HQ 112240: Vessel Repair; Inspection; NEDLLOYD HOLLAND v-39; Petition for Review; Entry No. C16-0008522-4.

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 112240

                        February 4, 1993

VES-13-18  CO:R:IT:C  112240  JBW

CATEGORY:  Carriers

Deputy Assistant Regional Commissioner
Commercial Operations
c/o Regional Commissioner
New Orleans, LA 70130-2341

RE:  Vessel Repair; Inspection; NEDLLOYD HOLLAND v-39; Petition
     for Review; Entry No. C16-0008522-4.

Dear Sir:

     This letter is in response to your memorandum that forwards
for our review and ruling the petition for review filed in
conjunction with the above-referenced vessel repair entry.

FACTS:

     The record reflects that the subject vessel, the NEDLLOYD
HOLLAND, arrived at the port of Charleston, South Carolina, on
July 18, 1991.  Vessel repair entry, number C16-0008522-4, was
filed on the same day as arrival and indicated work performed on
the vessel in Bremerhaven, Germany.  The vessel owner timely
filed an application for relief in which it claimed that certain
items were not subject to duty.  This office allowed in part and
denied in part the application.  Headquarters Ruling Letter
112025, dated February 20, 1992.  The vessel owner now seeks
review for a number of inspections that were not addressed in the
application for relief.

ISSUE:

     Whether the shipyard costs associated with inspections
carried out by qualifying inspection entities are subject to duty
under 19 U.S.C.  1466 when the inspections do not result in
repairs.
 
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.

     The Customs Service has held that where periodic surveys are
undertaken to meet the specific requirements of a governmental
entity, a classification society, or insurance carrier, the cost
of the surveys is not dutiable even when dutiable repairs are
effected as a result thereof.  Headquarters Ruling Letter 110368,
dated July 26, 1989.  In a recent case, we emphasized that this
interpretation exempts from duty only the cost of a required
scheduled inspection by a qualifying entity.  Headquarters Ruling
Letter 111328, dated August 7, 1991.  If, however, the survey is
to ascertain the extent of damage sustained or whether repairs
are deemed necessary, then the costs are dutiable as part of the
repairs that are accomplished.  C.I.E. 429/61; C.S.D. 79-2, 13
Cust. B. & Dec. 993 (1979); C.S.D. 79-277, 13 Cust. B. & Dec.
1395, 1396 (1979).  In the liquidation process, Customs should
look beyond the mere labels of "continuous" or "ongoing" before
deciding whether the item is dutiable.  If an inspection or a
survey is conducted as a part of a maintenance and repair program
labelled "continuous" or "ongoing," the cost of such survey is
dutiable if it is in fact repair related.

     The Petitioner seeks relief for the cost of certain
inspections where no repairs resulted from the inspections.  In
some instances, gaskets, seals, or other packing materials were
destroyed when areas were opened for inspection.  The Customs
Service has held that inspections not resulting in repairs are
not dutiable.  Headquarters Ruling Letter 110395, dated September
7, 1989; see American Viking Corp. v. United States, 37 Cust. Ct.
237, 247, C.D. 1830 (1956). Further, the Customs Service has held
that articles necessarily destroyed in the course of opening an
area for inspection may be replaced without duty consequences. 
Headquarters Ruling Letter 109349, dated July 15, 1988; American
Viking Corp., 37 Cust. Ct. at 247.  

     We have reviewed the items for which the Petitioner seeks
relief. We find no repairs related to the following operations
and the costs of such operations are not subject to duty:

     Lloyd Werft Invoice 0-161, Item 22, Rudder Pintle Clearance.

     Lloyd Werft Invoice 0-161, Item 23, Rudder Stock/Pintle Nut
          Clearance.

     Lloyd Werft Invoice 0-161, Item 167, Main Engine Oil Mist
          Detector Inspection.

     The following items, however, are repair related.  The
shipyard costs associated with such inspection are subject to
duty, but the costs of the ABS surveys are not subject to duty:

     Lloyd Werft Invoice 0-161, Item 25, Anchor Chain Inspection.

     Lloyd Werft Invoice 0-161, Item 26, Chain Locker Inspection.

     Lloyd Werft Invoice 0-161, Item 27, Sea Valve Inspection.

     Lloyd Werft Invoice 0-186, Item 39, Tailshaft Inspection. 

HOLDING:

     The shipyard costs associated with inspections carried out
by qualifying inspection entities are not subject to duty under
19 U.S.C.  1466 when the inspections do not result in repairs. 
Further, the cost of replacing articles that were destroyed in
the course of opening an area for inspection may be replaced
without duty consequences.  The petition for review is granted in
part and denied in part.


                              Sincerely,




                              Acting Chief
                              Carrier Rulings Branch