Protest No. 3001-99-200004; Vessel Repair Entry No. 110-6461890-0; PRESIDENT POLK; V-80; General Services; Drydocking; Proration; Modification; 19 U.S.C. § 1466

HQ 114638 April 30, 1999 VES-13-18-RR:IT:EC 114638 GEV CATEGORY: Carriers Chief, Liquidation Branch U.S. Customs Service Post Office Box 2450 San Francisco, California 94126 RE: Protest No. 3001-99-200004; Vessel Repair Entry No. 110-6461890-0; PRESIDENT POLK; V-80; General Services; Drydocking; Proration; Modification; 19 U.S.C. § 1466 Dear Sir: This is in response to your memorandum dated February 19, 1999, forwarding the above-referenced protest. Our ruling is 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 sought relief with respect to numerous items listed within the above-referenced vessel repair entry. Customs rendered its decision on the application for relief granting it in part and denying it in part based on Headquarters ruling letter 114047, dated January 27, 1998. Subsequently, a petition was timely filed. Pursuant to ruling letter 114334, dated September 23, 1998, Customs rendered its decision on the aforementioned petition. The subject entry was forwarded for liquidation which took place on October 23, 1998. A protest, dated January 21, 1999, was timely filed. The protest seeks relief for the following: general services and drydocking costs (both of which were prorated at liquidation); and the services of an individual who supervised and inspected the work covered by Item Nos. 501 and 502 of the subject vessel repair entry. With respect to the aforementioned general services and drydocking costs, the protestant contends that  - 2 - such costs are not dutiable and therefore should not have been prorated. In regard to the supervisory/inspection services at issue, it is claimed that the cost of such services is related to nondutiable modifications. ISSUE: Whether the costs for which the protestant 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..." With respect to the general services and drydocking costs under consideration, we note that at both the application and petition stages the evidence submitted was insufficient to support the claim that such costs were attributed solely to non-dutiable work. No additional evidence or legal arguments have been submitted by the protestant to support its claims with respect to these costs. Furthermore, since the subject entry contained both dutiable and nondutiable costs, the general services and drydocking costs at issue were prorated pursuant to Customs ruling letter 113474 and memorandum 113350 both of which addressed Customs implementation of the decision of the U.S. Court of Appeals for the Federal Circuit in Texaco Marine Services, Inc., and Texaco Refining and Marketing, Inc. v. United States, 44 F.3d 1539 (CAFC 1994). Notwithstanding the protestant’s assertions to the contrary, we maintain that the general services and drydocking costs in question were correctly prorated in accordance with the above-cited authority in view of the absence of evidence substantiating a finding that these costs were attributed solely to nondutiable work. The supervisory/inspection services at issue are alleged to have been performed in conjunction with the work covered by Item Nos. 501 and 502. We note that the invoice covering these services (PMC invoice no. 95-2900-8A) merely consists of the following statement: “Services performed by KARL MASANNECK from 1 April 1996 through 30 April 1996 in conjunction with the M/V PRESIDENT POLK as follows.” The invoice then lists a breakdown of costs per day, travel expenses, and a PMC fee. Nothing on the invoice provides any nexus between the services of this individual and Item Nos. 501 and 502. However, the protestant has submitted a letter from the owner of PMC stating that the services of the individual in question consisted of supervision and inspection of the work described by Item Nos. 501 and 502 which we determined to be nondutiable modifications. (See Customs ruling letter 114334, dated September 23, 1998) Based on this additional documentation, we find the cost of these services to have been incurred pursuant to nondutiable modification work and therefore is nondutiable.  - 3 - HOLDING: As detailed above, the protest is granted in part and denied in part. In accordance with § 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, Sandra L. Bell Director International Trade Compliance Division