VES-13-18-RR:IT:EC 114188 GEV
Chief, Liquidation Branch
U.S. Customs Service
Post Office Box 2450
San Francisco, California 94126
RE: Vessel Repair Entry No. C32-0010842-2; C. S. LONG LINES; V-209; Survey; Inspection; Asbestos Abatement;
Modification; 19 U.S.C. 1466
Dear Sir:
This is in response to your memorandum dated November 25,
1997, forwarding a petition for review of your decision on an
application for relief from duties assessed pursuant to 19 U.S.C.
1466. You request our review of four items contained within
the above-referenced entry. Our findings are set forth below.
FACTS:
The C. S. LONG LINES is a U.S.-flag vessel owned by
Transoceanic Cable Ship Company. Subsequent to the completion of
various foreign shipyard work, the vessel arrived in the United
States at Honolulu, Hawaii on March 26, 1997. A vessel repair
entry was timely filed.
Pursuant to an authorized extension of time, an application
for relief with supporting documentation was timely filed. By
letter dated September 22, 1997, your office denied the
application in part and and informed the applicant of the right
to file a petition of your decision pursuant to 4.14(d)(2) of
the Customs Regulations (19 CFR 4.14(d)(2)). Subsequently, a
petition dated October 17, 1997, was timely filed. Of the
numerous items contained within the above-referenced vessel
repair entry for which the petitioner seeks relief, you request
our review of the following: Item nos. 0340, 0390 and 0450 on
Victoria Shipyards Co. Ltd. invoice no. 8-01A(97) listed as
Reference No. 2 on the petitioner's worksheets; Foster Air
Conditioning Ltd. invoice no. 94063 listed as Reference No. 7 on
the petitioner's worksheets.
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ISSUE:
Whether the costs for which the petitioner 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..."
Item 0340 is entitled, "Turbines Survey - Main Turbine
Starboard Survey by U.S.C.G. and A.B.S." Upon reviewing this
item it is readily apparent that a portion of the work listed
thereunder constitutes maintenance (e.g.,
"blueing,...scraping,...honing,...reblueing). Customs considers
work performed to restore a part to good condition following
deterioration or decay to be maintenance operations within the
meaning of the term repair as used in the vessel repair statute.
(See generally, Customs ruling letter 106543, dated February 27,
1984; C.I.E. 142/61, dated February 10, 1961) In addition, we
note that although only a portion of the work covered by this
item constitutes dutiable maintenance, there is only one price
listed for the entire item. Customs will not grant relief where
there is not a sufficient breakdown between dutiable and
nondutiable costs. (See, C.I.E.s 565/55, 1325/58, and C.D. 1836)
Accordingly, this Item 0340 is dutiable in its entirety.
Item 0390 is entitled, "Electrical Motors - Inspection."
The invoice indicates that this item covered merely a nondutiable
inspection and that no repairs were performed in conjunction with
this inspection. Accordingly, this item is nondutiable.
Item 0450 is entitled, "Asbestos Removal - Inspection." The
work in question consisted of providing specialist services in
handling, transporting and disposing of asbestos removed by the
ship's crew in accordance with Canadian Government Regulations.
Customs considers asbestos abatement to be essentially akin to a
repair/maintenance operation and therefore dutiable. (See Custom
ruling letter 113122, dated March 20, 1996) Accordingly, Item
0450 is dutiable.
Reference No. 7 on the petitioner's worksheets (Foster Air
Conditioning Ltd. invoice no. 94063) covers the upgrade of the
vessel's refrigeration plant and is alleged to be a nondutiable
modification. 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
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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.
Upon reviewing the petitioner's letter of October 17, 1997,
to your office regarding this item (cross-referenced in the
petition), we note the following statement contained therein:
Before the work started in Victoria, all refrigeration
and airconditioning
[sic] systems were operating satisfactorily with the
exception of one broken isolation valve in the domestic
refrigeration manifold and one ice blocked
wall mounted box coil. Foster performed an inspection
prior to work and
did find several other leaks which needed repair. We
do not have an exact
breakdown of these repairs, but estimate them to be
valued at approximately
$3000.00.
Although the upgrade of the refrigeration plant would
improve the operation of the vessel and result in lower
maintenance costs, the fact remains that a portion of the upgrade
constitutes dutiable repairs since it encompasses the replacement
of current parts which are not in good working order. These
repairs are not segregated from the remainder of the nondutiable
work with any degree of specificity. As noted above, Customs
will not grant relief where there is not a sufficient breakdown
between dutiable and nondutiable costs. (See, C.I.E.s 565/55,
1325/58, and C.D. 1836) Consequently, the upgrade of the
refrigeration plant covered by Reference No. 7 on the
petitioner's worksheets (Foster Air Conditioning Ltd. invoice no.
94063) is dutiable in its entirety.
HOLDING:
As detailed above, the petition is granted in part and
denied in part.
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers
Branch