VES-13-18-RR:IT:EC 114047 GEV
Chief, Liquidation Branch
U.S. Customs Service
Post Office Box 2450
San Francisco, California 94126
RE: Vessel Repair Entry No. 110-6461890-0; PRESIDENT POLK; V-80;
19 U.S.C. 1466
Dear Sir:
This is in response to your memorandum dated September 27,
1996, forwarding an application for relief from duties assessed
pursuant to 19 U.S.C. 1466. You request our review of numerous
expenditures contained within the above-referenced entry. Our
findings are set forth below.
FACTS:
The PRESIDENT POLK is a U.S.-flag vessel owned and operated
by American President Lines, Ltd. Subsequent to the completion
of various foreign shipyard work, the vessel arrived at Seattle,
Washington, on May 9, 1996. A vessel repair entry was timely
filed.
An application for relief with supporting documentation was
timely filed. The applicant seeks relief with respect to
numerous items listed within the above-referenced vessel repair
entry.
ISSUE:
Whether the costs for which the applicant seeks relief are
dutiable under 19 U.S.C.
1466.
LAW AND ANALYSIS:
Title 19, United States Code, 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..."
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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), affirmed 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 (Item No. 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. Shell Connection Pipe Gauging (Item No. 208). The
invoice reflects that this item was incident to a nondutiable
ABS/USCG inspection and that no repairs were performed.
Accordingly, it is nondutiable.
4. Anchor Chain Inspection (Item No. 209). The invoice
reflects that this item was incident to a nondutiable ABS/USCG
inspection and that no repairs were performed. Accordingly, it
is nondutiable.
5. Cargo Hold Cleaning (Item No. 214). The invoice states,
"sweep clean and dispose of debris from the [sic] all levels of
each of the eight cargo holds." We find this item to be a
nondutiable cleaning.
6. Bilge Well Cleaning (Item No. 215). The invoice states,
"...muck out and wipe clean cargo hold bilge drainwells and
roseboxes." We find this item to be nondutiable.
7. Pintle Pin & Bush Survey (Item No. 217). The invoice
reflects that this item was a nondutiable ABS/USCG inspection and
that no repairs were performed. Accordingly, it is nondutiable.
8. Rudder Survey (Item No. 218). The invoice reflects that
this item was a nondutiable ABS/USCG inspection and that no
repairs were performed. Accordingly, it is nondutiable.
9. Carrier Bearing Inspection (Item No. 219). The invoice
reflects that this item was a nondutiable ABS/USCG inspection and
that no repairs were performed. Accordingly, it is nondutiable.
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10. Stock Nut Survey (Item No. 220). The invoice reflects
that this item was a nondutiable ABS/USCG inspection and that no
repairs were performed. Accordingly, it is nondutiable.
11. Chain Locker P/S Survey (Item No. 223). The invoice
reflects that this item was a nondutiable ABS/USCG inspection and
that no repairs were performed. Accordingly, it is nondutiable.
12. Ballast Deep Tank #1 Survey (Item No. 226). The
invoice reflects that this item was a nondutiable ABS/USCG
inspection and that no repairs were performed. Accordingly, it
is nondutiable.
13. H.F.O. Wing Tank Surveys (Item No. 229). The invoice
reflects that this item was a nondutiable ABS/USCG inspection and
that no repairs were performed. Accordingly, it is nondutiable.
14. M.E.L.O. Sump Tank C Survey (Item 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.
15. Bow Thruster Inspection (Item No. 302). The invoice
reflects that this item was a nondutiable ABS/USCG inspection and
that no repairs were performed. Accordingly, it is nondutiable.
16. Emergency and Independent Bilge Valve Inspection (Item
No. 304). The invoice reflects that this item was a nondutiable
ABS/USCG inspection and that no repairs were performed.
Accordingly, it is nondutiable.
17. Propeller Inspection (Item No. 307). The invoice
reflects that this item was a nondutiable ABS/USCG inspection and
that no repairs were performed. Accordingly, it is nondutiable.
18. Tailshaft Survey (Item No. 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.
19. Propeller Removal for Inspection (Item No. 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.
20. Cooler, Central FCW #1 Survey, Scoop Cooler Inspection
(Item No. 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.
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21. Cooler, Central FCW #2 Survey, Scoop Cooler Inspection
(Item No. 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.
22. Boiler, Exhaust Gas Clean for Inspection (Item No.
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.
23. Boiler, Oil-Fired Clean for Inspection (Item No. 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.
24. Shafting & Bearing Survey (Item No. 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.
25. Sea Valves, Chests, Etc. Survey (Item No. 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.
26. Sea Cooling Water System Inspection (Item No. 320).
The invoice reflects that this item was a nondutiable inspection
or survey and that no repairs were performed. Accordingly, it is
nondutiable.
27. Bow Thruster Inspection and Cleaning (Item No. 401).
The invoice reflects that this item was a nondutiable inspection
or survey and that no repairs were performed. Accordingly, it is
nondutiable.
28. Corrugated Bulkhead FR 271 Modification (Item No. 501).
The applicant states that "[t]he 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.
29. No. 3 Cargo Hold Structural Modification (Item No.
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..."
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We find that this item is a dutiable repair. Based upon the
information provided, we are unable to draw a meaningful
distinction between the item and Item No. 501, above, and Item
No. 503, below. Those items involved a bulkhead cracking (Item
No. 501) and a fracture (Item No. 503). This item involves
"structural failure problems."
30. Slim-Guide Bracket to Platform Modifications (Item No.
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.
31. Hatch Coaming Stays Modification (Item No. 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.
32. Web Frame 310 Bracket Modifications (Item No. 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.
33. High (Aux) Sea Chest Vent Modification (Item No. 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.
34. Anchor Pocket Modification (Item No. 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.
35. Web Frame Lug/Clip Modification (Item No. 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.
36. M.E. Charge Air Cooler Clean System (Item No. 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.
37. Category B Items - General Services. These costs are
to be prorated between dutiable and nondutiable costs.
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38. 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 Polk item #302 and 303." However, 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.
39. 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
designated 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
Rulings 113883, dated April 1, 1997, and 113673, dated July 7,
1997.
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40. C.O. #3 Main Switchboards. The applicant states that
this is a mandatory regulatory requirement. We agree and
therefore find the item to be nondutiable.
41. C.O. #6 Hull Thickness Gauging ABS Survey Requirements.
The invoice reflects that this is a mandatory ABS requirement.
We agree and therefore find this item to be nondutiable.
42. C.O. #21 No. 7A Cargo Hold Bracket Modification. The
record reflects that this work done to the lower bracket to the
forward bulkhead on the portside of the #7A cargo hold is a
nondutiable modification.
43. C.O. #24 5th Deck Ladder Way Access Modification. The
record reflects that this work done to the radius of the 5th deck
ladder is a nondutiable modification.
44. C.O. #29 Reefer Transformer Cleaning. The invoice
supports that applicant's assertion that this is a nondutiable
cleaning.
45. Item No. 3 (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 clas-
sifications 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).
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HOLDING:
As detailed above, the application is granted in part and
denied in part.
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers
Branch