HQ 111900: Vessel Repair; 19 U.S.C. 1466; Survey; Consumable Supplies

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 111900

                        December 17, 1991

VES-13-18-CO:R:IT:C 111900 RAH

CATEGORY: Carriers

Deputy Assistant Regional Commissioner
Commercial Operations Division
423 Canal Street
New Orleans, Louisiana 70130-2341

RE:  Vessel Repair; 19 U.S.C.  1466; Survey; Consumable
     Supplies

Dear Sir:

     This is in response to your memorandum of September 6, 1991,
regarding the SS JOSEPH LYKES.

FACTS:

     The record reflects that the SS JOSEPH LYKES arrived at the
port of Wilington, North Carolina, on May 5, 1991.  Vessel repair
entry number C15-0012335-8 dated May 17, 1991, was filed
reflecting foreign work performed and equipment purchased for the
vessel.

     The SS JOSEPH LYKES sailed from Baltimore, Maryland, on
September 21, 1990 for a regular commercial voyage.  However, on
December 9, 1990 at Antwerp, Belgium, she was chartered to the
U.S. Government due to the Persian Gulf Crisis, and various
repairs and purchases were necessary.

     The subject of this ruling is an application for relief
dated July 15, 1991.  The applicant seeks relief on six item:

Item #4 - Intersupply Shipstores
Item #7 - Tuministros Generales, consumable engine items
Item #8A - ABS, Annual Surveys
Item #8B - ABS, Survey for Extension of Cargo Ship
Item #9A - Yusuf Bin Adined Kanoo, visit charge
Item #12 - Mackay Communications, repairs by U.S. residents

                              - 2 -

ISSUES:

(1)  Whether items 8A and 8B are non-dutiable surveys under 19
U.S.C.  1466.

(2)  Whether item numbers 4 and 7 constitute non-dutiable
consumables.

(3)  Whether item numbers 9A and 12 constitute dutiable repairs
under 19 U.S.C.  1466.

LAW AND ANALYSIS:

     Title 19, United States Code, section 1466(a), provides in
pertinent part for payment of duty in the amount of 50 percent ad
valorem on the cost of foreign repairs to vessels documented
under the laws of the United States to engage in the foreign or
coastwise trade, or vessels intended to be employed in such
trade.

     The applicant claims that item 9A is not a dutiable repair
under 19 U.S.C.  1466.  Item 9A is an invoice from Yusof Bin
Asmed Kanoo for services rendered on service report 1274.  That
report describes the service as:

          Board vessel.  Informed by captain, radar
          repair completed by radio-officer.  From,
          captain, service however not necessary.  Left
          vessel.

Based on the foregoing, we find that no repairs were completed in
item 9A.  Accordingly, it is non-dutiable.  We note, however,
that item 9 is dutiable.

     The applicant also requests relief from duty on items 8A and
8B, claiming they are non-dutiable surveys.  In that regard,
C.S.D. 79-277 stated, "[i]f the survey was undertaken to meet the
specific requirements of a governmental entity, classification
society, insurance carrier, etc., the cost is not dutiable even
if dutiable repairs were effected as a result of the survey."

     With increasing frequency, this ruling has been utilized by
vessel owners seeking relief not only from charges appearing on
an A.B.S. or Coast Guard invoice (the actual cost of the
inspection), but also as a rationale for granting non-dutiability
to a host of inspection-related charges appearing on a shipyard
invoice.  In light of this continuing trend, we offer the
following clarification.



                              - 3 -
     C.S.D. 79-277 discussed the dutiability of certain charges
incurred while the vessel underwent biennial U.S. Coast Guard and
A.B.S. surveys.  That case involved the following charges:

     ITEM 29
          (a) Crane open for inspection.
          (b) Crane removed and taken to shop.  Crane
              hob and hydraulic unit dismantled and
              cleaned.
          (c) Hydraulic unit checked for defects, OK.
              Sundry jointings of a vessel's spare
              renewed.
          (d) Parts for job repaired or renewed.
          (e) Parts reassembled, taken back aboard ship
              and installed and tested.

     In conjunction with the items listed above, we held that a
survey undertaken to meet the specific requirements of a
governmental entity, classification society, insurance carrier is
not dutiable even when dutiable repairs are effected as a result
of the survey.  We also held that where an inspection or survey
is conducted merely to ascertain the extent of damages sustained
or whether repairs are deemed necessary, the costs are dutiable
as part of the repairs which are accomplished (emphasis added).

     It is important to note that only the cost of opening the
crane was exempted from duty by reason of the specific
requirements of the U.S. Coast Guard and the A.B.S. was exempted
from duty.  The dismantling and cleaning of the crane hob and
hydraulic unit was held dutiable as a necessary prelude to
repairs.  Moreover, the testing of the hydraulic unit for defects
was also found dutiable as a survey conducted to ascertain
whether repairs are necessary.  Although the invoice indicates
that the hydraulic unit was "OK," certain related parts and
jointings were either repaired or renewed.  Therefore, the cost
of the testing was dutiable.

     We emphasize that the holding exempts from duty only the
cost of a required scheduled inspection by a qualifying entity
(such as the U.S. Coast Guard or the American Bureau of Shipping
(A.B.S.).  In the liquidation process, Customs should go beyond
the mere labels of "continuous" or "ongoing" before deciding
whether a part of an ongoing maintenance and repair program
labelled "continuous" or "ongoing" is dutiable.

     Moreover, we note that C.S.D. 79-277 does not exempt repair
work done by a shipyard in preparation of a required survey from
duty.  Nor does it exempt from duty the cost of any testing by
the shipyard to check the effectiveness of repairs found to be
necessary by reason of the required survey.

                              - 4 -

     Turning to the case before us, the surveys in question are
not connected with any repairs.  Item 8A is an annual survey
hull, machinery & loadline inspection.  Item 8B is a survey for
extension of cargo ship safety construction certification.
Neither survey was performed in conjunction with repairs.
Accordingly, items 8A and 8B are non-dutiable.

     Additionally, the applicant claims items 4 and 7 constitute
non-dutiable consumable supplies.  Consumable supplies are
generally defined as supplies for the consumption, sustenance,
and medical needs of the crew and passengers during the voyage.
H.E. Warner, Trustee v. United States, 28 CCPA 143.  We find
that item 4 on invoice 1516/007 (V belt 3/8" and welders wire
brushes) and item 7 on invoice 107/91 (bolts and electrical
terminals) constitute dutiable parts and materials, not
consumable supplies.

     Finally, the applicant states that item 12 (repairs and
satellite communications terminal installation) is non-dutiable
because it was completed with American labor and materials
furnished by Mackay Communication.  The applicant further claims
that the installation was necessary for employment of MSC charter
during the persian Gulf crisis.

     Remission for necessary repairs may be granted under the
circumstances described, pursuant to 19 U.S.C.  1466(d)(2).
That subsection authorizes remission or refund of duties if:

          [S]uch equipment or parts thereof or repair
          parts or materials, were manufactured or
          produced in the United States, and the labor
          necessary to install such equipments or to
          make such repairs was performed by residents
          of the United States, or by members of the
          regular crew of such vessel.

    We have reviewed the Mackay Communication invoices and letter
dated July 17, 1991, and find that the work was performed by a
U.S. citizen employed by that company.  We further find that the
parts were also furnished by Mackay Communications, a U.S.
company.  Accordingly, item 12 is non-dutiable.

HOLDINGS:

(1)  Items 8A and 8B are non-dutiable surveys under 19 U.S.C.
1466.

                              - 5 -

(2)  Items 4 and 7 constitute dutiable parts and materials.

(3)  Item 9A does not constitute a dutiable repair under 19
U.S.C.  1466.  Item 12 is dutiable.

                                        Sincerely,



                                        B. James Fritz
                                        Chief
                                        Carrier Rulings Branch