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HQ 115836

January 7, 2003

VES-13-18-RR:EC:IT 115836 LLO


Chief, Residual Liquidation and Protest Branch U.S. Customs Service
1210 Corbin Street
Elizabeth, New Jersey 07201

RE: Vessel Repair; Vessel Protest No. 4601-02-101894; SEA-LAND DEFENDER; V-202; Entry No.C46-0017180-4 (C28-0266443-6);19 U.S.C. §1466;19 C.F.R. §4.14

Dear Sir:

We received your memorandum dated August 1, 2002, requesting we review a vessel protest relating to the SEA-LAND DEFENDER regarding the dutiability of transportation expenses. Our ruling on this matter is set forth below.


The SEA-LAND DEFENDER, a U.S. flag vessel operated by United States Ship Management, Inc., arrived at the port of Long Beach, California on February 20, 2002.

An application for relief was timely filed and on June 7, 2002 was denied in full by the New York office. The protestant’s letter protesting the prior decision is dated June 20, 2002.

The operator agents, U.S. Ship Management, Inc. submitted an application for relief identifying certain items as non-dutiable. This protest is requesting relief regarding the dutiability of transportation expenses.


Whether the transportation expenses charged 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.

United States Ship Management, Inc., maintains in its protest that transportation expenses meet the criteria specified in title 19 C.F.R. §174.24(b) for further review since the decision against which the protest is filed involves “questions of law or fact which have not been ruled upon by the Commissioner of Customs or his designee or by the Customs courts.” The protestant further asserts that, “[t]he Texaco case only applied to post repair cleaning and protective coverings used in the process of repairs.”

In Texaco Marine Services, Inc. v. U.S., 44 F.3d 1539, 1544 (1994) Texaco urged the U.S. Court of Appeals 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. The Court, however, found that this interpretation had no basis in the plain language of the statute and that aside from statutory exceptions, the language of expenses and repairs was broad and unqualified. The Court went on to interpret expenses of repairs as covering all expenses which, “but for” dutiable repair work, would not have been incurred.

The protestant’s assertions are incorrect with regard to Texaco’s applicability to transportation expenses. The court’s comment upon Mount Washington Tanker, 665 F.2d 340 (CCPA 1981), regarding the dutiability of transportation expenses is clear. The decision by the Mount Washington Tanker court ruled that the cost of compensating the members of a Swedish repair crew for their time spent traveling between Sweden and a vessel anchored at sea off the coast of Singapore was not dutiable as an expense of the dutiable repairs performed by the repair crew. However, as noted by the Texaco court in rejecting the Mount Washington Tanker court ruling, the transportation expenses would have been viewed as coming within the statute had the “but for” approach been used by the court.

The protestant goes on to argue that the application of Texaco’s “but for” test to revoke prior Customs rulings is in contravention of the Customs Modernization Act, title 19 U.S.C. §1625(c), which requires notice and comment before modifying or revoking a prior interpretive ruling or decision. The protestant should note for future reference, that 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 pr. 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 the 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 incidental to a non-repair item, they are subject to duties under the vessel repair statute. Additionally, no notice and comment period is required for changes in Customs interpretation that are implemented as a result of rulings made by a court, as is the situation in this case. (See, Sea-land Service, Inc. v. United States, 239 F.3d 1366 (2001).

In this situation, the SEA-LAND DEFENDER received foreign repairs in May of the year 2001, well after the April 5, 1995 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 protestant that the transportation expenses in question were incidental to a non-repair item. For this reason, these expenses are dutiable.


The transportation 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 since they were incurred incident to the foreign repairs. The protest is denied in full.


Georgina Grier
Acting Chief

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