United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 2006 HQ Rulings > HQ 115969 - HQ 116609 > HQ 116404

Previous Ruling Next Ruling
HQ 116404

March 1, 2005

VES-13-18-RR:IT:EC 116404 GOB


Chief, Vessel Repair Unit
U.S. Customs and Border Protection
423 Canal Street
New Orleans, LA 70130

RE: Vessel Repair Entry C16-0012133-4; OOCL INNOVATION; 19 U.S.C. 1466; Petition

Dear Sir:

This is in response to your memorandum of February 7, 2005, forwarding for our review certain items in the petition filed by counsel on behalf of Sea-Land Service, Inc. (“petitioner”) with respect to Vessel Repair Entry C16-0012133-4. Our ruling follows.


The OOCL INNOVATION (the “vessel”), a U.S.-flag vessel owned by the petitioner, incurred foreign shipyard costs. After completion of the work in question, the vessel arrived in Charleston, South Carolina on April 3, 1998. A vessel repair entry was timely filed.

The file indicates that your office issued a letter of December 14, 2001 with respect to the application for relief. By submission received on February 12, 2002, the subject petition was filed.


Whether the costs for which the petitioner seeks relief are dutiable under 19 U.S.C. §1466.


Title 19, United States Code, section 1466 (19 U.S.C. 1466) 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 SL Service, Inc. v. United States, 357 F.3d 1358 (Fed. Cir. 2004), reh. denied, reh. en banc denied, 2004 U.S. App. Lexis 10322 (Fed. Cir. April 12, 2004), rev’g 244 F. Supp. 1359 (Ct. Int’l Trade 2002), cert. denied December 13, 2004, the Court of Appeals for the Federal Circuit upheld CBP’s proration of certain expenses. The court stated in pertinent part as follows:

. . . apportionment is consistent with section 1466(a) and the “but for” test. In the context of dual-purpose expenses, it is rational to impose the duty on only that portion of the expense that is fairly attributable to the dutiable repairs. Indeed, to impose the 50% ad valorem duty on the entire costs of dry-docking in this case would exceed the mandate of the statute. The logical appeal of apportionment has been recognized in other areas of the law . . . . . .
Customs’ long-standing practice of apportioning the cost of various expenses between dutiable repairs and non-dutiable inspections and modifications comports with both the statute and common sense.

Our determinations follow with respect to the items for which you have requested our review.

HSS 6724. These costs are for tug services used to move the vessel in the vicinity of the shipyard. They should be prorated between dutiable and nondutiable costs.

HSD 6728, 6729, and 6730. The various general services or drydock costs on these invoices should be prorated between dutiable and nondutiable costs.

HSD 6732 (items 7a-7d). The invoice denotes this item “7-7 Hatch Cover Landing Pads.” The invoice provides in pertinent part as follows: “Intent: The intent of this modification is to remove existing metal landing pads and install new bearing bads [sic]. The new system will have reduced friction between hatch cover and coaming.” There is no evidence of any repairs on this invoice. The petitioner states:

These repairs [on the separate invoice] were to areas which were not part of the modification. The modification was to the hatch coamings which are the bearing surfaces at the edge of the hatch covers. The cracks were at the aft end of the middle girder of the hatch cover which is opposite from where the bearing pads were placed. . . .

We find that this item is a nondutiable modification.

HSD 6739 (items 2-5) and HSD 6742 (item 2). These costs for hotel, travel, etc. are dutiable as they are expenses incident to dutiable repairs. See Texaco Marine Services v. United States, 44 F.3d 1539 (Fed. Cir. 1994), aff’g 815 F.Supp. 1484 (Ct. Int’l Trade 1993).

HSD 6745 (unloading containers), HSD 6746 (use of a crane), HSD 6747 (various charges), and HSD 6748 (unloading containers). We find that these costs are essentially in the nature of drydock costs which should be prorated between dutiable and nondutiable costs. The petitioner claims that these costs are unrelated to repairs but the petitioner has not established that claim nor is the claim by any means substantiated from the documentation of record.


As discussed in the Law and Analysis section of this ruling, certain costs are dutiable under 19 U.S.C. 1466, certain costs are nondutiable, and certain costs should be prorated. Accordingly, you are instructed to allow the petition in part and deny the petition in part.


Glen E. Vereb

Previous Ruling Next Ruling