# 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]{.underline}

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]{.underline}

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]{.underline} Customs Ruling HQ 112778 (March 14, 1995).

[Item 19]{.underline}

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]{.underline} Customs Ruling HQ 113813 (October 15,
1998). Paint and coatings are considered materials pursuant to section
1466(h)(2). [See]{.underline} HQ 113813, [supra]{.underline}. 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