HQ 0111042 - Vessel repair; modification; steel plate Vessel: AMERICAN CONDOR V-31 - United States International Trade Commision Rulings

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HQ 111042

October 11, 1990

VES-13-18-CO:R:P:C 111042 KVS

CATEGORY: CARRIER

Chief
Residual Liquidation and Protest Branch
6 World Trade Center
New York, NY 10048-0954

RE: Vessel repair; modification; steel plate Vessel: AMERICAN CONDOR V-31
Vessel Repair Entry No. C110002124-0
Date of Arrival: June 28, 1988
Port of Arrival: Pennsauken, New Jersey

Dear Sir:

This is in response to your memorandum dated April 13, 1990, which forwards for our consideration a petition for review filed in connection with the AMERICAN CONDOR, vessel repair entry no. C110002124-0. Our findings are set forth below.

FACTS:

The AMERICAN CONDOR, an American-flag vessel, underwent certain foreign shipyard operations in the United Kingdom, the Netherlands and West Germany between June 13 and 20, 1988. Shortly thereafter, the vessel arrived in the United States at Pennsauken, New Jersey on June 28, 1988 and made formal entry.

An application for relief from vessel repair duties was filed on August 25, 1988. The application for relief was denied in part in Customs Ruling Letter 110761 PH, dated February 14, 1990. The applicant was notified of this decision in a letter dated February 28, 1990. The petition for review currently under consideration was timely filed on March 30, 1990.

ISSUE:

Whether certain foreign shipyard work performed on the subject vessel involving the installation of a new steel plate is dutiable under 19 U.S.C. 1466.

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 engaged, intended to engage, or documented under the laws of the United States to engage in the foreign or coastwise trade.

In its applicaiton of the vessel repair statute, Customs follows the old and well-established rule that alteration or modifications to the hull and fittings of a vessel are not considered equipment or repairs under 19 U.S.C. 1466 and therefore, are not dutiable (see United States v. Admiral Oriental Line et al., 18 C.C.C.P. 137, T.D. 44359 (1930), and C.I.E. 1294/58).

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.

The evidence before us indicates that the original steel plates aboard the subject vessel were malfunctioning. The Fleetserve invoice listing the alleged plate modification specifies that repairs to the plate section were necessary. Specifically, the invoice states, "Welding repairs, cracked plate section." Furthermore, the Senior Port Engineer for Crowley Maritime Corporation state, in a letter to Customs dated March 28, 1990, that the purpose of the alleged modifiction was "to remedy cracking problems."

More importantly, the drawing of the work to be performed (entitled "Hull Plating Modification F&A") indicates that the alleged modification involved nothing more than placing a new plate a short distance above the old plate.

Furthermore, although the petitioner asserts that the work was done to comply with American Bureau of Shipping requirements, we find no evidence of A.B.S. involvement. The documentation submitted in support of the petition does not contain a copy of any A.B.S. requirements pertaining to the work performed. Nor do
we find an invoice indicating that the vessel was surveyed by the A.B.S. pursuant to these requirements. Lastly, no A.B.S. report indicating lack of compliance with such requirements has been submitted.

In light of these facts, we are unable to conclude that the work carried out aboard the subject vessel was a new design feature and not a replacement for, or restoration of parts currently performing the same or similar function, albeit improperly. Therefore, we find the costs incurred in the installation of the steel plates to be dutiable. Accordingly, the petition is denied in full.

HOLDING:

Where installations are made to a vessel for the purpose of replacing malfunctioning parts currently performing the same or similar function, the costs incurred in the installation cannot be characterized as a non-dutiable modification and are held to be dutiable.

Sincerely,

Stuart P. Seidel

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