HQ 0111747 - Vessel Repair; 19 U.S.C. 1466; Modification; Factory fish processing vessel; M/V SEAFISHER; Vessel repair entry number H24-0010264-4; Port of entry Anchorage, Alaska - United States International Trade Commision Rulings

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HQ 111747

February 19, 1992

VES-13-18-CO:R:IT:C 111747 LLB

CATEGORY: CARRIER

Chief, Technical Branch
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90731

RE: Vessel Repair; 19 U.S.C. 1466; Modification; Factory fish processing vessel; M/V SEAFISHER; Vessel repair entry number H24-0010264-4; Port of entry Anchorage, Alaska

Dear Sir:

This is in response to your memorandum of June 5, 1991, regarding the application for relief filed on behalf of Cascade Fishing, Inc., in regard to the above-captioned vessel repair entry.

FACTS:

The vessel SEAFISHER proceeded to a shipyard in Japan , and there underwent modifications to enhance its previous conversion to a factory trawler/processor vessel. The record reflects that the vessel arrived in the United States on January 5, 1991, and filed a Customs Form 226 as an incomplete vessel repair entry that same day. Cursory review of the record reveals that the items for which relief is sought are in the nature of vessel modifications rather than dutiable repairs. The items submitted for our determination are:

Item No. Description

4 Work on crew quarters
5 Relocation of dust shooter
6 Relocation of fish head cutters
10 Relocation of entrance
12 Installation of chlorine system
14 Modification of fish bin
15 Relocation of conveyor belts
16 Lengthening of stainless steel table
17 Installation of new roller conveyor
18 Installation of two new head cutters
21 Installation of new fresh water makers 26 Welded extension to hood
29 Lubrication oil (segregated as related to repair and future consumption amounts)

ISSUE:

Whether the evidence establishes that the foreign shipyard repairs performed in the present matter may be considered to be modifications for purposes of granting refund or remission of duty assessed.

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.

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 layup.

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.

In the present matter, we are asked to review the qualification of thirteen (13) items for designation as duty-free vessel modifications. There can be no doubt that the evidence submitted supports a finding that conditions for refund or remission have been met for the entirety of the first twelve (12), and for the segregated future use portion of the last item (lubricating oil). As such, we have determined that the costs of the items under review are attributable to duty-free operations under the vessel repair statute.

HOLDING:

Following a thorough review of the evidence submitted and an analysis of the applicable law and precedents, we have determined that the expenditures under review, as listed in the Facts portion of this ruling, we made for duty-free modifications rather than dutiable repairs. As such, duty assessed on those named items should be remitted.

Sincerely,

B. James Fritz

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