Vessel Repair Entry No. C20-0058272-9; M/V SS ENERGY ENTERPRISE; Protest No. 2002-08-100160; 19 U.S.C. § 1466(a)

HQ H033696 December 5, 2008 VES-13-18:RR:BSTC:CCI H033696 ALS CATEGORY: Carriers Supervisory Import Specialist Vessel Repair Unit U.S. Customs and Border Protection 1515 Poydras Street, Suite 1700 New Orleans, Louisiana 70130 RE: Vessel Repair Entry No. C20-0058272-9; M/V SS ENERGY ENTERPRISE; Protest No. 2002-08-100160; 19 U.S.C. § 1466(a) Dear Sir: This is in response to your memorandum of July 9, 2008. The memorandum forwards an application for further review of a protest filed by Central Gulf Lines, Inc. (“Central Gulf Lines”), seeking relief for duties assessed pursuant to 19 U.S.C. § 1466(a). You have asked us to review three items noted in your memorandum. Our ruling follows. FACTS: The M/V SS ENERGY ENTERPRISE (the “vessel”), a U.S.-flag vessel owned by the protestant, incurred foreign shipyard costs. The vessel arrived in the port of Baltimore, Maryland on June 11, 2006. Pursuant to an authorized extension of time, the protestant timely filed a vessel repair entry on October 10, 2006, and filed an application for relief on that same day. After your office issued a determination of duty, dated February 1, 2008, the protestant timely filed the subject application for further review on June 23, 2008, seeking relief pursuant to 19 U.S.C. § 1466(a). ISSUE: Whether the costs for which the protestant seeks relief are dutiable under 19 U.S.C. § 1466(a). LAW AND ANALYSIS: Title 19, United States Code, section 1466(a) 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 . . . “ The following items are at issue: Item 13: An invoice from Chengxi Shipyard, dated May 12, 2006, that refers to “modifications in association with IACS UR S26 & S27,” “modifications in association with IACS UR S30,” and modifications in association with IACS UR S31.” Item 16: A letter and invoice from QBM, Inc. The letter is dated August 31, 2006, and the invoice is dated May 31, 2006. The letter states that Mr. Daniel La Londe is a Canadian citizen and a permanent resident of Canada, and the invoice lists costs to cover Mr. La Londe’s labor as a splice technician. Also included is a copy of Mr. La Londe’s passport. Item 19: An invoice from Hempel (USA) Inc., dated May 30, 2006, that refers to paint and paint thinner. We will discuss these items in turn. Item 13 The protestant contends that relief should be granted because the work consists of modifications to the vessel. The protestant cites to C.S.D. 89-94, C.S.D. 80-143, Customs Ruling HQ 114782, 112637, and 113826 to supports its contention. The cited cases hold that modifications are not dutiable as repairs. The submitted American Bureau of Shipping (ABS) class survey report, dated June 8, 2006, lists several entries indicating that rather than repairs, the vessel operator performed this work because of an ABS recommendation that the small hatches, fore deck fittings and equipment, and side shell frames be strengthened, secured, and renewed. Thus, this work consists of modifications and therefore the costs of such are non-dutiable. Item 16 The protestant contends that labor costs incurred in this case are non-dutiable pursuant to 19 CFR 4.14 because a Canadian resident performed the work. While it is true that 19 CFR 4.14(a) provides, in pertinent part, that vessel repair “expenditures made in Canada” are not subject to vessel repair duties, the citizenship/residency status of the laborers performing that work is not dispositive. There is no dispute that the labor costs at issue were incurred in China, not Canada. Therefore, they are dutiable. See Customs Ruling HQ 112778 (March 14, 1995). Item 19 The protestant contends that the subject paint and accessories are non-dutiable as materials purchased in the United States. Pursuant to 19 U.S.C. § 1466(h)(2), the following is provided: The duty imposed by subsection (a) of this section shall not apply to- (2) the cost of spare repair parts or materials (other than nets or nettings) which the owner or master of the vessel certifies are intended for use aboard a cargo vessel, documented under the laws of the United States and engaged in the foreign or coasting trade, for installation or use on such vessel, as needed, in the United States, at sea, or in a foreign country, but only if duty is paid under appropriate commodity classifications of the Harmonized Tariff Schedule of the United States upon first entry into the United States of each such spare part purchased in, or imported from, a foreign country… We have held that section 1466(h)(2) also applies to U.S.-made parts and materials. See Customs Ruling HQ 113813 (October 15, 1998). Paint and coatings are considered materials pursuant to section 1466(h)(2). See HQ 113813, supra. The submitted invoice indicates that the paint and coatings (including thinner), listed thereon were purchased from a vendor in the United States on May 30, 2006. Therefore, the costs covered by this invoice are non-dutiable. HOLDING: Following a thorough analysis of the facts as well as of the law and applicable precedents, we have determined that the protest with respect to the items considered above should be granted in part and denied in part as specified in the Law and Analysis portion of this ruling. In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), 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 of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, Glen E. Vereb Chief Cargo Security, Carriers, and Immigration Branch