Boiler, Exhaust Gas Clean for Inspection (315). The
invoice reflects that this item was incident to a nondutiable
ABS/USCG inspection and that no repairs were performed.
Accordingly, it is nondutiable.
20. Boiler, Oil-Fired Clean for Inspection (316). The
invoice reflects that this item was incident to a nondutiable
ABS/USCG inspection and that no repairs were performed.
Accordingly, it is nondutiable.
21. Shafting and Bearing Survey (317). The invoice
reflects that this item was a nondutiable ABS/USCG inspection or
survey and that no repairs were performed. Accordingly, it is
nondutiable.
22. Sea Valves, Chests, etc. Survey (318). The invoice
reflects that this item was a nondutiable ABS/USCG inspection or
survey and that no repairs were performed. Accordingly, it is
nondutiable.
23. Sea Cooling Water System Inspection (320). The
invoice reflects that this item was a nondutiable inspection or
survey and that no repairs were performed. Accordingly, it is
nondutiable.
24. Bow Thruster Inspection and Cleaning (401). The
invoice reflects that this item was a nondutiable inspection or
survey and that no repairs were performed. Accordingly, it is
nondutiable.
25. Corrugated Bulkhead FR271 Modification (501). The
applicant states that "the requirement for this modification was
a design defect' in the original construction of the vessel.
The original construction created a hard spot' which lead [sic]
to bulkhead cracking." Work performed to remedy "bulkhead
cracking" is dutiable. Accordingly, this item is a dutiable
repair under 19 U.S.C. 1466.
26. No. 3 Cargo Hold Structural Modifications (502). The
applicant states: "This again is a modification to correct an
original design defect. The P/S corner of the #3 cargo hold at
level 10790 above base line as originally designed was leading to
structural failure problems. This modification was initiated to
first strengthen the deficiency in the structure (the new insert
plate is 12mm in lieu of 8mm plate thickness), but more
importantly, to more evenly distribute the structural stresses by
increasing the inside corner radius..."
We find that this item is a dutiable repair. Based upon the
information provided, we are unable to draw a meaningful
distinction between this item and item 501, above, and item 503,
below. Those items involved a bulkhead cracking (item 501) and a
fracture (item 503). This item involves "structural failure
problems."
27. Slim-Guide Bracket to Platform Modifications (503).
The applicant states: "The existing brackets connecting the
stantion to the container "slim-guide" fractured. Rather than
just rewelding the fracture, a new design bracket was engineered,
fabricated, and installed..." This item is a dutiable repair
under 19 U.S.C. 1466. The fact that a new design bracket was
engineered, etc. does not change this result that is mandated by
a repair of a fracture.
28. Hatch Coaming Stays Modification (504). The applicant
states: "A new toe piece' was designed to correct this design
defect to better distribute the stresses by way of the 160mm
radius of the toe piece and the 30mm radius toe with a wrap-around weld." We find that this item is a nondutiable
modification.
29. Web Frame 310 Bracket Modifications (505). The
applicant states: "It is two new permanently installed by welding
previously non-existent web frame brackets..." We find that this
item is a nondutiable modification.
30. High (Aux) Sea Chest Vent Modification (506). The
applicant states: "The initial location of the 80mm vent line in
the bay between frames 99-100 was not removing the entrapped air
generated in the bay between frames 98-99. This entrapped air
was causing operational problems in the sea water circulator
pump. To correct this design defect problem, it was necessary to
make this modification for efficient operation of the vessel."
We find that this item is a nondutiable modification.
31. Anchor Pocket Modification (507). The applicant
states: "... there has [sic] been problems with the anchor
stowage...Enc. (L) details to [sic] structural modifications
engineered to correct this deficiency and to improve the existing
anchor stowage system." We find that this item is a nondutiable
modification.
32. Web Frame Lug/Clip Modifications (508). The applicant
states: "This is a new, previously non-existent 15mm steel plate
bracket permanently installed by welding with a 6mm fillet weld
wrapped around all ends." We find that this item is a
nondutiable modification.
33. M.E. Charge Air Cooler Clean System (510). The invoice
reflects, and the applicant states, that this item is a "new,
previously non-existent system." We find that this item is a
nondutiable modification.
34. Category B Items - General Services. These costs are
to be prorated between dutiable and nondutiable costs.
35. C.O. #1 Bow Thruster Service Engineer. This cost is
dutiable. The applicant states that the bow thruster service
representative is a U.S. citizen and resident, and that the cost
associated with the engineer should be nondutiable. The
applicant has not provided sufficient information with respect to
its claim of nondutiability. For example, if the applicant is
attempting to claim that the subject cost is subject to remission
pursuant to 19 U.S.C. 1466(d)(2), complete information with
respect to that claim must be provided. The pertinent invoice
reflects that the engineer performed services with respect to the
"MV President Adams item #302 and 303." However the subject work
was performed on the PRESIDENT TRUMAN, not the PRESIDENT ADAMS.
Further, while item 302 has been found to be nondutiable in this
ruling, item 303 is listed as dutiable on the spreadsheet, and
that item is not involved in this application. Thus, the engineer
was involved in dutiable work.
36. C.O.#2 No. 1 Deep Tank Modifications. The applicant
claims that prefabricated steel is dutiable under 19 U.S.C.
1466(h)(3), which provides:
The duty imposed by section (a) of this section shall
not apply to -
...
(3) the cost of spare parts necessarily installed
before the first entry into the United states, but only
if duty is paid under appropriate commodity
classifications of the Harmonized Tariff Schedules of
the United States upon first entry into the United
States of each such spare part purchased in, or
imported from, a foreign country.
For the purpose of 19 U.S.C. 1466(h), we have defined a
"part" as follows:
A part is determined to be something which does not
lose its essential character or its identity as a
distinct entity but which, like materials, is
incorporated into a larger whole. It would be possible
to disassemble an apparatus and still be able to
identify a part. The term part does not mean part of a
vessel, which practically speaking would encompass all
elements necessary for a vessel to operate in its
designed trade. Examples of parts as defined are seen
in such items as piston rings and pre-formed gaskets,
as opposed to gaskets which are cut at the work site
from gasket material.
There is no indication or statement as to what "spare parts"
the applicant seeks relief for pursuant to 19 U.S.C. 1466(h)(3).
The applicant has not established that the prefabricated steel is
a part under 19 U.S.C. 1466(h)(3). Therefore, the steel is
dutiable under 19 U.S.C. 1466(a).
Our determination and analysis is the same here as in Ruling
113883 dated April 1, 1997.
37. C.O.#3 Main Switchboards. The applicant states that
this is a mandatory regulatory requirement. We find that this
item is nondutiable.
38. Low Level Alarm Float Switch in M/E Lube Oil Sump
Tanks. The invoice reflects the removal and refitting of the
alarm switch. We find that this item is nondutiable.
39. Hull Thickness Gauging. The invoice reflects that this
item was an ABS requirement. We find that this item is
nondutiable.
40. Item No. 4 (CF 226) International U/W Paint. The
applicant claims dutiability under 19 U.S.C. 1466(h)(2), which
provides:
The duty imposed by subsection (a) of this section
shall not apply to-
...
(2) the cost of spare repair parts or materials (other
than nets or nettings) which the owner or master of the
vessel certifies are intended for use aboard a cargo
vessel, documented under the laws of the United States
and engaged in the foreign or coasting trade, for
installation or use on such vessel, as needed, in the
United States, at sea, or in a foreign country, but
only if duty is paid under appropriate commodity
classifications of the Harmonized Tariff Schedule of
the United States upon first entry into the United
States of each such spare part purchased in, or
imported from, a foreign country, or
...
19 U.S.C. 1466(h)(2) contemplates entry of the pertinent
part or material, and the payment of duty under the appropriate
commodity classification of the HTSUS, prior to the use of the
pertinent part or material in the foreign shipyard.
The applicant has provided no information which would
support a claim that the subject paint was entered and duty-paid
prior to its use in the foreign shipyard. Accordingly, the
applicant's claim for treatment under 19 U.S.C. 1466(h)(2) is
denied. The paint is dutiable under 19 U.S.C. 1466(a).
HOLDING:
As detailed above, the application is granted in part and
denied in part.
Sincerely,
Jerry Laderberg
Acting Chief,
Entry and Carrier Rulings Branch