HQ 113471: Vessel Repair Entry No. 110-6461445-3; PRESIDENT HOOVER; V-140; 19 U.S.C. 1466; Protest No. 3001-95-100297

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 113471

                        December 28, 1995

VES-13-18:R:IT:EC 113471 LLB

CATEGORY: Carriers

Chief, Liquidation Section
U.S. Customs Service
Post Office Box 2450
San Francisco, California 94126 

RE:  Vessel Repair Entry No. 110-6461445-3; PRESIDENT HOOVER; V-140; 19 U.S.C.  1466; Protest No. 3001-95-100297

Dear Sir:

     This is in response to your memorandum of June 6, 1995,
forwarding the above-captioned protest filed by American
President Lines, Ltd.  Our determination is provided in this
ruling.

FACTS:

     The American-flag vessel PRESIDENT HOOVER arrived in the
Port of Seattle, Washington, on December 4, 1993, and submitted a
vessel repair entry (CF-226) detailing foreign shipyard
operations in Taiwan, Hong Kong, and Japan.  An Application for
Relief from the assessment of vessel repair duty was submitted by
the operator and was considered by Customs Headquarters (Case No.
113108 GOB).  Certain elements of that decision were the subject
of an appeal in the form of a Petition for Review submitted under
regulations, decided in case number 113200 GEV dated November 15,
1994..  The entry was liquidated in accord with the November 15
ruling, and the present protest was filed less than 60 days
later.

     The protest under consideration seeks reliquidation on the
cost of 9 elements included in the vessel repair entry and
detailed in the invoice of Hong Kong United Dockyards, Limited. 
These items, the first 8 of which are for American Bureau of
Shipping survey costs, are:
     1.  Invoice item 2.1-8 relating to sea valves, appearing at
     pages 27-29.
     2.  Invoice item 2.1-4 relating to the rudder pintle,
     appearing at page 23.
     3.  Invoice item 2.1-7 relating to the anchor chain and
     locker, appearing at page 26.
     4.  Invoice item 2.1-11 relating to the ballast tanks,
     appearing at pages 34-36.
     5.  Invoice item 2.1-14 relating to the fuel oil tanks,
     appearing at page 39.
     6.  Invoice item 2.1-19 relating to the propeller, appearing
     at page 45.
     7.  Invoice item 4.1-10 relating to ballast piping,
     appearing at page 173.
     8.  Invoice item 5.1-9 relating to megger testing, appearing
     at page 218.
     9.  Overhead charges appearing throughout the invoice.

ISSUE:

     Whether sufficient evidence is presented to refute the
determinations made by Customs in considering the Petition for
Review in this matter (Case No. 113200), that items 1 through 9,
above, were sufficiently connected with repair operations to
themselves be considered dutiable.

LAW AND ANALYSIS:

          Title 19, United States Code, section 1466, provides in
pertinent part for payment of duty in the amount 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 engage in such trade.
     
     As previously indicated, the first 8 items under
consideration involve survey costs.  In previously reviewing
claims for relief from duty on this entry, Customs was of the
opinion that the charges in question were part of the cost of
repairing the same items surveyed.  In regard to the dutiability
of surveys themselves, Customs has held pursuant to C.S.D. 79-277
that where periodic surveys are undertaken to meet the specific
requirements of a classification society, insurance carrier,
etc., the cost of the survey is not dutiable even when dutiable
repairs are effected as a result thereof.  This result is to be
distinguished from a survey whose source is carrier-initiated
maintenance and repair, scheduled or otherwise.  The present
matter involved a required U.S. Coast Guard inspection, carried
out on behalf of that agency by the American Bureau of Shipping.

     In such cases, in order to gain remission of duty on the
cost of the permissible survey it is necessary to completely
segregate the cost of any attendant repairs from the actual cost
attributable to the survey itself.  This is part of a long-standing practice in which Customs has held that when costs of
various items are not segregated or separately shown, but are
lumped together, duty will be assessed on the entire cost even
though certain items may be non-dutiable (see C.I.E. 565/55,
C.I.E. 1325/58 and C.D. 1836).  We note that the portions of the
invoice under consideration here detail only direct survey costs. 
Repairs which may have followed specific survey elements are
detailed in separate portions of the invoice and are accompanied
by their own cost figures.  We find the segregation to be
complete, and thus have determined that the survey costs being
protested in items 1 through 8 are to be considered duty-free.   

     Item 9 as detailed in the Facts portion of this ruling
concerns what is termed "administrative overhead" costs, an
amorphous and ill-defined class of expenditures.  These charges
typically include clerical, data processing, accounting,
insurance, education, and general corporate costs.  It is claimed
that our findings which hold these costs to be dutiable are
contrary to Treasury Decision 39443, 43 Treas. Dec. 99 (1923).  

     The cited Treasury Decision is one in a line extending from
the court decision in United States v. George Hall Coal Company,
134 Fed. 1003, T.D. 26038 (1903).  This case, among others, has
been thoroughly discredited by the opinion issued by the Court of
Appeals for the Federal Circuit in the case of Texaco Marine
Services, Inc., and Texaco Refining and Marketing, Inc. v. United
States, Appeal No. 93-1354 (decided December 29, 1994).  Customs
has determined that the decision rendered in Texaco, supra., will
be applied from the decision date 
forward for all issues except for repair-related cleaning and
protective coverings.  Therefore, since the entry under
consideration dates from December 10, 1993, the protest should be
allowed in this case for administrative overhead charges.  These
same types of charges will be held as dutiable for all entries
filed on or after December 29, 1994.    

HOLDING:

     Following a thorough review of the evidence submitted as
well as analysis of the law and applicable precedents, we have
determined that for the reasons stated in the Law and Analysis
portion of this ruling, the protest under consideration must be
granted it its entirety.

     We have determined that the vessel survey conducted in
connection with this matter was of the type required for vessel
certification and retention in class.  Further, the cost of the
survey elements subject to this protest were thoroughly
segregated from repair elements addressed as a result of the
survey.  As such, the protested cost of the survey must be
reliquidated as free of duty under section 1466.  Additionally,
the administrative overhead charges under protest, having been
incurred prior to the December 29, 1994, decision date in the
Texaco matter, supra., should be reliquidated as duty-free
charges under section 1466.

     In accordance with Section 3A(11)(b) of Customs Directive
099 3550-065, dated August 4, 1993, Subject: Revised Protest
Directive, this decision should be mailed by your office to the
protestant no later that 60 days from the date of this letter. 
Any reliquidation of the entry in accordance with the decision
must be accomplished prior to the mailing of the decision.  Sixty
days from the date of the decision the Office of Regulations and
Rulings will take steps to make the decision available to customs
personnel via the Customs Ruling Module in ACS, and to the public
via the Diskette Subscription Service, the Freedom of Information
Act and other public access means.

                                                                
Sincerely,




                                                                
Director
                                                                
International Trade Compliance Division