HQ 0111179 - Vessel Repair; Modification; Ground Detection Monitor; 19 U.S.C. 1466; SEA-LAND DEFENDER; Protest No. 27040-000150. - United States International Trade Commision Rulings

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HQ 111179

November 1, 1990

VES-13-18 CO:R:P:C 111179 JBW

CATEGORY: CARRIER

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

RE: Vessel Repair; Modification; Ground Detection Monitor; 19 U.S.C. 1466; SEA-LAND DEFENDER; Protest No. 27040-000150.

Dear Sir:

This letter is in response to your memorandum of July 13, 1990, which forwards for our review and ruling the above- referenced protest from the assessment of vessel repair duties.

FACTS:

The record reflects that the subject vessel, the SEA-LAND DEFENDER, is a United States flag vessel that underwent work in Kobe, Japan, on May 18, 1989, for the installation of a twenty- four volt ground detection system. The vessel arrived at the port of Long Beach, California, on May 29, 1989; vessel repair entry number C27-0075222-6 was filed on the date of arrival. The record further reflects that the entry was liquidated on October 6, 1989. This liquidation included duties on the cost of the installation of the ground detection system. The vessel owner filed its protest against this assessment of duty on January 10, 1990.

ISSUE:

Whether the installation of a new ground detection system is a modification and is not subject to duty pursuant to 19 U.S.C. 1466 (1988).

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 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, in its interpretation of 19 U.S.C. 1466 and in accord with the logic established in United States v. Admiral Oriental Line, 18 C.C.P.A. 137 (1930), distinguishes between equipment and repairs on the one hand and permanent additions to the hull and fittings on the other. The court in Admiral Oriental cited with approval an opinion of the Attorney General (27 Op. Atty. Gen. 288) that defined the scope of the term equipment in examining a statute that permitted drawback on vessels built in the United States for foreign account, wholly or in part of duty-paid materials. The Attorney General found that items that 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....

Admiral Oriental, 18 C.C.P.A. at 140 (quoting the opinion of the Attorney General).

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.

T.D. 34150, 26 Treas. Dec. 183, 184 (1914)(quoted with approval in Admiral Oriental).

Customs has held that for an item to be characterized as a nondutiable modification, it must encompass the installation of an item as a new design feature, not as a replacement for, or restoration of, parts now performing a similar function. We have also held that the decision in each case as to whether an installation constitutes a nondutiable addition to the hull and fittings of the vessel depends to a great extent on the detail and accuracy of the drawings and invoice descriptions of the actual work performed. Even if an article is considered to be part of the hull and fittings of a vessel, the repair of that article, or the replacement of a worn part of the hull and fittings, is subject to vessel repair duties.

We have recently ruled that the installation of a new ground detection system is a modification and is not subject to duty pursuant to 19 U.S.C. 1466. Headquarters Ruling Letter 111139, dated October 12, 1990. The facts relating the installation of the ground detection monitor in the present protest are identical to those presented in this ruling. We conclude therefore that the cost of installing the ground detection monitor is not dutiable. The protest is granted in full.

HOLDING:

The installation of a new ground detection monitor system aboard the subject vessel is a modification and is not subject to duty pursuant to 19 U.S.C. 1466. The protest is consequently granted in full.

Sincerely,

B. James Fritz
Chief

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