19 U.S.C. 1466; APL KOREA, V-31E; Vessel Repair Entry No. 110-7995905-9; Petition

HQ 114859 December 10, 1999 VES-13-18-RR:IT:EC 114859 GOB CATEGORY: Carriers Port Director of Customs Attn.: Vessel Repair Liquidation Unit, Room 107 P.O. Box 2450 San Francisco, CA 94126 RE: 19 U.S.C. 1466; APL KOREA, V-31E; Vessel Repair Entry No. 110-7995905-9; Petition Dear Madam: This ruling is in response to your memorandum of October 22, 1999, which forwarded the petition submitted by American Ship Management, LLC (“petitioner”) with respect to the above-referenced vessel repair entry. FACTS: The APL KOREA (the “vessel”), a U.S.-flag vessel owned and operated by the applicant, arrived at the port of Seattle on April 2, 1999. The subject vessel repair entry was subsequently filed. The vessel underwent certain foreign shipyard work in China and Singapore. By Ruling 114782 dated August 20, 1999, the application for relief was granted in part and denied in part. ISSUE: Whether the subject items are dutiable pursuant to 19 U.S.C. 1466(a)? LAW AND ANALYSIS: 19 U.S.C. 1466 provides for the payment of duty at a rate of fifty percent ad valorem on the cost of foreign repairs to, and equipment purchased in a foreign country for, vessels documented under the laws of the United States to engage in foreign or coastwise trade, or vessels intended to be employed in such trade. Item 101 - Drydocking and General Services. This item represents drydock costs and general services costs which are to be prorated between dutiable and nondutiable costs in accord with our oft-stated position. The petitioner also states that Customs incorrectly includes 19 U.S.C. 1466(h)(3) duties in its proration calculation. We have addressed this matter previously on a number of occasions. It is our position that duties under 19 U.S.C. 1466(h)(3) are to be included in the dutiable component for the purpose of the proration calculation. In Ruling 226873 dated October 29, 1996, we stated: Duty assessed under 19 U.S.C. 1466(h)(3) is vessel repair duty (i.e., 19 U.S.C. 1466 duty), albeit assessed at a rate of duty different from the fifty percent rate of 19 U.S.C. 1466(a). As such, the dutiable amount with respect to duty assessed under 19 U.S.C. 1466(h)(3) is to be included in the dutiable component for the purpose of the proration calculation ... Item 316 - Life Boat Falls Renewal and Load Test. In our ruling on the application for the subject vessel repair entry (Ruling 114782), we stated: This item is dutiable because it includes certain dutiable items, e.g., “fall wires were renewed,” “rewinding back the drums,” “erected and dismantled staging ... to facilitate the fall wires renewal.” The petitioner claims that this item is a mandatory SOLAS requirement and that “[t]he replaced falls were not in need of repair or renewal.” While the invoice reflects an “ABS and USCG and SOLAS Inspection,” it also reflects, as described above, the renewal of the fall wires, which indicates a dutiable repair. The cost of this item is not itemized between the renewal/repair work and other work. Accordingly, we find this item to be dutiable. Item CO#12 - Bow Thruster Room Bottom Cleaning. In Ruling 114782 we found that “this item is dutiable as incident to the dutiable repairs in item 281, ‘bulkhead fracture between bow thruster and 1 dt.’ “ The petitioner states “that any cleaning incidental to Item 281 is covered within the cost of Item 281. This leaves the cost of the cleaning described in CO #12 to be independent of Item No. 281, thus CO #12 is a routine cleaning item ...” We have reviewed the invoices once again, and we find that the petitioner’s claim has merit. The invoice for item 281 does reflect certain cleaning related to that operation. Under that circumstance, we conclude that the cleaning in item CO #12 is not related to the repair work in item 281 and is therefore nondutiable.  HOLDING: As detailed above, the petition is granted in part and denied in part. Sincerely, Jerry Laderberg Chief, Entry Procedures and Carriers Branch