HQ 0110944 - Vessel repair; modification; installation of deck drain Vessel: PRESIDENT TRUMAN V-18 - United States International Trade Commision Rulings

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HQ 110944

June 19, 1990

VES-13-18-CO:R:P:C 110944 KVS

CATEGORY: CARRIER

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

RE: Vessel repair; modification; installation of deck drain Vessel: PRESIDENT TRUMAN V-18
Date of Arrival: January 20, 1990
Port of Arrival: San Pedro, California
Vessel Repair Entry No. C27-0011766-9

Dear Sir:

This is in response to your memorandum dated March 20, 1990, which forwards for our consideration an application for relief from vessel repair duties filed in connection with the PRESIDENT TRUMAN V-18, vessel repair entry no. C27-0011766-9. Our findings are set forth below.

FACTS:

The PRESIDENT TRUMAN underwent various shipyard operations in Hong Kong and Taiwan from January 4, 1990 until January 9, 1990. The vessel arrived in the United States on January 20, 1990, at San Pedro, California, and made entry.

The application for relief currently under consideration was timely filed on February 26, 1990. The applicant seeks relief from vessel repair duties assessed in connection with the installation of a drain on the upper forward deck on the basis that the work is a non-dutiable modification.

ISSUE:

Whether the installation of an upper forward deck drain is an alteration to the hull and fittings of the vessel and therefore free from duties assessed pursuant to 19 U.S.C. 1466 as a modification.

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.

In its application of 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. For an item to be characterized as a non-dutiable modification, the Customs Service has held that 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. (See Customs Memorandum 108871 GV (dated April 16, 1987)).

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. (See Customs Memorandum 108871 GV (dated April 16, 1987), 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).

In support of its position that the installation of a deck drain is a non-dutiable modification, the applicant has submitted a memorandum from their Vessel Engineering and Construction Department which provides a detailed description of the work specifications, as well as drawings which clearly indicate the location of the work to be performed. The applicant has also submitted Hong Kong United Dockyards Ltd, invoice # H008/12--89, dated December 20, 1989, which provides the costs incurred for labor and materials.

After reviewing the documentation submitted by the applicant, we find that the installation of a drain on the forward upper deck constituted a new design feature and was not in the nature of a repair. Accordingly, we find the cost incurred in the installation of the deck drain to be non- dutiable.

HOLDING:

Following a thorough review of the evidence provided, and as detailed in the "Law and Analysis" section of this ruling, we recommend that the application for relief be granted.

Sincerely,

B. James Fritz

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