HQ 0110894 - Temporary modification is dutiable; late entry penalty Vessel: JOHN LYKES V-120 - United States International Trade Commision Rulings

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HQ 110894

July 27, 1990

VES-13-18-CO:R:P:C 110894 KVS

CATEGORY: CARRIER

Chief
Residual Liquidation and Protest Branch
6 World Trade Center
New York, NY 10048-0954

RE: Temporary modification is dutiable; late entry penalty Vessel: JOHN LYKES V-120
Vessel Repair Entry no. C36-0002147-2

Dear Sir:

This is in response to your memorandum of March 6, 1990, which forwards for our consideration an application for relief filed in connection with the JOHN LYKES V-120, vessel repair entry no. C36-0002147-2. Our findings are set forth below.

FACTS:

The JOHN LYKES, an American-flag vessel, underwent foreign shipyard repairs to the starboard boiler on August 18-21, 1989, at Casablanca, Morocco. The subject vessel also underwent foreign shipyard operations on September 1-2, 1989, at Montreal, Canada, to fit the vessel with equipment to allow the vessel to transit the St. Lawrence Seaway and to repair radar equipment.

The vessel arrived in the United States at Duluth, Minnesota, on September 6, 1989. The vessel made untimely entry on October 2, 1989. The applicant filed one application for relief dated October 12, 1989. This application was superseded by a second application for relief, also dated October 12, 1989, which contained the instruction that the revised application was "to supercede and replace the original application."

LAW AND ANALYSIS:

Title 19, United States Code, section 1466(a) provides, in pertinent part, for payment of duty in the amount of 50 percent ad valorem on the cost of foreign repairs to vessels engaged, intended to engage, or documented under the laws of the United States to engage in the foreign or coastwise trade.

The regulations pertaining to the filing of an application for relief from duties assessed pursuant to 19 U.S.C. 1466 are found in section 4.14(d)(1), Customs Regulations (19 CFR 4.14(d)(1). Although the application need not be in any particular form, the application must identify the items for
which relief from payment of duty is sought, as well as the bases for Customs not to assess duty.

The application for relief currently under consideration, in addressing the repairs made to the boiler, does not provide any grounds upon which relief can be granted. Specifically, the application states, "temporary repairs to stbd. boiler after massive tube rupture. Minimum repair necessary for vessel's safe return to the United States." Although these are factors that Customs requires upon granting relief by reason of casualty (pursuant to 19 U.S.C. 1466(d)(1)), the applicant does not request relief on this basis. Nor does the applicant provide any evidence indicating the occurrence of a casualty within the meaning of 19 U.S.C.1466(d)(1). In the absence of a request for relief upon which relief can be granted, we find the cost of the boiler repairs to be dutiable.

Likewise, the application for relief is brief in making a claim for relief for the equipment fitted to the vessel to allow it to transit the St. Lawrence Seaway. Specifically, the application states, "alterations - fitting vessel with temporary required equipment for St. Lawrence Seaway Transit." With this statement, we presume that the applicant seeks relief on the basis that the installation of the equipment was a non-dutiable modification to the hull and fittings.

In its application of the vessel repair statute (19 U.S.C. 1466), Customs has held that modifications/alterations/additions to the hull and fittings of a vessel are not subject to vessel repair duties. A leading case in the interpretation and application of section 1466 is United States v. Admiral Oriental Line et al., T.D. 44359 (1930) where the Court considered the issue of whether steel swimming tanks installed on a U.S.-flag vessel in a foreign port constituted equipment or repairs within the meaning of section 1466. In holding that the installation of these tanks did not constitute either equipment or repairs and therefore was not dutiable, the Court in Admiral Oriental cited earlier court decisions which define equipment, promulgations by the Board of Naval Construction, and regulations of the Treasury Department, as well as opinions of the Attorney General.

Accordingly, for purposes of section 1466, dutiable equipment has been defined as:

...portable articles necessary or appropriate for the navigation, operation, or maintenance of a vessel, but not permanently incorporated in or permanently attached to its hull or propelling machinery, and not constituting consumable supplies. Admiral Oriental, supra., (quoting T.D. 34150,

By defining what articles are considered to be equipment, the authority cited above formulated criteria which distinguish those items deemed to be modifications/alterations/additions to the hull and fittings and therefore not dutiable under section 1466. These items include:

...those applications which are permanently attached to the vessel, and which would remain on board were the vessel to be laid up for a long period... Admiral Oriental, supra., (quoting 27 Op. Atty. Gen. 228).

In requesting relief for alterations made to the vessel to allow transportation on the St. Lawrence Seaway, the application for relief characterizes the work done as "temporary required equipment" rather than falling within the standards elucidated in Admiral Oriental, supra. In the absence of evidence indicating that the work performed involved the installation of permanent new design features to the vessel's hull and fittings rather than temporary fixtures, we decline to find that the work was a modification. Accordingly, we find the cost to be dutiable.

Lastly, the first application for relief submitted requested relief for "Repairs to 3 CM radar and VHF." The revised application, intended to "supersede and replace the original" does not contain any such request for relief. Therefore, in the absence of a request for relief and the identification of a basis upon which relief can be granted, we decline to consider this item on the merits. Accordingly, we find the cost for radar and VHF repairs to be dutiable.

Additionally, since the vessel repair entry was not filed in accordance with the time limitations prescribed by the Customs egulations, we refer this matter to your office for consideration regarding appropriate penalty action.

HOLDING:

After thorough review of the evidence submitted and as detailed in the Law and Analysis section of this ruling, the application for relief is denied.

Sincerely,

B. James Fritz

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