HQ 112446: Vessel Repair; Survey; Inspection; United States-Israel Free Trade Act; Presidential Proclamation 5924; 19 U.S.C. 1466; M/V FALCON PRINCESS, V-48; Entry No. VR-C20-0035773-4.

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 112446

                         March 18, 1993

VES-13-18  CO:R:IT:C  112446  JBW

CATEGORY:  Carriers

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

RE:  Vessel Repair; Survey; Inspection; United States-Israel Free
     Trade Act; Presidential Proclamation 5924; 19 U.S.C.  1466;
     M/V FALCON PRINCESS, V-48; Entry No. VR-C20-0035773-4.

Dear Sir:

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

FACTS:

     The record reflects that the subject vessel, the FALCON
PRINCESS, arrived at the port of New Orleans, Louisiana, on July
26, 1991.  A timely vessel repair entry, number VR-C20-0035773-
4, was filed that indicated that foreign shipyard work was
performed.  The vessel owner timely filed an application for
relief pursuant to an authorized extension of time.  The
application was allowed in part and denied in part.  Specifically
denied were costs for certain surveys that the vessel operator
contends are not subject to duty.

ISSUE:

     Whether costs of inspections carried out by qualifying
inspection entities are subject to duty under 19 U.S.C.   1466.

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.  The petitioner, in its application for relief,
claimed that certain repair surveys met the exemption
requirements under the United States-Israel Free Trade Act,
Presidential Proclamation 5924.  (Exhibits B(19) and B(20)). 
Citing the failure of the applicant to submit evidence that
demonstrates the citizenship of the inspectors, this office
denied this claim.  Headquarters Ruling Letter 112063, dated June
8, 1992.  The petitioner has now submitted evidence establishing
the Israeli citizenship of the surveyors.  We therefore agree
with your analysis that these costs are not subject to duty.  

     The petitioner also seeks relief for the cost of a survey
carried out by the American Bureau of Shipping (ABS) while the
ship was en route to Egypt.  (Exhibit A(4)).  We agree that the
petitioner has not provided additional evidence to qualify this
survey for duty free treatment under the Presidential
Proclamation.  Alternatively, the petitioner argues that the
survey was undertaken to meet the classification requirements of
the ABS.  The record shows that the survey was a required Special
Periodical Survey Number 4 that was performed pursuant to ABS
Rule 45.7.5.  The cost of this survey is not subject to duty
regardless of whether dutiable repairs were eventually carried
out.  For this reason, the cost of the ABS survey as appearing in
Exhibit A(4) is not subject to duty under 19 U.S.C.   1466.
 HOLDING:

     The petitioner has submitted evidence establishing the
Israeli citizenship of surveyors for inspections reflected in
Exhibits B(19) and B(20);  the costs of these surveys are not
subject to duty.  The survey appearing in Exhibit A(4) was a
required Special Periodical Survey Number 4 that was performed
pursuant to ABS Rule 45.7.5.  The cost of this survey is not
subject to duty under 19 U.S.C.   1466.



                         Sincerely,



                         Acting Chief