HQ 0110957 - Protest No. 27040-000149; SEA-LAND LIBERATOR V-99 - United States International Trade Commision Rulings

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HQ 110957

June 1, 1990

VES-13-18-CO:R:P:C 110957 GV

CATEGORY: CARRIER

Chief, Technical Branch
Commercial Operations
Pacific Region
1 World Trade Center
Long Beach, California 90831

RE: Protest No. 27040-000149; SEA-LAND LIBERATOR V-99

Dear Sir:

Your undated memorandum forwarded a protest regarding vessel repair entry no. C27-0075233-3. Our findings are set forth below.

FACTS:

The SEA-LAND LIBERATOR is a U.S.-flag vessel owned by Sea- Land Service, Inc. of Oakland, California. The subject vessel had shipyard work performed on her in Japan, Taiwan, and Hong Kong during May and June, 1989. Subsequent to the completion of this work the subject vessel arrived in the United States at Long Beach, California on June 18, 1989.

A vessel repair entry marked as full and complete was filed on the date of arrival. The protestant elected not to file an application for relief. The entry was liquidated on October 20, 1989. A timely protest was filed on January 11, 1990. The protestant contends that the installation of a ground detection monitor constitutes a nondutiable modification. It is further claimed that this same item was installed on all twelve Sea-Land D-9J class vessels and that remission was granted on nine of the vessels.

The only evidence submitted in support of the protestant's claim is a shipyard invoice containing the total cost of the item broken down into the following itemized expenses: "material fee", "engineering fee", "travel fee" (for which no duty was assessed), and "discount". The invoice also contains the statement, "Refer to the attached work report for more details." We note, however, that no such report was attached to the invoice.

ISSUE:

Whether the foreign work for which the applicant seeks relief is dutiable 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 50 percent ad valorem on the costs of foreign repairs to vessels documented under the laws of the United States to engage in the foreign or coastwise trade, or vessels intended to engage in such trade.

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 (1914))

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 item 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)

Furthermore, the court in Otte v. United States, T.D. 36489 (1916), stated that before an item can be regarded as part of a vessel, it must be "essential to the successful operation" of the vessel.

Upon reviewing the record, it is apparent that the evidence submitted is insufficient to support the protestant's claim that the installation of a ground detection monitor on the subject vessel constitutes a nondutiable modification. The invoice makes no reference to such an item and the report detailing the work in question was not submitted. Notwithstanding a finding of nondutiability with regard to the installation of this item on other Sea-Land vessels of the same class, we note that each application, petition, and/or protest seeking relief on duties assessed pursuant to 19 U.S.C. 1466 must include the requisite supporting documentation for the particular entry involved (see 19 CFR 4.14(d) and 19 CFR 174.13(a)).

HOLDING:

The foreign work for which the protestant seeks relief (i.e., the installation of a ground detection monitor) is dutiable under 19 U.S.C. 1466 in view of the fact that the evidence submitted does not support a finding that it constituted a nondutiable modification.

Accordingly, the protest is denied.

Sincerely,

Edward T. Rosse

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