VES-13-18-RR:IT:EC 115222 LLO
Chief, Residual Liquidation and Protest Branch
6 World Trade Center, Room 761
New York, N.Y. 10048
RE: Petition for Review; SEA-LAND QUALITY; V-552; Vessel Repair
Entry No. WK9-0065595-2; Duty Remission; 19 U.S.C. §1466(d);
19 C.F.R. §4.14; Travel Expenses
Dear Sir:
We received your memorandum dated November 3, 2000, requesting we review a petition relating to the SEA-LAND QUALITY V/552, regarding the dutiability of travel expenses incurred while foreign repairs are performed. Our ruling on this matter is set forth below.
FACTS:
The SEA-LAND QUALITY, a United States-flag vessel operated by United States Ship Management, Inc. of Charlotte, North Carolina arrived at the port of Boston, Massachusetts on July 12, 2000. The date of entry was July 12, 2000.
An application for relief was timely filed on October 4, 2000. Pursuant to a ruling letter from the Residual Liquidation and Protest Branch dated October 20, 2000, the application was denied in full. According to the vessel repair entry and other documents in the file, the vessel underwent work in Rotterdam, The Netherlands.
The operator agents, USSM, Inc. submitted an application for relief identifying certain items as non-dutiable, and that application was acted upon by the Residual Liquidation and Protest Branch of the United States Customs Service, located in New York. This particular petition is requesting relief regarding the dutiability of travel expenses according to Texaco Marine Services, Inc. v. United States, 44 F.3d 1539 (Fed. Cir. 1994).
ISSUE:
Whether the travel expenses incurred by foreign repair technicians while working on repairs to a U.S. flag vessel while outside of the United States are dutiable under 19 U.S.C. §1466.
LAW AND ANALYSIS:
Title 19, United States Code, § 1466(a), provides in part for payment of an ad valorem duty of 50% of the foreign cost of equipment, or any part thereof, including boats, purchased for, or the repair parts of materials to be used, or the expenses of repairs made in a foreign country to vessels documented under the laws of the United States to engage in the foreign or coastwise trade or vessels intended to engage in such trade.
The Court of Appeals for the Federal Circuit, affirmed the Texaco Marine Services, Inc. v. U.S., 44 F.3d 1539 (1994) “but for” test approach. The Court clearly opined that the decision by the Mount Washington Tanker court, which ruled that compensating the members of a Swedish repair crew for their time spent traveling between Sweden and a vessel anchored at sea off of Singapore were not dutiable as an expense of the dutiable repairs performed by the repair crew, was incorrect. The travel expenses would have been viewed as coming within the statute had the “but for” approach been used by that court.
United States Ship Management, Inc. maintains in its petition for review that travel expenses should not be subject to vessel repair duties. On March 3, 1995, the Assistant Commissioner, Office of Regulations and Rulings, issued a memorandum that was published in the Customs Bulletin on April 5, 1995 (Customs Bulletin and Decisions vol. 29, no. 14 at pg. 24). It provided that all vessel repair entries filed with Customs on or after the date of the Texaco decision were to be liquidated in accordance with the full weight and effect of that ruling. Therefore, travel expenses that are associated with repair charges are dutiable in accordance with the “but for” approach used in Texaco. Without a showing that the charges in questions were incident to a non-repair item, they are subject to duties under the vessel repair statute.
In this situation, the SEA-LAND QUALITY received foreign repairs well after the Texaco “but for” test approach took effect pursuant to Customs Bulletin and Decisions vol. 29, no. 14 at pg. 24. Additionally, the travel expenses in question were incidental to the repairs on the vessel. For this reason, the travel expenses are dutiable.
HOLDING:
Travel expenses incurred by foreign repairmen while repairing a U.S. flag vessel outside of the United States fall within 19 U.S.C. §1466(a) and are therefore dutiable if incurred incident to the foreign repairs.
Sincerely,
Larry L. Burton
Chief
Entry Procedures and Carriers Branch