HQ 0111623 - Vessel Repair; Modification; 19 U.S.C. 1466; PAUL BUCK; Entry No. 808-0514998-8. - United States International Trade Commision Rulings

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HQ 111623

October 15, 1991

VES-13-18 CO:R:IT:C 111623 JBW

CATEGORY: CARRIER

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

RE: Vessel Repair; Modification; 19 U.S.C. 1466; PAUL BUCK; Entry No. 808-0514998-8.

Dear Sir:

This letter is in response to your memorandum dated March 26, 1991, which forwards for our review the application for relief filed in conjunction with the above-referenced vessel repair entry.

FACTS:

The record reflects that the subject vessel, the PAUL BUCK, arrived at the port of San Francisco, California, on June 27, 1990. Vessel repair entry, number 808-0514998-8, was filed on the same day as arrival. The entry indicates that foreign shipyard work was performed in a large number of shipyards during the course of the vessel's twenty-three month voyage. The work included operations claimed to be free from duty as modifications.

ISSUE:

Whether certain work performed in the Keppel Shipyard results in modifications to the vessel that is not subject to duty under 19 U.S.C. 1466.

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 applicant claims that certain work performed at the Keppel Shipyard is not subject to duty, for the work constitutes modifications to the vessel. In its application of the vessel repair statute, the Customs Service has held that modifications, alterations, or additions to the hull and fittings of a vessel are not subject to vessel repair duties. Over the course of years, the identification of work constituting modifications on the one hand and repairs on the other has evolved from judicial and administrative precedent. In considering whether an operation has resulted in a modification that 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, 18 C.C.P.A. 137 (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 constitutes a new design feature and does not merely replace a part, fitting, or structure that is performing a similar function.

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.

T.D. 34150, 26 Treas. Dec. 183, 184 (1914)(quoted with approval in Admiral Oriental).

The Customs Service has 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. 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.

The applicant seeks relief from duty for claimed modifications to install a fathometer transducer (Keppel Shipyard Item 5413). This work involved cutting a hole in the hull, installing a watertight stand pipe, running new cable, and testing the operation of the fathometer. From the plans and invoice description submitted, we find that this work resulted in a new design feature that is not repair related. The costs appearing under Keppel Shipyard Item 5413 are not dutiable.

Similarly, the applicant seeks relief for the installation of an Elinca Antifouling System (Keppel Shipyard Item 2326/5506). This work involved cutting holes in the port and starboard ER sea chests, welding flange mountings, and installing anodes and cables necessary for the system. Again, we find that this work resulted in a new design feature that is not repair related. The costs appearing under Keppel Shipyard Item 2326/5506 are not dutiable.

Finally, the applicant seeks relief for work performed to the freezer meat room and vegetable room (Keppel Shipyard Item 8917). Specifically, this work entailed resecuring or reinforcing existing racks in the cold rooms. The work performed under these items involves the restoration of existing parts and does not represent improvements or new design features. We find, therefore, that the costs appearing under Keppel Shipyard Item 8917 are dutiable.

HOLDING:

The costs for the installation of the fathometer transducer and the Elinca Antifouling System are not dutiable, for the work performed resulted in new design features that are not repair related. However, the costs for resecuring or reinforcing existing racks in the cold rooms are dutiable, for the work performed does not constitute a modification to the vessel.

Sincerely,

B. James Fritz
Chief

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