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 116610 - HQ 116747 > HQ 116638

Previous Ruling Next Ruling
HQ 116638

April 10, 2006

VES-3-18-RR:BSTC:CCI 116638 GOB


Chief, Vessel Repair Unit
U.S. Customs and Border Protection
P. O. Box 1389
Kenner, LA 70063

RE: 19 U.S.C. §1466; Vessel Repair Entry C20-0058602-7; Protest 2002-05-100973

Dear Sir:

This is in response to your memorandum of March 22, 2006, forwarding for our review the protest filed on behalf of Teco Ocean Shipping (“protestant”) with respect to Vessel Repair Entry C20-0058602-7. Our ruling follows.


The Barge MARIE FLOOD (the “vessel”), a U.S.-flag vessel, incurred foreign shipyard costs. The vessel arrived in the port of New Orleans on May 18, 2002. A vessel repair entry was filed.

By letter of June 24, 2005, your office issued its determination with respect to the application for relief with respect to this entry.


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


Initially, we note that the information in the file indicates that the protest, with application for further review, was timely filed under the statutory and regulatory provisions for protests. 19 U.S.C. 1514(c)(3) and 19 CFR 174.12(e).

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), 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 shipyard 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.

You request our review with respect to the items discussed below.

Exhibit 1, items 101M, 102M, 103M, general services; Exhibit 2, item 201M, docking plugs. The protestant states that “Customs’ decision to assess duty on these costs related to inspections using a pro-rata method of calculation ignored the fact that the invoice had segregated the costs related to the inspections from the costs related to the owners’ work . . .” [Emphasis in original.] We have thoroughly and carefully considered this claim, as well as discussed this claim with your office. The protestant attributes the large majority of the general services costs to modifications, notwithstanding the fact that the majority of the work performed in this drydocking is dutiable under 19 U.S.C. 1466. It is our view that the protestant’s attribution of general services costs is not reflective of economic reality and does not comport with our “common sense” review of these matters and interpretation of the vessel repair statute. In the interest of the fair and impartial administration, we determine that the subject general services costs should be prorated between dutiable and nondutiable costs. We believe that this is consistent with SL Service, Inc., supra, where the court stated: “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.”

Exhibit 6, items 601M, 602M, 603M, and 609M, vessel coating system – waterline to main deck; main deck and attachments; hatch covers treatment; hatch covers’ gantry crane. The protestant states that these “costs were for work to accomplish the fleet color modifications to the vessel.” As your office correctly points out, the overall documentation indicates that there was some degree of deterioration with respect to the paint before this work was performed. The protestant has not established its claim by satisfactory documentary evidence. We find that these items are dutiable.

Exhibit 12, the cost of paint and related materials. The protestant states that “[t]his invoice was for the materials used to accomplish the color change . . .” We have found the vessel coating system to be dutiable in the previous paragraph of this ruling. We find that the protestant has not established its claim by satisfactory documentary evidence. Therefore, we find that this item is dutiable.


The costs for which the protestant seeks relief are dutiable or to be prorated under 19 U.S.C. § 1466 as discussed in the Law and Analysis section of this ruling.

With respect to the items addressed in this ruling, you are instructed to deny the protest.

In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.


Glen E. Vereb

Previous Ruling Next Ruling