Protest and Application for Further Review of Vessel Repair Entry No. C46-0017135-8 (C28-0266421-2); Protest No. 4601-02-101872; SEA-LAND EXPLORER; V-112; Transportation Expenses and Allowances; 19 U.S.C. § 1466

HQ 115833 October 28, 2002 VES-13-18-RR:IT:EC 115833 GG CATEGORY: Carriers Supervisory Liquidator Residual Liquidation and Protest Branch U.S. Customs Service 1210 Corbin Street 3rd Floor Elizabeth, NJ 07201 RE: Protest and Application for Further Review of Vessel Repair Entry No. C46-0017135-8 (C28-0266421-2); Protest No. 4601-02-101872; SEA-LAND EXPLORER; V-112; Transportation Expenses and Allowances; 19 U.S.C. § 1466 Dear Madam: This is in response to your memorandum dated August 1, 2002, forwarding the above-referenced protest and application for further review. The protestant, U.S. Ship Management, Inc. (“USSM”), is protesting the assessment of certain duties pursuant to 19 U.S.C. § 1466. FACTS: The SEA-LAND EXPLORER is a U.S. flag vessel owned by USSM. Subsequent to the completion of foreign shipyard work, the vessel arrived in Long Beach, California, on August 22, 2001. A vessel repair entry was filed. USSM also filed an application for relief, which was denied on June 7, 2002. The subject protest was timely submitted to Customs on June 20, 2002. The protestant seeks relief from the imposition of vessel repair duties pertaining to transportation expenses and allowances associated with the repairs in question. ISSUE: Whether the transportation expenses and allowances are dutiable pursuant to 19 U.S.C. § 1466. LAW AND ANALYSIS: Title 19, United States Code, § 1466, provides in pertinent part for the payment of an ad valorem duty of 50 percent of the cost of “equipments, or any part thereof, including boats, purchased for, or the repair parts or materials to be used, or the expenses of repairs made in a foreign country upon a vessel documented under the laws of the United States . . .” With regard to the transportation expenses, the protestant does not dispute the fact that these costs were incurred pursuant to dutiable repairs. However, USSM cites to a number of ruling letters previously issued by Customs in support of the proposition that the transportation expenses in question are not subject to duty. The rulings cited are HQ 112078, HQ 111294, HQ 111789, HQ 112937, HQ 110426, HQ 112726, and HQ 110845. While the cited rulings at one time reflected Customs position with respect to transportation charges, pursuant to the decision of the U.S. Court of Appeals for the Federal Circuit (CAFC) in Texaco Marine Services, Inc., and Texaco Refining and Marketing, Inc., v. United States, 44 F.3d 1539 (Fed. Cir. 1994), they no longer represent Customs position in this matter. (See also Customs memorandum 113308, dated January 18, 1995, published in the Customs Bulletin on April 5, 1995 (Customs Bulletin and Decisions, vol. 29, no. 14, at p. 24)). Furthermore, it should be noted that in post-Texaco vessel repair entries such as the one currently under consideration, Customs has held such charges incurred pursuant to dutiable repair work to be dutiable. See Headquarters Ruling Letters 115231, dated February 20, 2001; 115135, dated November 8, 2000; 115100, dated October 26, 2000; and 113977, dated November 12, 1997. USSM asserts that reliance on Texaco is misplaced because that decision applied only to post-repair cleaning and protective coverings used in the process of repairs. It further asserts that Customs must seek public notice and comment pursuant to 19 U.S.C. § 1625(c) prior to revoking those rulings. The protestant’s arguments in this regard are without merit. The CAFC in Sea-Land Service, Inc. v. United States, 239 F. 3d 1366 (Fed. Cir. 2001) affirmed a decision of the Court of International Trade granting summary judgment in favor of the United States on the issue of the applicability of 19 U.S.C. § 1625 to interpretive rulings issued under the Texaco “but for” test. Stated simply, the CAFC determined that since the Customs change in the way it approached vessel repair expenses under 19 U.S.C. § 1466(a) was mandated by the court’s decision in Texaco, requiring notice and comment would not serve the purpose and policy behind 19 U.S.C. § 1625(c). Accordingly, the transportation charges in question are dutiable. With respect to the allowances, the protestant has failed to provide sufficient information on their specific nature for a determination to be made on their dutiability. If the allowances are the meal, hotel and general costs referred to in Customs June 7th, 2002, response to the application for relief, such expenses would be dutiable in accordance with the decision reached in Texaco. HOLDING: The transportation expenses and allowances are dutiable pursuant to 19 U.S.C. §1466. Sincerely, Glen E. Vereb Acting Chief Entry Procedures and Carriers Branch