VES-13-18-RR:IT:EC 114493 GEV
Chief, Residual Liquidation and Protest Branch
U.S. Customs Service
6 World Trade Center
New York, New York 10048-0945
RE: Vessel Repair Entry No. 334-1002197-7; S.S. UNITED STATES;
Asbestos Removal; Towing-Related Work; 19 U.S.C. 1466
Dear Sir:
This is in response to your memorandum dated September 29,
1998, which forwards for our consideration a petition for review
of your decision denying an application for relief from the
assessment of vessel repair duties pursuant to 19 U.S.C. 1466.
Our findings in this matter are set forth below.
FACTS:
The S.S. UNITED STATES is a U.S.-flag vessel owned by Mamara
Marine, Inc. Subsequent to the completion of work at Sevastopol
Marine Plant, Sevastopol, Ukraine, the vessel arrived from the
Ukraine via Tuzla, Turkey, unmanned and under tow, at
Philadelphia, Pennsylvania, on July 23, 1996. A vessel repair
entry was timely filed.
On November 19, 1996, the New York Vessel Repair Liquidation
Unit (VRLU) received a copy of a letter dated October 4, 1996, by
facsimile transmission, addressed to the Disclosure Law Branch of
the Office of Regulations and Rulings at Customs Headquarters,
wherein counsel requested a ruling as to the dutiability of the
work contained within the above-referenced entry. Pursuant to
instructions from this office, the VRLU accepted and reviewed the
letter as an application for relief. By letter dated January 10,
1997, the application was denied by the VRLU due to the
insufficiency of the evidence submitted and the applicant was
informed of the right to file a petition for review of this
decision.
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Pursuant to an authorized extension of time, a petition for
review with additional supporting documentation (including
shipyard invoices and photographs) was submitted. Subsequent to
receipt of the petition and documentation, a meeting was held
between representatives of the VRLU and the petitioner, to
discuss the merits of the petitioner's claims for relief for the
cost of removing asbestos from the interior of the vessel,
including the work and removal of non-structural materials and
equipment in order to remove the asbestos, and for the cost of
work claimed to be necessary to tow the vessel back to the United
States ("towing-related work").
ISSUES:
1. Whether the foreign cost of asbestos removal from the
subject vessel is dutiable under 19 U.S.C. 1466.
2. Whether the foreign cost of "towing-related work" for
the subject vessel is dutiable under 19 U.S.C. 1466.
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..."
With respect to the asbestos removal in question, the
petitioner states that this work was necessary due to the
extensive conversion and modification of the subject vessel that
is to take place at a U.S. shipyard as contemplated by the
Business Plan submitted. This conversion work involves the
removal of all interior bulkheads, piping, ducts and other
fixtures and the installation of completely new interior
arrangements and services. In order to accomplish the precursory
asbestos removal the vessel was essentially gutted through the
service areas, public areas, and all the interior, non-structural
parts of the vessel were removed and discarded. Further in this
regard, the petitioner states that not only was it not possible
to find a U.S. contractor willing to remove the asbestos, in
order for the conversion work to be performed at a United States
shipyard, asbestos is required to be removed pursuant to the
requirements of applicable United States environmental
regulations (29 CFR 1910.1001 and 1915). In addition, the
petitioner states that the U.S. Coast Guard enforces this
requirement as to vessels being refitted since it interprets the
vessel as both a passenger vessel, and while undergoing
refitting, as a work place under 46 CFR Part H, 70.01.
Customs has had prior occasion to address the dutiability of
asbestos removal when it has been performed in conjunction with
dutiable repairs, including insulation renewal. (See Customs
ruling letters 108366, dated March 4, 1987; 111642, dated August
9, 1991; 113108, dated May
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25, 1994; 113122, dated March 20, 1996; and 114188, dated April
23, 1998) In these cases the cost of asbestos removal has been
held to be dutiable. However, the facts of those cases are
distinguishable from those now under consideration in that the
latter involves only a removal. No further dutiable repairs or
insulation renewal were performed. To the contrary, as noted
above the vessel was essentially gutted and rendered incapable of
being placed in service without the aforementioned
conversion/refurbishing in a U.S. shipyard. In this regard we
note that Customs has long-held that the mere removal of articles
from a vessel, without more, is neither a modification nor a
dutiable repair. Such work is merely work not considered to be
dutiable under the vessel repair statute. (Customs ruling
letters 108574, dated November 5, 1986; 109052, dated December 9,
1987; 109401, dated August 15, 1988; 109942, dated February 1,
1989; and C.D. 2514) We believe this rationale applies in the
case at hand.
Accordingly, the cost of asbestos removal covered by the
subject entry, including the work and removal of non-structural
materials and equipment in order to remove the asbestos, is not
dutiable.
In regard to the towing-related work under consideration
(e.g., removal of propellers and placement aboard deck,
withdrawal of shafts, sealing of stern tubes, etc.) our review of
the record indicates that such work constituted neither dutiable
repairs nor costs incident to dutiable repairs. Rather, it was
done to make the vessel capable of, and to facilitate, its
transoceanic tow back to the United States where it is to undergo
major refurbishing prior to being returned to service.
Consequently, these costs are nondutiable.
HOLDINGS:
1. The foreign cost of asbestos removal from the subject
vessel is not dutiable under 19 U.S.C. 1466.
2. The foreign cost of "towing-related work" for the
subject vessel is not dutiable under 19 U.S.C. 1466.
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers
Branch