VES-13-18-RR:IT:EC 114034 GEV
Chief, Liquidation Branch
U.S. Customs Service
Post Office Box 2450
San Francisco, California 94126
RE: Vessel Repair Entry No. C27-0158637-5; CHIEF GADAO; V-008B;
Modification; Survey; Prefabricated Steel; Cleaning; 19
U.S.C. 1466
Dear Sir:
This is in response to your memorandum dated July 7, 1997,
forwarding an application for relief from duties assessed
pursuant to 19 U.S.C. 1466 with supporting documentation. Our
findings are set forth below.
FACTS:
The CHIEF GADAO is a U.S.-flag vessel, formerly owned by
American President Lines, Inc. ("APL"), and known as the
PRESIDENT GRANT, now owned by Matson Navigation Company
("Matson"). The vessel underwent foreign shipyard work in Ulsan,
Korea, during January-February of 1997. Subsequent to the
completion of the work the vessel arrived in the United States at
San Pedro, California, on February 18, 1997. A vessel repair
entry was timely filed the following day.
Pursuant to an authorized extension of time, an application
for relief, dated June 18, 1997, with supporting documentation
was timely filed. Relief is requested for 58 items contained
within the subject entry. Our findings in this matter are as
follows.
ISSUE:
Whether the foreign costs contained within the subject entry
for which our review is sought are dutiable under 19 U.S.C.
1466.
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LAW AND ANALYSIS:
Title 19, United States Code, 1466 (19 U.S.C. 1466),
provides in pertinent part for the payment of an ad valorem duty
of 50 percent of the cost of "...equipments, or any part thereof,
including boats, purchased for, or the repair parts or materials
to be used, or the expenses of repairs made in a foreign country
upon a vessel documented under the laws of the United States..."
In regard to requests for relief pursuant to 19 U.S.C.
1466(h)(3), we note that
1466(h)(3) provides that the duty imposed by 1466(a) 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 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.
With respect to surveys or inspections, the general rule is
that a survey undertaken to meet the specific requirements of a
governmental entity, classification society, or insurance carrier
is not dutiable even when dutiable repairs are effected as a
result of a survey. When an inspection or survey is conducted to
ascertain the extent of damage sustained or whether repairs are
necessary, the survey cost is dutiable as part of the repairs
which are accomplished.
In its application of the vessel repair statute, Customs has
held that modifications, alterations, or additions to the hull
and fittings of a vessel are not subject to vessel repair duties.
The identification of work constituting modifications vis-a-vis
work constituting repairs has evolved from judicial and
administrative precedent. (See Otte v. United States, 7 Ct.
Cust. Appls. 166, T.D. 36489 (1916); United States v. Admiral
Oriental Line et al., 18 C.C.P.A. 137, T.D. 44359 (1930); and
Customs Bulletin and Decisions, Vol. 31, Number 40, published
October 1, 1997.) The factors discussed within the
aforementioned authority are not by themselves necessarily
determinative, nor are they the only factors which may be
relevant in a given case. However, in a given case, these
factors may be illustrative, illuminating, or relevant with
respect to the issue of whether certain work may be a
modification of a vessel which is nondutiable under 19 U.S.C.
1466.
In Texaco Marine Services, Inc., and Texaco Refining and
Marketing, Inc. v. United States, 815 F.Supp. 1484 (1993), the
issue before the U.S. Court of International Trade (CIT) was
whether costs for post-repair cleaning and protective coverings
incurred pursuant to dutiable repairs constituted "expenses of
repairs" as that term is used in 19 U.S.C. 1466. In holding
that
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the costs at issue were dutiable as "expenses of repairs" the
court adopted the "but for" test proffered by Customs; that is,
these costs were an integral part of the dutiable repair process
and would not have been necessary "but for" the dutiable repairs.
On appeal, the CAFC issued a watershed decision which not
only affirmed the opinion of the CIT regarding the specific
expenses at issue, but also provided clear guidance with respect
to the interpretation of 19 U.S.C. 1466, hence, Customs
administration of that statute. In upholding the "but for" test
adopted by the CIT, the CAFC stated:
"...the language expenses of repairs' is broad and
unqualified.
As such, we interpret expenses of repairs' as covering
all
expenses (not specifically excepted in the statute)
which,
but for dutiable repair work, would not have been
incurred.
Conversely, expenses of repairs' does not cover
expenses
that would have been incurred even without the
occurrence
of dutiable repair work. As will be more clearly
illustrated
below...the but for' interpretation accords with what
is
commonly understood to be an expense of repair."
44 F.3d 1539, 1544.
In reaching the above determination, the CAFC steadfastly
rejected the non-binding judicial authority relied upon by the
plaintiff/appellant. Specifically, the court addressed the
following: Mount Washington Tanker Co. v. United States, 505
F.Supp. 209 (CIT 1980) which held that transportation
compensation for members of a foreign repair crew performing
dutiable repairs was not dutiable as an expense of repairs;
American Viking Corp. v. United States, 150 F.Supp. 746 (Cust.Ct.
1956) which held that the expense of providing lighting needed to
perform a dutiable repair was not dutiable as an expense of the
repair; and International Navigation Co. v. United States, 148
F.Supp. 448 (Cust.Ct. 1957) which held that transportation
expenses for a foreign repair crew to travel to and from an
anchored vessel being repaired was not dutiable as expenses of
repairs. With regard to these three cases, the CAFC stated,
"Seemingly, these expenses too would have been viewed as coming
within the [vessel repair] statute if the court had used a "but
for" approach." 44 F.3d 1539, 1547. The CAFC concluded, "Thus
Mount Washington Tanker, like American Viking and International
Navigation, was incorrectly decided." Id.
In addition to the above judicial authority, the CAFC
discussed at length the case of United States v. George Hall Coal
Co., 142 F. 1039 (1939), heavily relied upon by the plaintiff/
appellant, which held dry-docking expenses were not an expense of
repair and therefore were not dutiable. Although this decision
seemingly supported the position that the expenses at issue were
dutiable, the CAFC examined the rationale provided in a December
31, 1903, unpublished decision of the Department of Treasury
Board of General Appraisers (Board) upon which the court's
decision was based. It noted that, "...the Board held the dry-docking expense was not subject to the vessel repair duty because
the Board found that the expense would have been
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incurred irrespective of whether or not dutiable repairs were
performed." 44 F.3d 1539, 1546 The CAFC went on to state,
"George Hall Coal simply stands for the proposition that expenses
that would have been incurred irrespective of whether or not
dutiable repairs are performed are not dutiable as an expense of
repairs." Id. It therefore concluded, "...George Hall Coal is
entirely consistent with the but for' interpretation of the
statute." Id.
Recognizing that the decision of the CAFC was not only
dispositive of the expenses at issue, but also instructive as to
Customs administration of the vessel repair statute with respect
to the interpretation of the term "expenses of repairs" contained
therein, the Assistant
Commissioner, Office of Regulations and Rulings, issued a
memorandum to the Regional Director, Commercial Operations, New
Orleans (file no. 113308) dated January 18, 1995, published in
the Customs Bulletin on February 8, 1995 (Customs Bulletin and
Decisions, vol. 29, no. 6, at p. 59) In that memorandum, copies
of which were disseminated to two other Customs field offices
charged with the liquidation of vessel repair entries, it was
stated that pursuant to the
decision of the CAFC, a myriad of foreign repair expenses
previously accorded duty-free treatment would, under certain
circumstances, no longer receive such treatment. The memorandum
further provided that any such affected costs contained in vessel
repair entries not finally liquidated as of the date of the CAFC
decision (December 29, 1994) should be liquidated as dutiable
"expenses of repairs" provided they pass the "but for" test
discussed above.
Subsequent to the publication of the above memorandum, on
February 22, 1995, various representatives of U.S.-flag vessel
owners/operators met with the Assistant Commissioner, Office of
Regulations and Rulings, and members of his staff. It was the
collective opinion of the vessel owners/operators that the
memorandum be rescinded, contending, inter alia, that it was
violative of 19 U.S.C. 1625(c)(1) and 19 CFR Part 177. Upon
further review of this matter, the Assistant Commissioner, Office
of Regulations and Rulings, again issued a memorandum to the
Regional Director, Commercial Operations Division, New Orleans
(file no. 113350), dated March 3, 1995, published in the Customs
Bulletin on April 5, 1995 (see Customs Bulletin and Decisions,
vol. 29, no. 14, at p. 24) clarifying the January 18 memorandum
with respect to Customs implementation of the CAFC decision. It
provided that all vessel repair entries filed with Customs on or
after the date of that decision are to be liquidated in
accordance with the full weight and effect of the decision (i.e.,
costs of post-repair cleaning and protective coverings incurred
pursuant to dutiable repairs are dutiable and all other foreign
expenses contained within such entries are subject to the "but
for" test). With respect to vessel repair entries filed prior to
December 29, 1994, all costs for post-repair cleaning and
protective coverings incurred pursuant to dutiable repairs are
dutiable. It further provided that in view of the fact that
carriers have relied on Customs rulings (some of which were based
on court cases which the CAFC in Texaco held were incorrectly
decided), and retroactive application would cause both the
Government and the carriers a major administrative burden,
Customs will not apply Texaco retroactively except as to the two
issues directly decided by the court. All other costs contained
within such entries are to be accorded that treatment previously
accorded them by Customs prior to the decision of the CAFC in the
Texaco case.
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Parenthetically, we note that the CAFC decision was
published in its entirety in the Customs Bulletin on March 8,
1995 (See Customs Bulletin and Decisions, vol. 29, no. 10, at p.
19).
The applicant contends that the CAFC decision should not be
applicable to the subject vessel repair entry and by doing so
Customs has violated 19 U.S.C. 1625(c) as amended by
623 of Title VI of the North American Free Trade Agreement
Implementation Act (Pub.L. 103-182, 107 Stat. 2057 (the "Mod
Act"). Title 19, United States Code, 1625(c) provides, in
pertinent part, as follows:
A proposed interpretive ruling or decision which would--
(1) modify...or revoke a prior interpretive ruling or
decision which
has been in effect for at least 60 days; or
(2) have the effect of modifying the treatment
previously accorded
by the Customs Service to substantially identical
transactions;
shall be published in the Customs Bulletin. The Secretary
shall give interested
parties an opportunity to submit...comments on the
correctness of the proposed
ruling or decision.
Specifically, the applicant contends that the publication in
the Customs Bulletin of memorandum 113308, subsequently clarified
by memorandum 113350, without the solicitation of public
comments, constitutes a violation of 19 U.S.C. 1625(c). The
underlying rationale of the applicant's position is that, "The
letter by the Customs Service was clearly an interpretive
ruling' within the meaning of the Mod Act." It is further
contended that this "interpretive ruling" modified or revoked "a
host of interpretive rulings or decisions that have been in
effect for more than sixty days." We do not agree.
At the outset, notwithstanding the applicant's claim that
the aforementioned memoranda published in the Customs Bulletin
constitute an "interpretive ruling", we note that the applicant
readily acknowledges, "...the Mod Act does not define the term
interpretive ruling,' and to date no court has interpreted the
term in the context of the Mod Act..." (See p. 1 of the
attachment to the protest). Consequently, by his own admission
the applicant's contention with respect to an "interpretive
ruling" within the meaning of 19 U.S.C. 1625 is without
legislative or judicial support.
The applicant, citing Flagstaff Medical Center, Inc., v.
Sullivan, 962 F.2d 879, 886 (1992), Linoz v. Heckler, 800 F.2d
871, 877 (1986), and Powderly v. Schweiker, 704 F.2d 1092, 1098
(1983), nonetheless argues that although the term "interpretive
ruling" has not been defined for purposes of the 19 U.S.C.
1625(c), it has been defined for purposes of the Administrative
Procedures Act ("APA" 5 U.S.C. 553(b)-(c)). The applicant's
rationale, however, is antithetic.
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Assuming, arguendo, the Customs memoranda in question
collectively constitute an interpretive ruling for purposes of
the APA, such rulings are exempt from the notice and comment
provisions of the APA pursuant to 5 U.S.C. 553(b)(A).
Furthermore, the aforementioned memoranda did not modify or
revoke any prior interpretive ruling or decision or have the
effect of modifying the treatment Customs previously accorded
certain foreign expenses under 19 U.S.C. 1466. Rather, the
memoranda, in conjunction with the publication of the CAFC
decision in the Customs Bulletin, merely provided
notice to the public that the impetus behind any change in
Customs interpretation of the term "expenses of repairs" within
the meaning of the vessel repair statute is the CAFC itself, not
Customs.
The applicant further alleges that Customs did not comply
with its own regulations set forth in 19 CFR Part 177, entitled
"Administrative Rulings." The applicant cites to numerous
Customs vessel repair rulings issued prior to the CAFC decision
(again, based in large measure on the court cases stated to have
been incorrectly decided by the CAFC, and George Hall Coal which
is in accord with the CAFC decision), some of which were
published in the Customs Bulletin, stating that pursuant to 19
CFR 177.10(b) they established a uniform practice that certain
foreign expenses are not dutiable under the vessel repair
statute. Consequently, the Customs memoranda in question are
alleged to have constituted a "ruling" which has the effect of
changing a practice thereby necessitating its publication in the
Federal Register giving interested parties an opportunity to
submit written comments with respect to the correctness of the
contemplated change (19 CFR 177.10(c)(1)).
With respect to the applicability of 19 CFR Part 177, we
note that neither of the two Headquarters memoranda published in
the Custom Bulletin are "rulings" within the meaning of that
part. Pursuant to 177.1(d)(1), Customs Regulations, a "ruling"
is defined as a "...written statement issued by the Headquarters
Office or the appropriate office of Customs as provided in this
part that interprets and applies the provisions of the Customs
and related laws to a specific set of facts." (Emphasis added)
Neither memorandum applied 19 U.S.C. 1466 or 19 CFR 4.14 (the
applicable Customs regulations promulgated pursuant to 1466) to
a specific set of facts (i.e., no single vessel repair entry
containing foreign expenses was discussed). Rather, they
provided notice to the public that Customs will administer 19
U.S.C. 1466 in accordance with the explicit guidelines set by
the CAFC in interpreting the term "expenses of repairs" within
the meaning of the statute as determined by the "but for" test.
Such guidelines, prior to the date of that decision, were non-existent.
Further in regard to the applicability of 19 CFR Part 177,
it is noteworthy that since neither memorandum was a "ruling" as
defined in 19 CFR 177.1(d), the mere fact that they were
published in the Customs Bulletin does not, as the applicant
suggests, render either a "published ruling" within the meaning
of 19 CFR 177.1(d). Furthermore, in view of the fact that 19
CFR 177.1(d) also defines a "ruling letter" as "a ruling issued
in response to a written request therefor and set forth in a
letter addressed to the person making the request or his
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designee", neither memoranda, which were issued at the behest of
the Assistant Commissioner, Office of Regulations and Rulings to
the Regional Director, Commercial Operations Division, New
Orleans, constituted a "ruling letter" for purposes of 19 CFR
Part 177. The delayed effective date provisions of 19 CFR
177.9(d)(3), applicable to a "ruling letter" are therefore of no
consequence.
Accordingly, the provisions of 19 U.S.C. 1625 and 19 CFR
Part 177 are inapplicable to the subject application.
We now turn to consideration of the items presented, and
will utilize the numbering system which the Liquidation Unit used
in forwarding the application.
1. General Services. The claim is made that all of the general
service items (nos. 101 through 119 on Hyundai Mipo Dockyard Co.,
Ltd. invoice no. 962961) are considered to be duty-free with the
exception of item 114 (Gas Free Certificate which the applicant
agrees should be pro-rated). The applicant further states that
Item no. 118 (Steam Heat for Modification (Portable Boiler)) was
required to carry out the modifications outlined in Item no. 227
and is therefore nondutiable.
As explained in ample precedent, Customs considers the types
of expenses associated with these costs to be prorated under the
terms of the Court opinion in Texaco, supra. We therefore find
that with the exception of Item no. 118 (which we agree was done
pursuant to the nondutiable modification work in Item no. 227),
the expenses of General Services should be prorated between
dutiable and nondutiable costs as reflected on the vessel repair
entry.
2. Item No. 121 - Dock Trial. The applicant states that the
dock trial was done to prove the performance and correct
operation of the vessel's auxiliary systems that were opened and
inspected during this drydocking. Upon reviewing the record,
however, we find no documentation to corroborate the applicant's
claim that the dock trial was related solely to a nondutiable ABS
inspection. Furthermore, we note the existence of dutiable
repairs covered by this vessel repair entry, as well as an ABS
repair survey. Consequently, in the absence of evidence to the
contrary, it appears that the Dock Trial expense covered by Item
no. 121 is attributed to both dutiable and nondutiable costs and
should be prorated.
3. Item No. 201 - Drydock Vessel. This cost is alleged to be
pursuant to a mandatory regulatory requirement. In support of
this allegation the applicant has submitted the shipyard invoice
as well as documentation from the ABS (see ABS Rule 1/3.2.1a
"Drydocking Surveys"). Upon reviewing the record we conclude
that it supports the applicants's position regarding this cost.
Item no. 201 is therefore nondutiable.
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4. Item No. 202 - Strut Bearing & Tube Shaft Weardowns. This
cost is alleged to be pursuant to a mandatory regulatory
requirement. In support of this allegation the applicant has
submitted the shipyard invoice as well as documentation from the
ABS (see ABS Rule 1/3.13.2 "Survey Details"). Upon reviewing the
record we conclude that it supports the applicants's position
regarding this cost. Item no. 202 is therefore nondutiable.
5. Item No. 203 - Rudder Pintle Clearances. This cost is
alleged to be pursuant to a mandatory regulatory requirement. In
support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.2.1c "Parts to be Examined"). Upon reviewing the record
we conclude that it supports the applicants's position regarding
this cost. Item no. 203 is therefore nondutiable.
6. Item No. 203.1 - Rudder Pintle Nut Access Plate Removal.
This cost is alleged to be pursuant to a mandatory regulatory
requirement. In support of this allegation the applicant has
submitted the shipyard invoice as well as documentation from the
ABS (see ABS Rule 1/3.2.1c "Parts to be Examined"). Upon
reviewing the record we conclude that it supports the
applicants's position regarding this cost. Item no. 203.1 is
therefore nondutiable.
7. Item No. 203.6 - Rudder Stock Packing Gland Fairwater Plates.
The applicant claims that the cost of prefabricated steel under
this item is subject to 19 U.S.C. 1466(h)(3). We disagree. We
have previously discussed our position regarding such claims of
the applicant (see Customs ruling letters 113883, dated April 1,
1997, and 114010, dated October 3, 1997). In each of those cases
we have held that since the applicant has not established that
the prefabricated steel is a "part" under 19 U.S.C. 1466(h)(3),
it is dutiable under 19 U.S.C. 1466(a). The same result is
reached with respect to this item. It is our view that
prefabricated steel is not a spare part or part, and thus is not
eligible for treatment under 19 U.S.C. 1466(h)(3). Item 203.6
is therefore dutiable.
8. Item No. 204 - Anchor Chains & Chain Lockers. This cost is
alleged to be pursuant to a mandatory regulatory requirement. In
support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.7.1n "Special Periodic Survey - Hull"). Upon reviewing
the record we conclude that it supports the applicants's position
regarding this cost. Item no. 204 is therefore nondutiable.
9. Item No. 205 - Sea Valve Inspection. This cost is alleged to
be pursuant to a mandatory regulatory requirement. In support of
this allegation the applicant has submitted the shipyard invoice
as well as documentation from the ABS (see ABS Rule 1/3.2.1c
"Parts to be Examined"). Upon reviewing the record we conclude
that it supports the applicants's position regarding this cost.
Item no. 205 is therefore nondutiable.
10. Item No. 206 - Chain Locker & Eductor Piping. This cost is
alleged to be pursuant to a mandatory regulatory requirement. In
support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.11.2a "Parts to be
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Examined"). Upon reviewing the record we conclude that it
supports the applicants's position regarding this cost. Item no.
206 is therefore nondutiable.
11. Item No. 207 - Sea Chests & Strainers. This cost is alleged
to be pursuant to a mandatory regulatory requirement. In support
of this allegation the applicant has submitted the shipyard
invoice as well as documentation from the ABS (see ABS Rule
1/3.1c "Parts to be Examined"). Upon reviewing the record we
conclude that it supports the applicants's position regarding
this cost. Item no. 207 is therefore nondutiable.
12. Item No. 208 - Propeller Inspection. This cost is alleged
to be pursuant to a mandatory regulatory requirement. In support
of this allegation the applicant has submitted the shipyard
invoice as well as documentation from the ABS (see ABS Rule
1/3.13.2a "Survey Details"). Upon reviewing the record we
conclude that it supports the applicants's position regarding
this cost. Item no. 208 is therefore nondutiable.
13. Item No. 210 - Propeller Removal & Tailshaft Inspection.
This cost is alleged to be pursuant to a mandatory regulatory
requirement. In support of this allegation the applicant has
submitted the shipyard invoice as well as documentation from the
ABS (see ABS Rule 1/3.13.2b3 "Survey Details"). Upon reviewing
the record we conclude that it supports the applicants's position
regarding this cost. Item no. 210 is therefore nondutiable.
14. Item No. 211 - Intermediate Shaft Removal/Inspection. This
cost is alleged to be pursuant to a mandatory regulatory
requirement. In support of this allegation the applicant has
submitted the shipyard invoice as well as documentation from the
ABS (see ABS Rule 1/3.13.2b3 "Survey Details"). Upon reviewing
the record we conclude that it supports the applicants's position
regarding this cost. Item no. 211 is therefore nondutiable.
15. Item No. 213 - Stern Tube Shaft Removal/Inspection. This
cost is alleged to be pursuant to a mandatory regulatory
requirement. In support of this allegation the applicant has
submitted the shipyard invoice as well as documentation from the
ABS (see ABS Rule 1/3.13.2b3 "Survey Details"). Upon reviewing
the record we conclude that it supports the applicants's position
regarding this cost. Item no. 213 is therefore nondutiable.
16. Item No. 214 - Stern Tube Shaft Installation. This cost is
alleged to be pursuant to a mandatory regulatory requirement. In
support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.13.2b3 "Survey Details"). Upon reviewing the record we
conclude that it supports the applicants's position regarding
this cost. Item no. 214 is therefore nondutiable.
17. Item No. 215 - Tailshaft Removal & Reinstallation. This
cost is alleged to be pursuant to a mandatory regulatory
requirement. In support of this allegation the applicant has
submitted the shipyard invoice as well as documentation from the
ABS (see ABS Rule 1/3.13.2b3 "Survey
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Details"). Upon reviewing the record we conclude that it
supports the applicants's position regarding this cost. Item no.
215 is therefore nondutiable.
18. Item No. 220 - Rudder Inspection and Air Test. This cost is
alleged to be pursuant to a mandatory regulatory requirement. In
support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.2.1c "Parts to be Examined"). Upon reviewing the
record we conclude that it supports the applicants's position
regarding this cost. Item no. 220 is therefore nondutiable.
19. Item No. 222 - Void & Cofferdam Inspection & Survey. This
cost is alleged to be pursuant to a mandatory regulatory
requirement. In support of this allegation the applicant has
submitted the shipyard invoice as well as documentation from the
ABS (see ABS Rule 1/3.7.4d "Special Periodic Survey-Hull"). Upon
reviewing the record we conclude that it supports the
applicants's position regarding this cost. Item no. 222 is
therefore nondutiable.
20. Item No. 223 - Ballast Tank Inspection & Survey. This cost
is alleged to be pursuant to a mandatory regulatory requirement.
In support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.7.4d "Special Periodic Survey-Hull"). Upon reviewing
the record we conclude that it supports the applicants's position
regarding this cost. Item no. 223 is therefore nondutiable.
21. Item No. 224 - Fuel Oil Tank Inspection & Survey. This cost
is alleged to be pursuant to a mandatory regulatory requirement.
In support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.7.4d "Special Periodic Survey-Hull"). Upon reviewing
the record we conclude that it supports the applicants's position
regarding this cost. Item no. 224 is therefore nondutiable.
22. Item No. 227 - Vent Line Modifications. The applicant
claims this work constitutes a nondutiable modification. It
involves the re-routing of double bottom ballast tank vent lines
from within fuel oil tanks to within ballast wing tanks. This
work was done to the existing vent lines to prevent the
accidental discharge of fuel oil from the vessel, thus
eliminating the possibility of an environmental hazard. The
record supports the applicant's modification claim. Item no. 227
is therefore nondutiable.
23. Item No. 228 - Hatch Cover Survey. This cost is alleged to
be pursuant to a mandatory regulatory requirement. In support of
this allegation the applicant has submitted the shipyard invoice
as well as documentation from the ABS (see ABS Rule 1/3.3.1a3
"Annual Surveys-Hull"). Upon reviewing the record we conclude
that it supports the applicants's position regarding this cost.
Item no. 228 is therefore nondutiable.
24. Item No. 228.1 - Hatch Cover Repairs. While conceding the
dutiability of labor costs under this item, the applicant claims
that the cost of prefabricated steel under this item is subject
to 19 U.S.C. 1466(h)(3). We disagree. We have previously
discussed our position regarding such
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claims of the applicant (see Customs ruling letters 113883, dated
April 1, 1997, and 114010, dated October 3, 1997). In each of
those cases we have held that since the applicant has not
established that the prefabricated steel is a "part" under 19
U.S.C. 1466(h)(3), it is dutiable under 19 U.S.C. 1466(a).
The same result is reached with respect to this item. It is our
view that prefabricated steel is not a spare part or part, and
thus is not eligible for treatment under 19 U.S.C. 1466(h)(3).
Item no. 228.1 is therefore dutiable.
25. Item No. 229 - Port & Stbd Boiler Cleaning for Inspections.
This cost is alleged to be pursuant to a mandatory regulatory
requirement. In support of this allegation the applicant has
submitted the shipyard invoice as well as documentation from the
ABS (see ABS Rule 1/3.15.2a "Parts to be Examined"). Upon
reviewing the record we conclude that it supports the
applicants's position regarding this cost. Item no. 229 is
therefore nondutiable.
26. Item No. 230 - Port & Stbd Boiler Firesides & Watersides.
This cost is alleged to be pursuant to a mandatory regulatory
requirement. In support of this allegation the applicant has
submitted the shipyard invoice as well as documentation from the
ABS (see ABS Rule 1/3.15.2a "Parts to be Examined"). Upon
reviewing the record we conclude that it supports the
applicants's position regarding this cost. Item no. 230 is
therefore nondutiable.
27. Item No. 230.4 - Port & Stbd Boiler Sliding Feet. This cost
is alleged to be pursuant to a mandatory regulatory requirement.
In support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.9.1g "Parts to be Examined"). Upon reviewing the record
we conclude that it supports the applicants's position regarding
this cost. Item no. 230.4 is therefore nondutiable.
28. Item No. 231 - Port & Stbd Hydrostatic Test. This cost is
alleged to be pursuant to a mandatory regulatory requirement. In
support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.15.2d "Parts to be Examined"). Upon reviewing the
record we conclude that it supports the applicants's position
regarding this cost. Item no. 231 is therefore nondutiable.
29. Item No. 232 - Port & Stbd Boiler Mount Opening. This cost
is alleged to be pursuant to a mandatory regulatory requirement.
In support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.15.2b "Parts to be Examined"). Upon reviewing the
record we conclude that it supports the applicants's position
regarding this cost. Item no. 232 is therefore nondutiable.
30. Item No. 232.1 - Additional Port Boiler Mount Openings.
This cost is alleged to be pursuant to a mandatory regulatory
requirement. In support of this allegation the applicant has
submitted the shipyard invoice as well as documentation from the
ABS (see ABS Rule 1/3.15.2b "Parts to be Examined"). Upon
reviewing the record we conclude that it supports the
applicants's position regarding this cost. Item no. 232.1 is
therefore nondutiable.
- 12 -
31. Item No. 232.2 - Additional Port Boiler Mount Openings.
This cost is alleged to be pursuant to a mandatory regulatory
requirement. In support of this allegation the applicant has
submitted the shipyard invoice as well as documentation from the
ABS (see ABS Rule 1/3.15.2b "Parts to be Examined"). Upon
reviewing the record we conclude that it supports the
applicants's position regarding this cost. Item no. 232.2 is
therefore nondutiable.
32. Item No. 233 - Main Steam Inlet Strainer. This cost is
alleged to be pursuant to a mandatory regulatory requirement. In
support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.15.2b "Parts to be Examined"). Upon reviewing the
record we conclude that it supports the applicants's position
regarding this cost. Item no. 233 is therefore nondutiable.
33. Item No. 234 - H.P. Turbine Inspection. This cost is
alleged to be pursuant to a mandatory regulatory requirement. In
support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.11.3 "Steam Turbines"). Upon reviewing the record we
conclude that it supports the applicants's position regarding
this cost. Item no. 234 is therefore nondutiable.
34. Item No. 235 - Main Gear Inspection. This cost is alleged
to be pursuant to a mandatory regulatory requirement. In support
of this allegation the applicant has submitted the shipyard
invoice as well as documentation from the ABS (see ABS Rule
1/3.11.2g "Parts to be Examined"). Upon reviewing the record we
conclude that it supports the applicants's position regarding
this cost. Item no. 235 is therefore nondutiable.
35. Item No. 236 - Kingsbury Thrust Bearing. This cost is
alleged to be pursuant to a mandatory regulatory requirement. In
support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.11.3 "Steam Turbines"). Upon reviewing the record we
conclude that it supports the applicants's position regarding
this cost. Item no. 236 is therefore nondutiable.
36. Item No. 237 - First Stage Heater Inspection. This cost is
alleged to be pursuant to a mandatory regulatory requirement. In
support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.11.2.e "Parts to be Examined"). Upon reviewing the
record we conclude that it supports the applicants's position
regarding this cost. Item no. 237 is therefore nondutiable.
37. Item No. 238 - D.C. Heater Internal Inspection. This cost
is alleged to be pursuant to a mandatory regulatory requirement.
In support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.11.2.e "Parts to be Examined"). Upon reviewing the
record we conclude that it supports the applicants's position
regarding this cost. Item no. 238 is therefore nondutiable.
- 13 -
38. Item No. 239.1 - D.C. Heater Atomizing Valve Stem Renewal.
The applicant claims that the cost of prefabricated steel under
this item is subject to 19 U.S.C. 1466(h)(3). We disagree. We
have previously discussed our position regarding such claims of
the applicant (see Customs ruling letters 113883, dated April 1,
1997, and 114010, dated October 3, 1997). In each of those cases
we have held that since the applicant has not established that
the prefabricated steel is a "part" under 19 U.S.C. 1466(h)(3),
it is dutiable under 19 U.S.C. 1466(a). The same result is
reached with respect to this item. It is our view that
prefabricated steel is not a spare part or part, and thus is not
eligible for treatment under 19 U.S.C. 1466(h)(3). Item no.
239.1 is therefore dutiable.
39. Item No. 241 - Main Condenser Inspection. This cost is
alleged to be pursuant to a mandatory regulatory requirement. In
support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.11.2l "Parts to be Examined"). Upon reviewing the
record we conclude that it supports the applicants's position
regarding this cost. Item no. 241 is therefore nondutiable.
40. Item No. 243 - Bilge & Ballast Line Air Testing. This cost
is alleged to be pursuant to a mandatory regulatory requirement.
In support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.11.2b "Parts to be Examined"). Upon reviewing the
record we conclude that it supports the applicants's position
regarding this cost. Item no. 243 is therefore nondutiable.
41. Item No. 246 - Bilge & Ballast Suction/Discharge Manifolds.
This cost is alleged to be pursuant to a mandatory regulatory
requirement. In support of this allegation the applicant has
submitted the shipyard invoice as well as documentation from the
ABS (see ABS Rule 1/3.11.2b "Parts to be Examined"). Upon
reviewing the record we conclude that it supports the
applicants's position regarding this cost. Item no. 246 is
therefore nondutiable.
42. Item No. 247 - P/S Boiler Forced Draft Fan Cleanings. The
work under this item constituted cleaning unrelated to dutiable
repairs. Item no. 247 is therefore nondutiable.
43. Item No. 251 - Main & Emergency Switchboards. This cost is
alleged to be pursuant to a mandatory regulatory requirement. In
support of this allegation the applicant has submitted the
shipyard invoice as well as documentation from the ABS (see ABS
Rule 1/3.17.2a "Auxiliary Apparatus"). Upon reviewing the
record we conclude that it supports the applicants's position
regarding this cost. Item no. 251 is therefore nondutiable.
44. Item No. 253 - Cargo Hold & Engineering Bilge Wells. This
cost is alleged to be pursuant to a mandatory regulatory
requirement. In support of this allegation the applicant has
submitted the shipyard invoice as well as documentation from the
ABS (see ABS Rule 1/3.7.1d "Special Periodic Surveys-Hull").
Upon reviewing the record we conclude that it supports the
applicants's position regarding this cost. Item no. 253 is
therefore nondutiable.
- 14 -
45. Item No. 256 - Hull Painting Preparation. The cost of
repainting the loadline marks, stated by the applicant to be
$200, is alleged to be pursuant to a mandatory regulatory
requirement. In support of this allegation the applicant has
submitted the shipyard invoice as well as documentation from the
ABS (see ABS Rule 1/3.7.1r "Special Periodic Surveys-Hull").
Upon reviewing the record we note that the shipyard invoice
contains no breakdown as to the cost of repainting the loadline
(the applicant concedes that the remainder of the work done under
this item is dutiable) but rather lists one price for the entire
item. Pursuant to C.I.E.s 1325/58 and 565/55, duties may not be
remitted in cases where invoices fail to segregate dutiable from
nondutiable expenditures. Item no. 256 is therefore dutiable in
its entirety.
46. Item No. 260 - Hatch Cover Gasket Modifications. The
applicant states that this work involved "...the relocation of
the hatch cover gasket retaining angle to eliminate damage to the
angle and hatch cover gasket material which occurred during the
normal removal and refitting of hatch covers during cargo
operations." (Emphasis added) It appears that notwithstanding
the improvement to the vessel from this new installation, this
work also constituted repairs to a damaged existing portion of
the vessel. Item no. 260 is therefore dutiable.
47. Item No. 301 - Hull Gaugings. This cost is alleged to be
pursuant to a mandatory regulatory requirement. In support of
this allegation the applicant has submitted the shipyard invoice
as well as documentation from the ABS (see ABS Rule 1/3.21.3
"Special Periodic Surveys-Hull"). Upon reviewing the record we
conclude that it supports the applicants's position regarding
this cost. Item no. 301 is therefore nondutiable.
48. Item No. 303 - FWD S.W. Ballast Tank Repairs. While
conceding the dutiability of the labor costs under this item, the
applicant claims that the cost of prefabricated steel under this
item is subject to 19 U.S.C. 1466(h)(3). We disagree. We have
previously discussed our position regarding such claims of the
applicant (see Customs ruling letters 113883, dated April 1,
1997, and 114010, dated October 3, 1997). In each of those cases
we have held that since the applicant has not established that
the prefabricated steel is a "part" under 19 U.S.C. 1466(h)(3),
it is dutiable under 19 U.S.C. 1466(a). The same result is
reached with respect to this item. It is our view that
prefabricated steel is not a spare part or part, and thus is not
eligible for treatment under 19 U.S.C. 1466(h)(3). Item no.
303 is therefore dutiable.
49. Item No. 304 - No. 2A Port Wing Ballast Tank Repairs. While
conceding the dutiability of the labor costs under this item, the
applicant claims that the cost of prefabricated steel under this
item is subject to 19 U.S.C. 1466(h)(3). We disagree. We have
previously discussed our position regarding such claims of the
applicant (see Customs ruling letters 113883, dated April 1,
1997, and 114010, dated October 3, 1997). In each of those cases
we have held that since the applicant has not established that
the prefabricated steel is a "part" under 19 U.S.C. 1466(h)(3),
it is dutiable under 19 U.S.C. 1466(a). The same result is
reached with respect to this item. It is our view that
prefabricated steel is not a spare part or part, and thus is not
eligible for treatment under 19 U.S.C. 1466(h)(3). Item no.
304 is therefore dutiable.
- 15 -
50. Item No. 305 - No. 2A Stbd Wing Ballast Tank Repairs. While
conceding the dutiability of the labor costs under this item, the
applicant claims that the cost of prefabricated steel under this
item is subject to 19 U.S.C. 1466(h)(3). We disagree. We have
previously discussed our position regarding such claims of the
applicant (see Customs ruling letters 113883, dated April 1,
1997, and 114010, dated October 3, 1997). In each of those cases
we have held that since the applicant has not established that
the prefabricated steel is a "part" under 19 U.S.C. 1466(h)(3),
it is dutiable under 19 U.S.C. 1466(a). The same result is
reached with respect to this item. It is our view that
prefabricated steel is not a spare part or part, and thus is not
eligible for treatment under 19 U.S.C. 1466(h)(3). Item no.
305 is therefore dutiable.
51. Item No. 306 - Aft Flume Tank Steel Repairs. While
conceding the dutiability of the labor costs under this item, the
applicant claims that the cost of prefabricated steel under this
item is subject to 19 U.S.C. 1466(h)(3). We disagree. We have
previously discussed our position regarding such claims of the
applicant (see Customs ruling letters 113883, dated April 1,
1997, and 114010, dated October 3, 1997). In each of those cases
we have held that since the applicant has not established that
the prefabricated steel is a "part" under 19 U.S.C. 1466(h)(3),
it is dutiable under 19 U.S.C. 1466(a). The same result is
reached with respect to this item. It is our view that
prefabricated steel is not a spare part or part, and thus is not
eligible for treatment under 19 U.S.C. 1466(h)(3). Item no.
306 is therefore dutiable.
52. Item No. 314 - Remove Three (3) Forty Foot Containers. This
item covered the removal of three (3) containers from the vessel
on arrival and reloading same on deck prior to departure using
the yard crane. Spares from a container were removed and crane
service was also provided for this removal. The applicant
contends that this item is a General Service item. We agree.
Accordingly, pursuant to our discussion of General Services
contained within this ruling, Item no. 314 should be prorated
between dutiable and nondutiable costs as reflected on the vessel
repair entry.
53. Item No. 318 - Transom Shell Insert. While conceding the
dutiability of the labor costs under this item, the applicant
claims that the cost of prefabricated steel under this item is
subject to 19 U.S.C. 1466(h)(3). We disagree. We have
previously discussed our position regarding such claims of the
applicant (see Customs ruling letters 113883, dated April 1,
1997, and 114010, dated October 3, 1997). In each of those cases
we have held that since the applicant has not established that
the prefabricated steel is a "part" under 19 U.S.C. 1466(h)(3),
it is dutiable under 19 U.S.C. 1466(a). The same result is
reached with respect to this item. It is our view that
prefabricated steel is not a spare part or part, and thus is not
eligible for treatment under 19 U.S.C. 1466(h)(3). Item no.
318 is therefore dutiable.
54. Item No. 335 - Removal of Spares from Container. The
applicant contends that this item is a General Service item. We
agree. Accordingly, pursuant to our discussion of General
Services contained within this ruling, Item no. 335 should be
prorated between dutiable and nondutiable costs as reflected on
the vessel repair entry.
- 16 -
55. Item No. 337 - Deck Repair List. While conceding the
dutiability of the labor costs under this item, the applicant
claims that the cost of prefabricated steel under this item is
subject to 19 U.S.C. 1466(h)(3). We disagree. We have
previously discussed our position regarding such claims of the
applicant (see Customs ruling letters 113883, dated April 1,
1997, and 114010, dated October 3, 1997). In each of those cases
we have held that since the applicant has not established that
the prefabricated steel is a "part" under 19 U.S.C. 1466(h)(3),
it is dutiable under 19 U.S.C. 1466(a). The same result is
reached with respect to this item. It is our view that
prefabricated steel is not a spare part or part, and thus is not
eligible for treatment under 19 U.S.C. 1466(h)(3). Item no.
337 is therefore dutiable.
56. Item No. 338 - No. 6 Ballast Tank Repairs. While conceding
the dutiability of the labor costs under this item, the applicant
claims that the cost of prefabricated steel under this item is
subject to 19 U.S.C. 1466(h)(3). We disagree. We have
previously discussed our position regarding such claims of the
applicant (see Customs ruling letters 113883, dated April 1,
1997, and 114010, dated October 3, 1997). In each of those cases
we have held that since the applicant has not established that
the prefabricated steel is a "part" under 19 U.S.C. 1466(h)(3),
it is dutiable under 19 U.S.C. 1466(a). The same result is
reached with respect to this item. It is our view that
prefabricated steel is not a spare part or part, and thus is not
eligible for treatment under 19 U.S.C. 1466(h)(3). Item no.
338 is therefore dutiable.
57. Item No. 340 - Cargo Hold Work List. While conceding the
dutiability of the labor costs under this item, the applicant
claims that the cost of prefabricated steel under this item is
subject to 19 U.S.C. 1466(h)(3). We disagree. We have
previously discussed our position regarding such claims of the
applicant (see Customs ruling letters 113883, dated April 1,
1997, and 114010, dated October 3, 1997). In each of those cases
we have held that since the applicant has not established that
the prefabricated steel is a "part" under 19 U.S.C. 1466(h)(3),
it is dutiable under 19 U.S.C. 1466(a). The same result is
reached with respect to this item. It is our view that
prefabricated steel is not a spare part or part, and thus is not
eligible for treatment under 19 U.S.C. 1466(h)(3). Item no.
340 is therefore dutiable.
58. Item No. 342-2 - Purchase Jacking Gear Bearings. While
conceding the dutiability of the labor costs under this item, the
applicant claims that the cost of prefabricated steel under this
item is subject to 19 U.S.C. 1466(h)(3). We disagree. We have
previously discussed our position regarding such claims of the
applicant (see Customs ruling letters 113883, dated April 1,
1997, and 114010, dated October 3, 1997). In each of those cases
we have held that since the applicant has not established that
the prefabricated steel is a "part" under 19 U.S.C. 1466(h)(3),
it is dutiable under 19 U.S.C. 1466(a). The same result is
reached with respect to this item. It is our view that
prefabricated steel is not a spare part or part, and thus is not
eligible for treatment under 19 U.S.C. 1466(h)(3). Item no.
342-2 is therefore dutiable.
- 17 -
HOLDING:
The foreign costs contained within the subject entry for
which our review is sought are dutiable in part under 19 U.S.C.
1466 as discussed in the Law and Analysis portion of this ruling.
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers
Branch