HQ 0111381 - Vessel Repair; 19 USC 1466; Lash Barge; Modification; Drydocking; Inspection - United States International Trade Commision Rulings

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HQ 111381

February 19, 1991

VES-13-18-CO:I:T:C 111381 RAH

CATEGORY: CARRIER

Chief, Technical Branch
Commercial Operations Division
Pacific Region
300 North Los Angeles Street
Los Angeles, CA 90053-3371

RE: Vessel Repair; 19 USC 1466; Lash Barge; Modification; Drydocking; Inspection

Dear Sir:

This is in response to your memorandum of October 31, 1990, regarding vessel repair entry number 331-3918079-9

FACTS:

The record reflects that BARGE 450-7 arrived in the United States at Bellingham, Washington, on March 29, 1990, and an entry was filed on April 9, 1990. No information was received from the operators of the barge, and the entry was liquidated on July 20, 1990, using estimated amounts for the drydocking and repairs.

The subject of this ruling is protest number 30040-000273 filed October 16, 1990. The protestant claims that modifications on invoice 4-3A, drydocking on invoice 4-3B and inspections on invoice 4-3D are non-dutiable under 19 U.S.C. 1466.

ISSUE:

Whether work performed on the subject vessel constitutes non-dutiable modifications, drydocking and inspections.

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 documented
under the laws of the United States to engage in the foreign or coastwise trade, or vessels intended to be employed in such trade.

On August 20, 1990, the President signed into law the Customs and Trade Act of 1990 (Pub. L. 101-382), section 484E of which amends the vessel repair statute by adding a new subsection (h), which provides in part:

(h) The duty imposed by subsection (a) of this section shall not apply to--

(1) the cost of any equipment, or any part of equipment, purchased for, or the repair parts or materials to be used, or the expense of repairs made in a foreign country with respect to, LASH (Lighter Aboard Ship) barges documented under the laws of the
United States and utilized as cargo containers.

It is clear that the statutory exemption does not apply to all LASH barges, but rather only to those which are documented under U.S. laws and are utilized as cargo containers. Further, the benefits of the statute are not made applicable to LASH barges which are undocumented. Neither should benefits extend to LASH barges which were not in continual cargo container service (e.g., such service may have been suspended or terminated) between the time of the last pre-repair departure from the U.S., and first subsequent U.S. arrival.

The effective date of the amendment is stated as follows:

Effective Date.--The amendment made by this section shall apply to--

(1) any entry made before the date of enactment of this Act that is not liquidated on the date of enactment of this Act, and (2) any entry made--
(A) on or after the date of enactment of this Act, and
(B) on or before December 31, 1992.

In the instant case, the entry was filed on March 29, 1990, before the date of enactment of the Customs and Trade Act of 1990, but the entry was liquidated on July 29, 1990, before its enactment and is thus not subject to treatment thereunder.

With regard to the protestant's claim that the items on invoice 4-3A constitute non-dutiable modifications, 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. Customs Memorandum 108871 (4-16-87). Customs has 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. Customs Memorandum 108871 (4-16-87), citing C.S.D. 83-35. 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. See, C.I.E. 233/60. We have reviewed invoice 4-3A and find the items listed thereon to be non-dutiable modifications.

Next, we will address the drydocking services listed on invoice 4-3B. Expenses of docking a vessel while undergoing repairs in a foreign port is not subject to the payment of a duty. United States v. Geo. Hall Coal Co., 134 F. 1003 (Circuit Court, New York 1905). See also, American Viking Corp. v. United States, C.D. 1830 (1830). A review of that invoice reflects that the items listed thereon constitute non-dutiable drydocking expenses.

Finally, the protestant claims that the inspection of the barge on invoice 4-3D is non-dutiable. Customs has held that where periodic surveys are undertaken to meet the specific requirements of a classification society, insurance carrier, etc., the cost of the surveys is not dutiable even when dutiable repairs are effected as a result thereof; however, in the liquidation process Customs should go beyond the mere labels of "continuous:" or "ongoing" before deciding whether a part of an ongoing maintenance and repair program labelled "continuous" or "ongoing" is dutiable. Although, if the survey is to ascertain the extent of damage sustained, or to ascertain if the work is adequately completed, the costs are dutiable as part of the repairs which are accomplished pursuant to the holdings in C.I.E. 429/61, C.S.D. 79-2, and C.S.D. 79-277. In the instant case, the items on invoice 4-3C, inspection account, correspond with the shell repairs made on the repair account, invoice 4-3C. Accordingly, since the inspections in question were performed in conjunction with dutiable repairs, the inspections are also dutiable.

HOLDING:

Following a thorough review of the evidence provided, and as detailed in the law and analysis section of this ruling, the petition for review is denied with regard to the inspections and granted with regard to the modifications and drydocking.

If you have any further questions regarding this matter, please do not hesitate to contact our office.

Sincerely,

B. James Fritz
Chief

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