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HQ 111333

February 19, 1991

VES-13-18 CO:R:IT:C 111333 JBW

CATEGORY: CARRIER

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

RE: Vessel Repair; Foreign Shipyard; Warranty; SEA-LAND VOYAGER V-150; Entry No. 110-0104005-1; 19 U.S.C. 1466; 19 C.F.R. 4.14.

Dear Sir:

This letter is in response to your memorandum of October 2, 1990, which forwards for our review and ruling the above referenced application for relief from the assessment of vessel repair duties.

FACTS:

The record reflects that the subject vessel, the SEA-LAND VOYAGER, arrived in the port of Tacoma, Washington, on July 15, 1990. Vessel repair entry, number 110-0104005-1, was filed on the same day as arrival. The vessel repair entry states, among other items, that repairs were made to the hinged frame at hatch 7A. The Mitsubishi Heavy Industries, Ltd., invoice indicates that no charge was made, for these repairs were made pursuant to a warranty on a contract for a previous modification made to the ship performed by the shipyard. Nevertheless, the invoice covering the repairs indicates a cost of 50,000. The vessel owner claims that no duty is owed on this cost.

ISSUE:

Whether the cost of foreign repairs performed pursuant to a warranty on a contract with a foreign shipyard for vessel modification is dutiable under 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 fifty 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 has consistently held that duty allowance will not be made for foreign shipyard warranties. Headquarters Ruling Letter 110658, dated April 9, 1990. The Court of International Trade recognized one narrow category of foreign shipyard warranties as potentially eligible for duty refund. Sea-Land Service, Inc. v. United States, 683 F. Supp. 1404 (CIT 1988). The Court in that case found that, under certain conditions, warranties issued pursuant to new vessel construction contracts should be honored for duty refund purposes. Id. at 1409. This decision did not disturb, however, our long-standing position that disallows other classes of foreign warranty work.

The repair work performed by Mitsubishi Heavy Industries was not performed pursuant to a new vessel construction contract warranty. It does not, therefore, qualify under the exception established in the Sea-Land decision discussed in the previous paragraph. Failing qualification for this exception, we conclude that the work performed under warranty to repair the hinged frame at hatch 7A is dutiable.

HOLDING:

The cost of repair work performed pursuant to a warranty on a vessel modification contract for which the vessel owner seeks relief is dutiable under 19 U.S.C. 1466.

Sincerely,

B. James Fritz
Chief

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