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HQ 115297

March 20, 2001

VES-13-18-RR:IT:EC 115297 LLO


Vessel Repair Liquidation Unit

555 Battery Street, Room 107
San Francisco, California 94111

RE: Petition for Review; SEA-LAND EXPLORER; V-0004; Vessel Repair Entry No. C27-0171464-7; Duty Remission; 19 U.S.C. §1466(d); 19 C.F.R. §4.14; Expenses Incurred Incident to Foreign Repairs

Dear Sir:

We received your memorandum dated January 25, 2001, requesting we review a petition relating to the SEA-LAND EXPLORER, V-0004 regarding the dutiability of expenses incurred while foreign repairs are performed. Our ruling on this matter is set forth below.


The SEA-LAND EXPLORER, a United States-flag vessel operated by United States Ship Management, Inc. of Charlotte, North Carolina arrived at the port of Los Angeles, California on October 30, 2000. The date of entry was October 12, 2000.

An application for relief was timely filed. Pursuant to a ruling letter from the San Francisco office dated January 9, 2001, the application was denied in part. According to the vessel repair entry and other documents in the file, the vessel underwent work in Korea and Japan.

The operator agents, United States Ship Management, Inc. submitted an application for relief identifying certain items as non-dutiable, and that application was acted upon by the San Francisco office. This particular petition is requesting relief regarding the dutiability of travel expenses pursuant to Texaco Marine Services, Inc. v. United States, 44 F.3d 1539 (Fed. Cir. 1994).


Whether the travel expenses incurred by foreign repair technicians while working on repairs to a U.S. flag vessel while outside of the United States are dutiable under 19 U.S.C. §1466.


Title 19, United States Code, § 1466(a), provides in part for payment of an ad valorem duty of 50% of the foreign cost of equipment, or any part thereof, including boats, purchased for, or the repair parts of materials to be used, or the expenses of repairs made in a foreign country to vessels documented under the laws of the United States to engage in the foreign or coastwise trade or vessels intended to engage in such trade.

The Court of Appeals for the Federal Circuit, affirmed the Texaco Marine Services, Inc. v. U.S., 44 F.3d 1539,1547 (1994) “but for” test approach. The Court clearly opined that the decision by the Mount Washington Tanker court, which ruled that compensating the members of a Swedish repair crew for their time spent traveling between Sweden and a vessel anchored at sea off of Singapore were not dutiable as an expense of the dutiable repairs performed by the repair crew, was incorrect. The travel expenses would have been viewed as coming within the statute had the “but for” approach been used by that court.

United States Ship Management, Inc. maintains in its petition for review that “rental, administration, and travel charges and allowances” should not be subject to vessel repair duties. On March 3, 1995, the Assistant Commissioner, Office of Regulations and Rulings, issued a memorandum that was published in the Customs Bulletin on April 5, 1995 (Customs Bulletin and Decisions vol. 29, no. 14 at pg. 24). It provided that all vessel repair entries filed with Customs on or after the date of the Texaco decision were to be liquidated in accordance with the full weight and effect of that ruling. Therefore, expenses that are associated with repair charges are dutiable in accordance with the “but for” approach used in Texaco. Without a showing that the charges in question are incident to a non-repair item, they are subject to duties under the vessel repair statute.

In this situation, the SEA-LAND EXPLORER received foreign repairs in September of the year 2000, well after the Texaco “but for” test approach took effect pursuant to Customs Bulletin and Decisions vol. 29, no. 14 at pg. 24. Additionally, the expenses in question were incidental to the repairs on the vessel. No showing has been made by the petitioner that the expenses in question were incidental to a non-repair item. For this reason, these expenses are dutiable.


Expenses incurred by foreign repairmen while repairing a U.S. flag vessel outside of the United States fall within 19 U.S.C. §1466(a) and are therefore dutiable if incurred incident to the foreign repairs.


Larry L. Burton

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