United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1992 HQ Rulings > HQ 0111571 - HQ 0111693 > HQ 0111616

Previous Ruling Next Ruling

---

HQ 111616

January 13, 1992

VES-13-18-CO:R:IT:C 111616 BEW

CATEGORY: CARRIER

Deputy Assistant Regional Commissioner
Commercial Operations Division
South Central Region
New Orleans, Louisiana 70130

RE: Vessel repair; Repairs; Modifications; Vessel TYSON LYKES, ex. DELAWARE BAY, V-1, Vessel repair entry No. C14- 0021244-0

Dear Sir:

This is in reference to your memoranda of March 21 and April 12, 1991, which forwarded for our consideration an Application for Relief from assessment of vessel repair duties submitted by counsel in regard to the above-captioned vessel repair entry.

FACTS:

The subject vessel underwent foreign shipyard work in Germany. During the period of foreign work, various repairs and modifications were undertaken. Specific items of work have been forwarded for our review as to dutiable status. These include the following:

1. Lloyd Werft invoice page 6, item 011; work on the anchor windless.

2. Lloyd Werft invoice page 43, item 068; work on catwalks.

3. WL invoice 90-03-0066-We, exhibit C, page 3; refilling fire extinguishers with CO.

4. WL invoices 90-06-0324-We and 90-04-0138-We, exhibit C, pages 5 and 50; purchase of working leather gloves.

ISSUE:

Whether certain vessel survey expenses, materials purchases, and labor operations are considered subject to duty under the vessel repair statute.

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 so employed.

A question exists as to whether certain of the items under consideration might be considered non-dutiable modifications. In its application of the vessel repair statute, Customs has held that modifications/alterations/additions to the hull and fittings of a vessel are not subject to vessel repair duties. Over the course of years, the identification of modification processes has evolved from judicial and administrative precedent. In considering whether an operation has resulted in a modification which is not subject to duty, the following elements may be considered:

1. Whether there is a permanent incorporation into the hull or superstructure of a vessel (see United States v. Admiral Oriental Line et al., T.D. 44359 (1930), either in a structural sense or as demonstrated by the means of attachment so as to be indicative of the intent to be permanently incorporated. This element should not be given undue weight in view of the fact that vessel components must be welded or otherwise "permanently attached" to the ship as a result of constant pitching and rolling. In addition, some items, the cost of which is clearly dutiable, interact with other vessel components resulting in the need, possibly for that purpose alone, for a fixed and stable juxtaposition of vessel parts. It follows that a "permanent attachment" takes place that does not necessarily involve a modification to the hull and fittings.

2. Whether in all likelihood, an item under consideration would remain aboard a vessel during an extended lay up.

3. Whether, if not a first time installation, an item under consideration replaces a current part, fitting or structure which is not in good working order.

4. Whether an item under consideration provides an improvement or enhancement in operation or efficiency of the vessel.

For purposes of section 1466, dutiable equipment has been defined to include:

...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. Admiral Oriental, supra., (quoting T.D. 34150, (1914)).

Relating the foregoing to the items under consideration, we find as follows:

1. The work on the anchor windless is largely a modification, but does include an unsegregated repair element (renewal of stainless steel fittings). Accordingly, the entire cost of this item is dutiable.

2. The work on the catwalks is largely a modification, but does include an unsegregated repair cost for the "numerous minor local damages in scattered location" (See ABS report 90-224-BR page 3), a repair of damage which is not shown to have been necessitated by casualty.

3. The recharging of the fire extinguishers is equatable to the purchase of freon for refrigeration which has been held to be nondutiable (C.I.E. 887/64).

4. Articles which are purchased to be used as a part of repair work are dutiable. The leather work gloves are considered dutiable under subsection (a) of the statute.

5. The cost of obtaining a gas-free certificate constitutes and ordinary and necessary expense incident to repair operations and is pro-rated between dutiable and non- dutiable work.

HOLDING:

Following a thorough review of the facts as well as full analysis of the law and applicable precedents, we are of the opinion that the Application for Relief should be allowed in part and denied in part, as specified in the Law and Analysis portion of this ruling.

Sincerely,

B. James Fritz
Chief

Previous Ruling Next Ruling