HQ 0110888 - Tacoma Vessel Repair Entry No. 110-0103885-7 dated December 17, 1989; M/V SEALAND DEVELOPER, Voyage No. 122. Application; modifications; 19 U.S.C. 1466; 19 CFR 4.14 - United States International Trade Commision Rulings

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HQ 110888

October 2, 1990

VES-13-18 CO:R:P:C 110888 BEW

CATEGORY: CARRIER

Chief, Technical Assistant
Pacific Region
U. S. Customs Service
One World Trade Center
Long Beach, California 90831

RE: Tacoma Vessel Repair Entry No. 110-0103885-7 dated December 17, 1989; M/V SEALAND DEVELOPER, Voyage No. 122. Application; modifications; 19 U.S.C. 1466; 19 CFR 4.14

Dear Sir:

This is in reference to a memorandum dated March 1, 1990, from your office which transmitted an application for relief from duties filed by Sea-Land Services, Inc., relating to vessel repair entry No. 110-0103885-7 concerning foreign repairs performed on the SEALAND DEVELOPER, voyage 122.

FACTS:

The record shows that the shipyard work in question was performed on the subject vessel in Kobe, Japan, during the month of December 1989. The subject vessel arrived in the United States at the port of Tacoma, Washington, on December 17, 1989.

The entire vessel repair entry involves a potential duty of $2,378.

The applicant claims that relief for the subject items should be granted because the items should be classified as nondutiable items covered under title 19, United States Code, section 1466 and sections 4.14 of the Customs Regulations.

You have requested our advice concerning repairs to the after house doors on 12 of Sea-Land's vessels (D-9J). This entry covers only the SEALAND DEVELOPER. It claims that the work performed is a permanent modification to the vessel hull and fittings.

ISSUE:

Whether the foreign work performed on the subject vessel is dutiable under 19 U.S.C. 1466.

LAW AND ANALYSIS:

Section 466, Tariff Act of 1930, as amended (19 U.S.C. 1466) provides, in pertinent part, for payment of duty in the amount of 50 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.

A leading case in the interpretation and application of 1466 is United States v. Admiral Oriental Line et al., 18 C.C.P.A. 137 (T.D. 44359 (1930)). That case distinguished between equipment and repairs on one hand and permanent additions to the hull and fittings on the other, the former being subject to duty under 1466.

The Court in Admiral Oriental, supra., cited with approval an opinion of the Attorney General (27 Op. Atty. Gen 228). That opinion interpreted 17 of the Act of June 26, 1884 (23 Stat. 57), which allowed drawback on vessels built in the United States for foreign account, wholly or in part of duty-paid materials. In defining equipment of a vessel, the Attorney General found that items which are not equipment are:
those appliances which are permanently attached to the vessel, and which would remain on board were the vessel to be laid up for a long period...[and] are material[s] used in the construction of the vessel...

While the opinion of the Attorney General interpreted a provision of law other than 1466 or a predecessor thereto, it is considered instructive and has long been cited in Customs Service rulings as defining permanent additions to the hull and fittings of a vessel.

Under long-standing and consistently applied administrative policy, an installation, even one of a permanent nature, is considered to be a dutiable repair rather than a modification if the installation addresses a repair need. Thus, if an area of a vessel is enhanced by the replacement of one permanent installation with another, the operation is considered dutiable if evidence reveals that a defect or wastage was present in the former installation, which condition was cured by replacement.

In the present case, the applicant claims that the installation of the panic-proof locks is a design and operational improvement over the old locks. It is claimed that the old locks were not found to be damaged at the time they were replaced, and that the permanent installation of the panic proof locks is to improve security and crew safety and should be properly considered a non-dutiable modification.

Examination of the entire record, including that portion of the invoice relating to the subject items, reveals that the panic-proof locks are permanent installations to the vessel's hull and fittings. Accordingly, the subject item is a non- dutiable modification to the vessel's hull and fittings.

HOLDING:

1. In light of our present findings based upon the evidence as stated in the law and analysis section of this ruling, we find that the installation of panic-proof locks to the outside doors to be a non-dutiable permanent modification to the hull and fittings of the vessel. The said items constitute 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.

Sincerely,

B. James Fritz

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