HQ 0110665 - Protest No. 890002702; Vessel Repair Entry No. C2700-3- 4914-8 dated June 13, 1988; Date of Arrival: June 13, 1988; Port of Arrival: Long Beach, California; Vessel: SEA-LAND ENDURANCE, Voyage No. 83 - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1991 HQ Rulings > HQ 0110362 - HQ 0110803 > HQ 0110665

HQ 110665

June 28, 1990

VES-13-18 CO:R:P:C 110665 BEW

CATEGORY: CARRIER

Chief, Technical Assistant
Pacific Region
U. S. Customs Service
Los Angeles, California 90831

RE: Protest No. 890002702; Vessel Repair Entry No. C2700-3- 4914-8 dated June 13, 1988; Date of Arrival: June 13, 1988; Port of Arrival: Long Beach, California; Vessel: SEA-LAND ENDURANCE, Voyage No. 83

Dear Sir:

Reference is made to your memorandum of November 8, 1989, which forwarded the above-captioned protest from the assessment of vessel repair duties for our determination.

FACTS:

On May 23, 1988, while in Yokohama, Japan,, the vessel SEA- LAND ENDURANCE underwent various shipyard operations. The dutiability of these operations has previously been considered by your office. The protestant elected not to file an Application for Relief. The entry was liquidated on May 26, 1989. The protest was timely filed on August 23, 1989. Included in your considerations was the matter of whether the cost associated with the installation of the following items is dutiable under the statute:

Item 7/87-1(2) - Rope Guard,

Item 7/87-1(1) - Stern Frame Boss,

Item 7/87-11 - Stern Tube Seal Modification,

Item 7/87-3 - New door on Economizer preheating casing,

Item 7/87-4 - Stern Tube Bearing Lube Oil System

Item 7/87-6 - Gas Economizer drain,

Item 7/87-10 - Propeller modification,

Item 7/87-13 - Purifier Separator Driven Feed pumps,

Item 7/87-18 - Lube Oil Filing Line,

Item 7/88-10 - Rudder Lower Pintle Nut Access,

Item 7.88-1 - Modification of Sea Chests Strainers for Diver Access,

Item 7.88-2 - Modification of Rudder Pintle inspection access plate,

Item 7.88-3 - Modification of under water hull painted markings for diver indentifications,

Item 7.88.4 - Furnish Video Camera services,

Page 4 - Exhaust Gas Economizer, and

2-1 Economizer Cleaning
Hydro Pressure Test.

These are the only items which are presently being protested. The protestant claims that all of the above items except the Exhaust Gas Economizer, Economizer Cleaning and Hydro Pressure Test are modifications/alterations/additions to the hull and fittings of the vessel. It claims that the repair work associated with the Exhaust Gas Economizer was necessitated by a casualty, i.e. a fire caused by crew negligence.

ISSUES:

Whether certain work performed in a foreign country constitutes modifications/alterations/additions to the hull and fittings rather than equipment purchases or repairs within the meaning of 19 U.S.C. 1466?

Whether a video recording of the vessel's hull which is used as a survey for a hull frame markings modification, is considered a survey under the provisions of C.S.D. 79-277 so as to render the cost nondutiable?

Whether the costs of certain repairs due to damage caused by crew negligence are dutiable under 19 U.S.C. 1466?

LAW AND ANALYSIS:

Title 19, United States Code, section 1466, provides in part for payment of an ad valorem duty of 50 percent of the cost of foreign repairs to vessels documented under the laws of the United States to engage in the foreign or coastwise trade.

Section 1466 (d)(1) provides that the Secretary of the Treasury is authorized to remit or refund such duties if the owner or master of the vessel was compelled by stress of weather or other casualty to put into such foreign port to make repairs to secure the safety and seaworthiness of the vessel to enable her to reach her port of destination.

In its application of the vessel repair statute (19 U.S.C. 1466), Customs has consistently held that modifications/altera- tions/additions to the hull and fittings of a vessel which allow the vessel to operate more efficiently are not subject to vessel repair duties. Alterations to the hull and fittings of vessels are not within the purview of section 1466, and the cost of the work is not subject to duty. An article must be permanently attached to the vessel and it most be essential to the successful operation of the vessel (see Otte v. United States, 7 C.C.P.A. 166 (1916), and United States v. Richard & Co., 8 Ct. Cust. App. 231, T. D. 37496 (1917). To be found non-dutiable as a modification/alteration/addition, the work must involve no element of repair due to damages, deterioration or wear and tear. If those are present, the work will be considered a repair and dutiable. After reviewing the record and Mitsubishi Heavy Industries, Ltd. (MHI), bill No. 3142-473350, dated July 28, 1988, we consider the work done under the following items to be in the nature of non-dutiable modifications/alterations/additions to the hull and fittings rather than dutiable repairs to the vessel due to damage or deterioration:

Item 7/87-1(2) - Rope Guard,

Item 7/87-1(1) - Stern Frame Boss,

Item 7/87-11 -Stern Tube Seal Modification,

Item 7/87-3 - New door on Economizer preheating casing,

Item 7/87-4 - Stern Tube Bearing Lube Oil System

Item 7/87-6 - Gas Economizer drain,

Item 7/87-10 - Propeller modification,

Item 7/87-13 - Purifier Separator Driven Feed pumps,

Item 7/87-18 - Lube Oil Filing Line,

Item 7.88-1 - Modification of Sea Chests Strainers for Diver Access,

Item 7.88-2 - Modification of Rudder Pintle inspection access plate,

Item 7.88-3 - Modification of under water painted markings for diver identification,

In Headquarters ruling 106543 JM, we held that mere cleaning operations are not dutiable. However, cleaning operations which remove rust and deterioration or worn parts, and which are a necessary factor in the effective restoration of a vessel to its former state of preservation, constitute vessel repairs (See C.I.E. 429/61). Accordingly, the cost associated with the inspection of Item 7/88-10 - Rudder Lower Pintle Nut Access, is nondutiable.

Customs has held that where periodic surveys are undertaken to meet the specific requirements of a classification society, insurance carrier, etc., the cost of the surveys is not dutiable even when dutiable repairs are effected as a result thereof; however, in the liquidation process Customs should go beyond the mere labels of "continuous" or "ongoing" before deciding whether the item is dutiable. If an inspection or survey is conducted as a part of an ongoing maintenance and repair program labelled "continuous" or "ongoing" the cost is dutiable. Also, if the survey is to ascertain the extent of damage sustained, or to ascertain if the work is adequately completed, the costs are dutiable as part of the repairs which are accomplished pursuant to the holdings in C.I.E. 429/61, C.S.D. 79-2, and C.S.D. 79- 277. Item 7/88.4 is for video services which were performed to survey the condition of the underwater hull to qualify for 3 + 2 year extended term drydock per USGA requirements. Since no repairs followed this survey, the video camcorder service is in the nature of a periodic survey. Accordingly, the cost of this service is a non-dutiable expense.

The term "casualty", as it is used in the vessel repair statute (19 U.S.C. 1466), has been interpreted by the Customs Court as something which, like stress of weather, comes from unexpected force or violence, such as from a fire, explosion, or collision (see Dollar Steamship Lines, v. United States, 5 Cust. Ct. 28-29, C.D. 362 (1940)).

A clear requirement of the statute is that the vessel be compelled by such a casualty to seek foreign shipyard service to secure the safety and seaworthiness of the vessel and to enable her to safely reach her port of destination.

The documents submitted with the protest substantiates that the a fire in the exhaust gas boiler caused damage to the economizer in that the duty engineer blew exhaust gas boiler tubes and shortly thereafter high pressures was indicated in 7 K system. At this time, the high pressure dump valve was opened and it was controlled to the full open position in order to increase the dump. However, when the assistant engineer went down below he found that the dump outlet value was closed.

Upon reviewing the record in its entirety, we find that the damage sustained to the subject vessel which occurred on February 15,1986, was the result of a "casualty" within the meaning of section 1466. The Customs Service has ruled that single acts of negligence of crewmembers which cause damage to vessels, whether attributable to officers or not, will be considered "other casualties" within the meaning of section 1466(d)(1), provided no evidence of owner direction or inducement is present (see C.S.D. 82-42).

The cost on MHI bill No. 3142-473350 relating to the work on the exhaust gas economizer shows that the work was done in May 1988. There is no authority under title 19, United States Code, section 1466, to remit duty assessed on the cost of repairs effected in foreign ports because the work load at the only United States port said to be capable of serving the vessel, precluded performance of the necessary work within a specific time. We have in the past declined to grant remission on repairs obtained in a foreign shipyard for reasons of commercial expediency (see case No. 105884 LLB). Accordingly, the repair work performed on the subject vessel is dutiable. In view of foregoing, the protest is denied as to the exhaust gas economizer, the cleaning, and Hydro pressure test relating to this repair.

HOLDINGS:

1. The installation of Items Nos. 7/87-1(2), 7/87-1(1), 7/87-11 7/87-3, 7/87-4, 7/87-6, 7/87-10, 7/87-13, 7/87-18, 7.88-1, 7.88-2, and 7.88-3 constitutes modifications/ alterations/additions to the hull and fittings rather than repairs. As such, the cost of this work in not dutiable under 19 U.S.C. 1466. The protest is granted.

2. The record shows that no repairs were accomplished as a result of the video camcorder survey. The camcorder video survey is in the nature of a periodic survey. Under the circumstances, the cost of the survey is not subject to duty under 19 U.S.C. 1466. The protest is granted as to Item 7.88-4.

3. The cost associated with the inspection in item No. 7/88/-10 is non-dutiable. The protest is granted.

4. Repairs necessitated by crew negligence where there is no owner direction or inducement are "other casualties" under the statute, however, there is no authority under the provisions of the statute to grant relief for repairs which are deferred for commercial expediency. The protest is denied as to the subject items associated with the casualty.

Sincerely,

B. James Fritz

Previous Ruling Next Ruling