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HQ 115131

September 27, 2000

VES-13-18:RR:IT:EC 115131 LLO


Chief, Liquidation Section
U.S. Customs Service
P.O. Box 2450
San Francisco, CA 94126

RE: Vessel Repair Petition; APL SINGAPORE V/29; Vessel Repair Entry No. 110-7995856-4; Lifeboat Falls; Pro-ration Calculation Method; 19 U.S.C. 1466; 19 C.F.R. §4.14

Dear Sir:

We received your memorandum dated August 8, 2000, requesting we review a petition relating to the APL SINGAPORE V/29, regarding the dutiability of lifeboat falls, and the pro-ration calculations. Our ruling on this matter is set forth below.


The APL SINGAPORE, a United States-flag vessel operated by American Ship Management, LLC, of Walnut Creek, California, arrived at the port of Seattle Washington, on March 19, 1999. The date of entry was March 25, 1999.

An application for relief was timely filed on June 16, 1999. Pursuant to Customs Ruling Letter 114750, dated May 2, 2000, the application was granted in part and denied in part. Pursuant to an approved extension, a petition for review was filed on July 31, 2000. According to the vessel repair entry and other documents in the file, the vessel underwent work in Kaohsiung, ROC, Singapore, and Yantian, PRC.

The operator agents, American Ship Management, LLC, (ASM) submitted an application for relief identifying certain items as non-dutiable, and that application was acted upon by this office. This particular petition is requesting relief regarding the following items:

-Item No. 316, lifeboat falls; and
-pro-ration calculations


1) Whether the replacement of lifeboat falls, is dutiable under 19 U.S.C. §1466; and

2) How pro-ration is properly calculated 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 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 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.

With regard to the lifeboat falls, Item No. 316, the petitioner in this situation alleges that three facts are pertinent to any ruling on this subject, they are stated as follows:

-there is no shipyard (foreign) material involved -all materials are U.S. domestic origin
-the existing “falls” if re-certified, could have been reused, in which case, the item would be a mandatory regulatory inspection item and qualify for duty exclusion.

Although the petitioner notes that “no shipyard (foreign) materials are involved,” and that “all materials are of U.S. domestic origin,” the invoice implies that items 4, 5, and 11 are of foreign origin. Consequently, the supporting documentation does not corroborate the petitioner’s claim.

A clearer indication from American Ship Management of what specific information on the invoice (along with any other information that can be supplied) is applicable to the lifeboat falls is necessary for full consideration of the three facts regarding the lifeboat falls they want taken into account in this ruling.

Otherwise, petitioner’s last factor to be taken into consideration is that, “the existing ‘falls’ if re-certified, could have been reused in which case, the item would be a mandatory regulatory inspection item and qualify for duty exclusion.” Customs has consistently ruled that while certain inspection/survey/test expenses may be determined to be duty free, any repairs (or replacements) done in order to comply with regulations remain subject to duty. Any directive to replace outdated or defective lifeboat falls in order for ASM to stay in compliance with regulations, does not render the falls duty free. (HQ 114750, HQ 115024)

With regard to Pro-ration, the petitioner notes that there are two disputes:

-Pro-rate per se; and
-methodology of calculation.

Under Pro-rate per se, the petitioner espouses a position similar to those noted in past applications and petitions. The argument noted in the application was that expenses attributable to so-called GATT items (items claimed under subsection (h)(3) of the vessel repair statute) should not be included in the calculation. The claim is that the cost of (h)(3) items (those purchased and installed abroad without first having been entered into the commerce of the United States) are properly excluded from consideration under subsection (a) of the vessel repair statute. (HQ 115039)

The petitioner further notes that “subparagraph f of the statute exempts aircraft totally, and that (h)(3) exempts parts totally provided the Harmonized Tariff Schedule (HTS) is paid. Therefore, if the HTS is zero, which it can be in some cases, ‘(h)(3)’ is totally excluded, the same as ‘f’, and the item is totally exempt.” pg.2 petitioner’s appeal request letter. The carrier in question is a vessel which makes 19 U.S.C. §1466(f) inapplicable to this particular ruling.

Customs, when deciding the procedures which would govern the administration of subsection (h)(3) of the vessel repair statute, determined that a qualifying article would be dutiable at the applicable rate of duty under the Harmonized Tariff Schedule of the United States (HTSUS) rather than at the normal 50 percent rate applicable to other vessel repair expenses under paragraph (a) of the statute. Even though the items claimed under (h)(3) were to be recorded on a Customs Form 7501-A Continuation Sheet, which would then be attached to a traditional vessel repair entry and those items were considered as part of the vessel repair entry, those items are considered foreign shipyard expenses. The pro-ration of expenses is intended to take into account the totality of foreign repair-related expenditures. For this reason, it is proper to include any (h)(3) expenses as dutiable amounts. Pro-ration should include the cost of so-called GATT items. (HQ115039)


We have determined that this petition should be denied, as specified in the Law and Analysis portion of this ruling.


Larry L. Burton

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