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HQ 114493

November 17, 1998

VES-13-18-RR:IT:EC 114493 GEV


Chief, Residual Liquidation and Protest Branch U.S. Customs Service
6 World Trade Center
New York, New York 10048-0945

RE: Vessel Repair Entry No. 334-1002197-7; S.S. UNITED STATES; Asbestos Removal; Towing-Related Work; 19 U.S.C. ? 1466

Dear Sir:

This is in response to your memorandum dated September 29, 1998, which forwards for our consideration a petition for review of your decision denying an application for relief from the assessment of vessel repair duties pursuant to 19 U.S.C. ? 1466. Our findings in this matter are set forth below.


The S.S. UNITED STATES is a U.S.-flag vessel owned by Mamara Marine, Inc. Subsequent to the completion of work at Sevastopol Marine Plant, Sevastopol, Ukraine, the vessel arrived from the Ukraine via Tuzla, Turkey, unmanned and under tow, at Philadelphia, Pennsylvania, on July 23, 1996. A vessel repair entry was timely filed.

On November 19, 1996, the New York Vessel Repair Liquidation Unit (VRLU) received a copy of a letter dated October 4, 1996, by facsimile transmission, addressed to the Disclosure Law Branch of the Office of Regulations and Rulings at Customs Headquarters, wherein counsel requested a ruling as to the dutiability of the work contained within the above-referenced entry. Pursuant to instructions from this office, the VRLU accepted and reviewed the letter as an application for relief. By letter dated January 10, 1997, the application was denied by the VRLU due to the insufficiency of the evidence submitted and the applicant was informed of the right to file a petition for review of this decision.

Pursuant to an authorized extension of time, a petition for review with additional supporting documentation (including shipyard invoices and photographs) was submitted. Subsequent to receipt of the petition and documentation, a meeting was held between representatives of the VRLU and the petitioner, to discuss the merits of the petitioner's claims for relief for the cost of removing asbestos from the interior of the vessel, including the work and removal of non-structural materials and equipment in order to remove the asbestos, and for the cost of work claimed to be necessary to tow the vessel back to the United States ("towing-related work").


1. Whether the foreign cost of asbestos removal from the subject vessel is dutiable under 19 U.S.C. ? 1466.

2. Whether the foreign cost of "towing-related work" for the subject vessel is dutiable under 19 U.S.C. ? 1466.


Title 19, United States Code, ? 1466 (19 U.S.C. ? 1466), 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..."

With respect to the asbestos removal in question, the petitioner states that this work was necessary due to the extensive conversion and modification of the subject vessel that is to take place at a U.S. shipyard as contemplated by the Business Plan submitted. This conversion work involves the removal of all interior bulkheads, piping, ducts and other fixtures and the installation of completely new interior arrangements and services. In order to accomplish the precursory asbestos removal the vessel was essentially gutted through the service areas, public areas, and all the interior, non-structural parts of the vessel were removed and discarded. Further in this regard, the petitioner states that not only was it not possible to find a U.S. contractor willing to remove the asbestos, in order for the conversion work to be performed at a United States shipyard, asbestos is required to be removed pursuant to the requirements of applicable United States environmental regulations (29 CFR ?? 1910.1001 and 1915). In addition, the petitioner states that the U.S. Coast Guard enforces this requirement as to vessels being refitted since it interprets the vessel as both a passenger vessel, and while undergoing refitting, as a work place under 46 CFR Part H, 70.01.

Customs has had prior occasion to address the dutiability of asbestos removal when it has been performed in conjunction with dutiable repairs, including insulation renewal. (See Customs ruling letters 108366, dated March 4, 1987; 111642, dated August 9, 1991; 113108, dated May

25, 1994; 113122, dated March 20, 1996; and 114188, dated April 23, 1998) In these cases the cost of asbestos removal has been held to be dutiable. However, the facts of those cases are distinguishable from those now under consideration in that the latter involves only a removal. No further dutiable repairs or insulation renewal were performed. To the contrary, as noted above the vessel was essentially gutted and rendered incapable of being placed in service without the aforementioned conversion/refurbishing in a U.S. shipyard. In this regard we note that Customs has long-held that the mere removal of articles from a vessel, without more, is neither a modification nor a dutiable repair. Such work is merely work not considered to be dutiable under the vessel repair statute. (Customs ruling letters 108574, dated November 5, 1986; 109052, dated December 9, 1987; 109401, dated August 15, 1988; 109942, dated February 1, 1989; and C.D. 2514) We believe this rationale applies in the case at hand.

Accordingly, the cost of asbestos removal covered by the subject entry, including the work and removal of non-structural materials and equipment in order to remove the asbestos, is not dutiable.

In regard to the towing-related work under consideration (e.g., removal of propellers and placement aboard deck, withdrawal of shafts, sealing of stern tubes, etc.) our review of the record indicates that such work constituted neither dutiable repairs nor costs incident to dutiable repairs. Rather, it was done to make the vessel capable of, and to facilitate, its transoceanic tow back to the United States where it is to undergo major refurbishing prior to being returned to service. Consequently, these costs are nondutiable.


1. The foreign cost of asbestos removal from the subject vessel is not dutiable under 19 U.S.C. ? 1466.

2. The foreign cost of "towing-related work" for the subject vessel is not dutiable under 19 U.S.C. ? 1466.


Jerry Laderberg

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