19 U.S.C. 1466; ARCO SPIRIT; Vessel Repair Entry No. C31-0015282-7; Protest

HQ 114112 October 7, 1998 VES-13-18-RR:IT:EC 114112 GOB CATEGORY: Carriers Port Director of Customs Attn.: Vessel Repair Liquidation Unit, Room 107 P.O. Box 2450 San Francisco, CA 94126 RE: 19 U.S.C. 1466; ARCO SPIRIT; Vessel Repair Entry No. C31-0015282-7; Protest Dear Madam: This ruling is in response to your memorandum dated September 22, 1997, which forwarded the protest submitted on behalf of ARCO Marine, Inc. ("ARCO" or "protestant") with respect to the above-referenced vessel repair entry. FACTS: The ARCO SPIRIT (the "vessel"), a U.S.-flag vessel owned and operated by the petitioner, arrived at the port of Valdez, Alaska on July 29, 1996. The subject vessel repair entry was timely filed. The vessel underwent certain foreign shipyard work in Korea in June and July of 1996. In Ruling 113798 dated January 9, 1997, the application for relief with respect to the subject entry was granted in part and denied in part. In Ruling 113907 dated April 29, 1997, the petition was granted in part and denied in part. ISSUE: Whether the subject item is dutiable pursuant to 19 U.S.C. 1466(a)? LAW AND ANALYSIS: 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. The sole item protested is the cost of sludge removal on the Mi Sung Corp. invoice. In Ruling 113798 we stated with respect to the sludge removal: The invoice reflects that this item is for "sludge mucking" and "sludge disposal." ... We find that this cost appears to be a drydock cost or general cost which would relate to both dutiable and nondutiable items. Accordingly, it should be prorated between dutiable and nondutiable items. In its petition, ARCO stated: The Mi Sung Corporation Ltd. invoice covers work that is not a repair, nor in anticipation of a repair...The removal of sludge is an ongoing process, comparable to removal of any debris that would accumulate in the hold of a cargo ship. The subject sludge was all removed from #5 center tank. To make tanks "gas free, safe for entry" for regulatory inspection purposes, the removal of the solid cargo residues is a normal process. It was necessary at this time in order to have the areas involved available for required ABS/USCG survey and/or inspection. In Ruling 113907 we stated with respect to the sludge removal: The pertinent invoice provides no information or indication that the sludge removal related solely to a regulatory inspection. In fact, the pertinent invoice provides no information or indication that the sludge removal related in any way to a regulatory inspection. Therefore, we determine that our decision to prorate this item is the correct and appropriate manner of treatment. (Emphases in original.) The protestant has now supplied additional information. It states that "[t]he subject cleaning costs were not repairs to the vessel and were absolutely necessary to accomplish the required periodic inspections of the No. 5 Center Tank by the American Bureau of Shipping." The protestant has provided an affidavit from Roy Ellis, senior surveyor of American Bureau of Shipping, in which he states: ... I am a senior surveyor for the American Bureau of Shipping. I have personal knowledge concerning the requirements for inspections and surveys required by the Bureau and which were accomplished on the ARCO SPIRIT during the 1996 drydocking at Hyundai Mipo Dockyard. Regarding these inspections, I hereby make the following statements which are within my personal belief and knowledge: Part of the work that was accomplished on the ARCO SPIRIT during the 1996 drydocking at Hyundai Mipo Dockyard was the required periodic inspection (SSH No. 4) of the Number 5 Center Tank. In order to accomplish this inspection, the tank had to be thoroughly cleaned and gas freed, including the removal of an accumulation of cargo sludge across the entire bottom of the Number 5 Center Tank. This was absolutely necessary for the inspection, regardless of whether any repairs followed. Our ABS Invoice No. 7620860252 reflects the costs for the ABS inspections that were accomplished, including the SSH No. 4. The thorough cleaning and gas freeing of the Number 5 Center Tank would have been necessary to accomplish the required periodic inspection (SSH No. 4) of the Number 5 Center Tank regardless of whether any other work was performed in the tank after the inspection. Based upon the additional information presented, we determine that the cost of the sludge removal is nondutiable. The protestant has established a sufficient link between the subject item and the ABS inspection. HOLDING: As detailed above, the protest is granted. 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 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 take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, the Freedom of Information Act and other public access channels. Sincerely, Jerry Laderberg Chief, Entry Procedures and Carriers Branch