VES-13-18 CO:R:IT:C 112666 BEW
Chief, Residual Liquidation and Protest Branch
U.S. Customs Service
6 World Trade Center
New York, New York 10048-0945
RE: Protest No. 4106-91-000007; Cleveland, Ohio, Vessel Repair
Entry No. 1001-92-201546, dated February 25, 1988; RICHARD
REISS; drydocking; crane service; surveys; painting; 19
U.S.C. 1466
Dear Sir:
This is in response to a memorandum dated March 31, 1993,
that forwards protest No. 4106-91-000007 concerning vessel repair
entry No. 1001-92-201546, relating to the RICHARD REISS.
FACTS:
The RICHARD REISS, an American-flag vessel, underwent
certain foreign shipyard operations in Port Weller, Canada. The
vessel arrived in the United States at Erie, Pennsylvania, on
December 12, 1987. A vessel repair entry (CF 226) was filed on
February 25, 1988.
An application for relief was denied, and a petition was
timely filed. By decision 111328 KVS, dated August 7, 1991, we
found as follows:
... The petitioner seeks relief for certain items listed on
Port Weller Dry Docks invoice nos. 12-25-87, 12-26-87 and
12-27-87, all of which are dated December 31, 1987. Invoice
no. 12-25-87 lists charges related to drydocking expenses:
blocks, line handling, water, telephone, garbage removal,
tug service, etc. Consistent with previous Customs
decisions regarding these items, the cost of these items
(totalling Can.$ 59,357.60) is non-dutiable.
The applicant asserts that certain items should be non-
dutiable as required inspections or surveys . . . among the
charges asserted by the petitioner to be non-dutiable as a required inspection or survey is an item which lists the
cost of painting draft marks and load line marks. The mere
fact that a vessel underwent certain operations in
compliance with regulations is not determinative as to a
claim of non-dutiability. To analogize, we note that while
vessels are required to retain various items of firefighting
and other safety equipment on board, the foreign purchase of
this equipment is, nonetheless, subject to the 50% ad
valorem duty levied by 19 U.S.C. 1466. . . . Here, although the vessel may be required by the U.S.
Coast Guard or American Bureau of Shipping to maintain
clearly visible load lines and draft marks the process of
keeping those markings in the required condition constitutes
maintenance. . .
We parenthetically note that this painting operation appears
to be part of an overall program of maintenance painting, as
evidenced by the underwater painting operation listed on
Port Weller Dry Docks invoice no. 12-27-87, the cost of
which is acknowledged by the petitioner to be dutiable.
Accordingly, the cost of painting load lines and draft marks
(Can.$ 1,000.00) is dutiable.
The petitioner has also submitted American Bureau of
Shipping report no. C8454 and accompanying invoice no.
175024 which were not included with its previous submission.
Please note the above discussion on the subject of
"surveys". In addition, the Customs Service has held that in
the liquidation process Customs should go beyond the mere
labels of "continuous" or "ongoing" before deciding whether
a part of an ongoing maintenance and repair program labelled
"continuous" or "ongoing" is dutiable. If the purpose of a
survey is to ascertain the extent of damage sustained, or to
ascertain if the work is adequately completed, the costs are
dutiable as part of the repairs which are accomplished
pursuant to C.I.E. 429/61. . . .
Item (e) is also asserted to be non-dutiable. The invoice
description for this item states, "open up sea valves and
overboards for inspection and close up in good order upon
completion of inspection." Careful examination of A.B.S.
report no. 8454 ( p.2, item 4a and 4b) reveals that, in
conjunction with the inspection of these items, engine
cooling watergate valve guides were repaired and the
drinking water pump suction valve was renewed. Since we are
unable to identify the repair of these items on any other
item listed on the Port Weller Dry Docks invoices, we
conclude that the cost of the repair was incorporated into
item (e).
The Customs Service has held that when the costs of various
items are not segregated or separately shown, but are lumped
together, duty will be assessed on the entire cost even
though certain items may be non-dutiable (see C.I.E. 565/55,
C.I.E. 1325/58 and C.D. 1836). Therefore, the cost of this
item (Can.$ 8,000.00) is dutiable.
The entry was liquidated on September 13, 1991, and the
protest was timely filed on November 22, 199l. The protestant
claims that certain charges entered on the vessel repair entry as
drydocking, crane services and surveys should not be considered
dutiable.
ISSUE:
Whether sufficient evidence is presented to establish that
the subject repairs constitute nondutiable drydocking, crane
service, staging and surveys costs which are remissible under the
vessel repair statute (19 U.S.C. 1466).
LAW AND ANALYSIS:
Title 19, United States Code, section 1466, provides in
pertinent part for payment of duty in the amount of 50 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 engage in such trade.
Your memorandum states that your office inadvertently
liquidated items of repair listed on page one of the Port Weller
Dry Docks invoice No. 12-25-87, dated December 31, 1987, in the
amount of $59,357.60 as dutiable.
Pursuant to CD 1836 charges for drydocking, for furnishing
electricity, air and water, fees paid for the use of tugs and
pilots in drydocking and undocking a vessel, staging, and crane
expenses are not dutiable repairs if segregated on the invoice.
Upon reviewing the entire record in this matter, we affirm
our decision of August 7, 1991, as it relates to page one of
invoice No. 12-25-87, listed as items 1 and 2 of the protest.
The costs associated with items 1 and 2 are nondutiable. The
protest is granted as to these two items.
Customs has held that where periodic surveys are undertaken
to meet the specific requirements of a classification society,
insurance carrier, etc., the cost of the surveys is not dutiable
even when dutiable repairs are effected as a result thereof;
however, in the liquidation process Customs should go beyond the
mere labels of "continuous" or "ongoing" before deciding whether
the item is dutiable. If an inspection or survey is conducted as
a part of an ongoing maintenance and repair program labeled
"continuous" or "ongoing" the cost is dutiable. Also, if the
survey is to ascertain the extent of damage sustained, or to
ascertain if the work is adequately completed, the costs are
dutiable as part of the repairs that are accomplished pursuant to
holdings in C.I.E. 429/61, C.S.D. 79-2, and C.S.D. 79-277.
Painting operations which are a part of an overall program
of maintenance painting, as evidenced by the underwater painting
operation listed on Port Weller Dry Docks invoice No. 12-27-87,
are dutiable as maintenance repairs. The protestant acknowledged
in the petition that the cost of this repair as a dutiable cost.
Accordingly, we find the cost of painting load lines and draft
marks, (Can.$ 1,000.00) to be dutiable.
Pursuant to C.I.E. 1325/58 and C.I.E. 565/55, duties may not
be remitted where the invoice does not segregate the dutiable
costs from the nondutiable costs. We have thoroughly reviewed
the entry documentation and the additional documents submitted
with the protest in this matter. It is our conclusion that the
repairs that were made to the certain items were made to replace
a current part, fitting or structure that was not in good working
order at the time of the inspection and repair. With regard to
the American Bureau of Shipping (ABS) surveys under consideration
our findings are as follows:
Items (a), (b) and (c) of Port Weller Dry Docks, invoice No.
12-26-87 are nondutiable. The protest is granted as to
these three items.
Item (d) of Port Weller Dry Docks, invoice No. 12-26-87 is
dutiable. The protest is denied as to this item.
Item (e) of Port Weller Dry Docks, invoice No. 12-26-87.
The invoice description for this item states, "open up sea
valves and overboards for inspection and close up in good
order upon completion of inspection." A.B.S. report no.
8454 ( p.2, item 4a and 4b) reveals that, in conjunction with the inspection of these items, engine cooling
watergate valve guides were repaired and the drinking water
pump suction valve was renewed. Since we are unable to
identify the repair of these items on any other item listed
on the Port Weller Dry Docks invoices, we conclude that the
cost of the repair was incorporated into item (e). In view
of the fact that the cost for the dutiable repairs is not
segregated from the nondutiable repairs, the entire item is
dutiable. The protest is denied as to this item.
HOLDING:
Following a thorough review of the LAW AND ANALYSIS of the
evidence, the protest is granted with the exception of the items
enumerated above. Please refer this matter immediately for
reliquidation, and send a copy of this ruling to the protestant
with the Customs Form 19.
Sincerely,
Stuart P. Seidel
Director, International