HQ 112894

March 21, 1996

VES-13-18-RR:IT:EC 112894 GOB

CATEGORY: Carriers

Port Director of Customs

Attn.: Chief, Residual Liquidation and Protest Branch

Six World Trade Center

New York, N.Y. 10048-0945

RE: Vessel Repair Entry No. C05-0000084-6; 19 U.S.C. 1466;

Petition;

MARINE RELIANCE, V-31; Surveys

Dear Sir:

This is in response to the memorandum from your office dated

September 17, 1993 with respect to the above-referenced vessel

repair entry.

FACTS:

The record reflects that the S/S MARINE RELIANCE (the

\"vessel\") is a U.S.-flag vessel owned by Marine Transport Lines,

Inc. (\"petitioner\"). In July 1992 the vessel underwent shipyard

operations in Yokosuka, Japan. The vessel arrived at the port of

Davisville, Rhode Island on September 17, 1992, and filed the

subject vessel repair entry.

In Ruling 112580 dated May 25, 1993, the application for

relief with respect to the subject entry was denied.

ISSUE:

Whether the costs at issue are dutiable pursuant to 19

U.S.C. 1466.

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

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.

The petition for relief is dated July 21, 1993. We note

initially that the petition states with respect to certain items

(i.e., 15-5(b) - pin inspection; 16-3(g) and (h) - tube gauging

and engineer inspection; 16-4(c) - pump inspection; and 17-3(c),

(g), and (h) - main engine inspections): \"In accordance with

clarification guidance, provided with letter above, this item is

withdrawn from consideration.\" We take this to mean that the

petitioner is not contesting the finding of dutiability for each

item with respect to which that statement is made. Accordingly,

these items are not the subject of this petition.

In general, surveys or inspections are nondutiable

under 19 U.S.C. 1466 if they are periodic surveys or inspections

which are required by a governmental entity or classification

society and if they are not resultant from, or associated with,

dutiable repairs.

In CSD 79-277, we stated as follows:

Where a survey is undertaken to meet the specific

requirements of a governmental entity, classification

society, insurance carrier, etc., the cost is not dutiable

even when dutiable repairs are effected as a result thereof.

We note that the decision in Texaco Marine Services, Inc.

and Texaco Refining and Marketing, Inc. v. United States, 815

F.Supp. 1484 (CIT 1993), 44 F.3d. 1539 (CAFC 1994) may be

relevant to the dutiability of surveys or inspections in certain

cases. In Texaco, the Court of Appeals for the Federal Circuit

stated in pertinent part:

Texaco urges us to reject the Court of International Trade\'s

\"but for\" approach and to interpret \"expenses of repairs\" so

as to exclude those expenses (e.g., expenses for clean-up

and protective covering work) not incurred for work directly

involved in the actual making of repairs. Such a reading

has no basis in the plain language of the statute, however.

Aside from the inapplicable statutory exceptions, the

language \"expenses of repairs\" is broad and unqualified. As

such, we interpret \"expenses of repairs\" as covering all

expenses (not specifically exempted in the statute) which,

but for dutiable repair work, would not have been incurred.

(Emphasis supplied.)

However, as stated in Headquarters memorandum 113350 dated March

3, 1995, which was published in the Customs Bulletin on April 5,

1995, Customs has determined that, except for post-repair

cleaning and protective coverings, Texaco will not apply with

respect to vessel repair entries filed prior to the date of the

appellate decision in Texaco, December 29, 1994. Inasmuch as the

subject entry was filed in 1992, the only

application of Texaco herein would be to issues involving post-repair
cleaning and protective coverings.

After a review of the evidence of record, we determine that

the following items are nondutiable because they fall within the

scope of a nondutiable survey or inspection. As stated supra, in

general, surveys or inspections are nondutiable under 19 U.S.C.

1466 if they are periodic surveys or inspections which are

required by a governmental entity or classification society and

if they are not resultant from, or associated with, dutiable

repairs.

15-16 - fire equipment - inspection cost (15-16) and

pipe line test (15-16(b)). The invoice indicates that the

inspection cost in 15-16 was for an annual inspection and testing

in accordance with U.S. Coast Guard (\"USCG\") and SOLAS rules and

regulations. The renewals in 15-16(a) and the materials in 15-16(b) are
dutiable.

16-3 - composite boiler - (a), (b), (c), (d), and (e).

These items are all inspections or tests. No repairs are noted.

Note, however, that 16-3(c) contains a dutiable item -

replacement/repairs cost of 32,000 yen; the inspection cost of

300,000 yen in 16-3(c) is nondutiable. Note further that 16-3(f)

was not included within the scope of the petition. Finally note

that 16-3(g) and (h) were \"withdrawn from consideration,\" as

noted above.

16-4 - pumps. Only the inspection costs are

nondutiable. The inspection costs are nondutiable inspection

costs. No repairs are noted. The costs of new parts and

replacements are dutiable.

17-1(a) and (e) - rudder clearance and dye check. The

invoice indicates that these items are tests or surveys.

17-2 - propeller and tailshaft - (a) - only inspection

cost; (b) propeller removal; (c) - only inspection cost; (f) -

only inspection cost; and (h) - fairwater. The invoice reflects

that these inspection or inspection-related costs are nondutiable

inspection costs which were required for ABS special survey

credit and pursuant to USCG rules and regulations. No repairs

are noted.

17-3 - main engine items. The petition pertains to

(a), (b), (c), (d), (g), and (h), (j), and (k). Except for item

(k), the invoice reflects that all separately itemized inspection

costs are nondutiable inspections. Item 17-3(k), which includes

the cleaning of scavenging air space, is dutiable pursuant to the

authority of Ruling 111571 dated March 4, 1992 (as well as other

rulings on point). Ruling 111571 held that:

The removal of carbon and oil deposits from the main engine

scavenger spaces is a maintenance operation the cost of

which is subject to duty under 19 U.S.C. §1466.

18-1 - quadrennial cargo gear inspection. The invoices

reflects that this is a required ABS inspection.

18-2 - ramp hose test. The invoice reflects that this

item is related to ABS and USCG requirements.

Item 15-5(a) (life boats) is dutiable. The invoice and the

application indicate that this item involved work done to the

life boats per USCG requirements. However, the invoice also

indicates that the work included the renewal of wires, which is

dutiable. The renewal of wires is not separately itemized.

Accordingly, item 15-5(a) is dutiable.

Item 15-15 (life rafts - inspection) is dutiable because it

includes \"renewals of all annual replacement items,\" which is not

separately itemized. Renewals of replacement items are dutiable.

Item 15-15(a), a USCG-required five year inflation test of four

life rafts, is nondutiable because it is a test required by a

governmental entity which is not resultant from or associated

with dutiable repairs.

Item 16-1 - sea valves is dutiable because the invoice

includes dutiable repairs which are not separately itemized,

i.e., the renewal of missing or defective studs and nuts.

On page 10 of the petition, the petitioner refers to certain

items as \"purported to be an incidental operation to

inspections.\" Certain of these items (i.e., 16-3(a) and (d); 18-1; and
18-2) are covered by our findings, supra, that they are

nondutiable.

All transportation costs which are segregated are

nondutiable. The \"but-for test\" of Texaco, does not apply to

transportation costs herein per Headquarters memorandum 113350,

supra, since the subject entry was filed prior to the date of the

appellate decision in Texaco.

HOLDING:

As detailed supra, the petition is granted in part and

denied in part.

Sincerely,

William G. Rosoff

Chief, Entry and Carrier Rulings

Branch