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HQ 113992

July 2, 1997

VES-13-18-RR:IT:EC 113992 GOB


Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 107 P.O. Box 2450
San Francisco, CA 94126

RE: Vessel Repair Entry No. C27-0158619-3; 19 U.S.C. 1466; MOKIHANA, V-7; Protest; Value added tax; Fresh water

Dear Madam:

This is in response to your memorandum dated June 9, 1997, which forwarded the protest submitted by Matson Navigation Company ("protestant") with respect to the above-referenced vessel repair entry.


The MOKIHANA ("vessel"), a U.S.-flag vessel, arrived at the port of San Pedro, California on December 2, 1996. The subject vessel repair entry was timely filed. The vessel underwent certain foreign shipyard work in Korea and Japan in November of 1996.


Whether the subject items are dutiable pursuant to 19 U.S.C. 1466.


19 U.S.C. 1466(a) 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.

In its protest of May 6, 1997, the protestant states:

... it appears your agent calculated customs duty on our invoice from New Sulzer Diesel of Pusan, Korea. This invoice shows a VAT (value added tax) which we, as an international shipping company are not required to pay, and in fact have not paid (Enclosure 3). Consequently, we are asking for a rebate of $568.00 which is 50% of the tax as represented on the invoice (Enclosure 2). Enclosure 4 is included to show a similar tariff ruling on the VAT issue.

Additionally, we were never invoiced for potable water entered on line three (3) of Form 226 (Enclosure 5) and believe that potable water is free to berthed vessels, as it is Oakland, CA.

In a letter of May 2, 1997 to Customs, the protestant states:

Pursuant to Article 26, Paragraph 1, Item 3 of the Enforcement Decree of Value Added Tax (VAT) law of Korea, any goods or services provided to the vessel shall be for VAT purposes zero-rated. Accordingly, Matson did not pay nor is obliged to pay the VAT assessed by New Sulzer Diesel on their invoice.

Value Added Tax

Customs has held on many occasions that foreign government tax or value added tax is dutiable under 19 U.S.C. 1466. See, for example, Rulings 111792 and 113187.

In support of its claim with respect to the value added tax ("VAT"), the protestant cites Ruling 111304 dated March 4, 1991, which involved a New Zealand goods and services tax ("GST"). We held the GST to be nondutiable in the situation where the vessel operator submitted adequate documentary evidence that the GST was never paid. The documentary evidence included the shipping invoice paid by the vessel operator which reflected that the vessel operator did not pay the GST, as well as the statement of the vessel operator's foreign agent that the GST was not paid or payable.

In this case, the petitioner has not submitted documentary evidence supporting its assertion that the VAT was not paid or payable. The assertions of the protest are not considered to be documentary evidence. In this regard, we note the statement of the court in Bar Bea Truck Leasing Co., Inc. v. United States, 5 CIT 124, 126 (1983):

Again, plaintiff has presented no affidavit or other evidence in support of its counsel's bald assertion...

With respect to the subject vessel repair entry, the VAT is specifically provided for on the pertinent invoice.

Accordingly, in the absence of documentary evidence that the VAT was not paid, we find that it is dutiable.


The protestant states that it was never invoiced for the water and that it believes that potable water is free to berthed vessels.

As the protestant states, fresh water in the estimated amount of $250 was listed on the vessel repair entry. Further, the protestant provided Service Purchase Order #215062 from a contractor for the provision of "approx. 90 tons fresh water." That purchase order did not have an amount in the "item subtotal" or "total cost" column.

The evidence indicates that fresh water was provided to the vessel in Japan. The protestant has not provided documentary evidence in support of its claim that it was never invoiced for the water.

We have previously held that water should be prorated in the same manner as drydock costs and general services costs such as shore power and garbage removal because it is in fact a drydock cost and/or general services cost. See Ruling 113798 dated January 9, 1997 and Ruling 113907 dated April 29, 1997. In this regard, we note that Service Purchase Order #215062 indicates that water is a "general services cost" by stating:

Job Category: General Services
Job: Fresh Water

Accordingly, we find that the cost of the water should be prorated between dutiable and nondutiable amounts in the same manner as other drydock and/or general services costs.


The subject items are dutiable under 19 U.S.C. 1466. The protest is denied.


Jerry Laderberg
Acting Chief,

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