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 0111884 - HQ 0112008 > HQ 0112007

Previous Ruling Next Ruling



HQ 112007


May 13, 1992

VES-13-18 CO:R:IT:C 112007 JBW

CATEGORY: CARRIER

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

RE: Vessel Repair; Modification; Casualty; Collision; Seaworthiness; 19 U.S.C. 1466; SEA-LAND DEVELOPER, V-126; Entry No. 110-0103988-9.

Dear Sir:

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

FACTS:

The vessel SEA-LAND DEVELOPER arrived at the port of Tacoma, Washington, on March 19, 1990, and filed a timely vessel repair entry. The entry indicated that the vessel underwent foreign shipyard work while in Japan, Hong Kong, Singapore, and Taiwan.

An application for relief was filed by the vessel operator in which it was claimed that certain items were not subject to duty as modifications to the vessel or as a casualty resulting from the collision of the vessel. This office allowed in part and denied in part the application for relief. Headquarters Ruling Letter 111293, dated September 5, 1991. The vessel owner has supplied further information and explanation on certain items that we previously denied and petitions for review of these items.

ISSUE:

(1) Whether the foreign shipyard work described herein would constitute modifications to the hull and fittings so as to render the work nondutiable under 19 U.S.C. 1466.

(2) Whether the damage resulting from the collision of the vessel impaired the safety and seaworthiness of the vessel.

LAW AND ANALYSIS:

I. Modifications to the Vessel.

Title 19, United States Code, section 1466, provides in pertinent part for payment of an ad valorem duty of fifty percent of the cost of foreign repairs to or equipment purchased for a vessel documented under the laws of the United States to engage in the foreign or coastwise trade.

In its application of the vessel repair statute, Customs has held that modifications 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

Very often when considering whether an addition to the hull and fittings took place for the purpose of 19 U.S.C. 1466, we have considered the question from the standpoint of whether the work involved the purchase of "equipment" for the vessel. It is not possible to compile a complete list of items that might be aboard a ship that constitute its "equipment". An unavoidable problem in that regard stems from the fact that vessels differ as to their services. What is required equipment on a large passenger vessel might not be required on a fish processing vessel or offshore rig.

"Dutiable equipment" has been defined to include:

...portable articles necessary or appropriate for the navigation, operation, or maintenance of a vessel, by 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))

By defining what articles are considered to be equipment, the Court attempted to formulate criteria to distinguish non- dutiable items which are part of the hull and fittings of a vessel from dutiable equipment, as defined above. These items might be considered to include:

...those appliances which are permanently attached to the vessel, and which would remain on board were the vessel to be laid up for a long period... Admiral Oriental, supra., (quoting 27 Op. Atty. Gen. 228).

A more contemporary working definition might be that which is used under certain circumstances by the Coast Guard; it includes a system, accessory, component or appurtenance of a vessel. This would include navigational, radio, safety and, ordinarily, propulsion machinery.

After reviewing the evidence regarding the specific items submitted for our consideration, we find the following:

MHI Invoice 14 A, Item No. 3-1-10: Upper Pintle Inspection Cover:

The invoice description and the additional drawings submitted by the petitioner indicate that the rudder access plate was modified by installing hinges and a locking mechanism. This modification will permit easier access for inspection of the rudder and pintle. This work represents a new design feature, and we conclude that the cost of the operation is not subject to duty.

MHI Invoice 14 A, Item No. A-9: Chain Locker Eductor Pipe:

The invoice description of this item indicates that a clogged eductor pipe was cleaned out. Such work constitutes a dutiable repair. The invoice indicates that work was also performed to permanently correct the persistent clogging of the eductor pipe. This operation would have qualified as a non-dutiable modification had the costs of the repairs and the modification been segregated. Absent such segregation, the entire cost is dutiable.

MHI Invoice Item ADD. 5 A & B: Cargo Securing Boxes:

The invoice indicates that boxes were constructed and installed to hold cargo securing gear. While these boxes are similar to boxes already on the vessel, these boxes do not replace the existing boxes. The installation constitutes a new design feature and is not dutiable.

MHI Invoice 17, Item 17: Paint Locker:

The existing paint locker was divided into two rooms through the addition of a division bulkhead and a separate entrance. This partition did not previously exist and represents a new design. The cost for this modification is not dutiable.

II. Damage Resulting from the Collision of the Vessel.

The vessel repair statute provides for the remission of duties in those instances where good and sufficient evidence is furnished to show that foreign repairs were compelled by "stress of weather or other casualty" and were necessary to secure the safety and seaworthiness of the vessel to enable her to reach her port of destination. 19 U.S.C. 1466(d)(1). The term casualty, as it is used in the statute, has been interpreted as something that, like stress of weather, comes with unexpected force or violence, such as fire, explosion, or collision. Dollar Steamship Lines, Inc. v. United States, 5 Cust. Ct. 23, 28-29, C.D. 362 (1940). In the absence of evidence of such a casualty causing event, we must consider the repair to have been necessitated by normal wear and tear. C.S.D. 89-95, 23 Cust. B. & Dec., No. 43, 4, 5 (1989).

In ruling on the application, we determined that a casualty had occurred, but that the evidence presented did not enable us to infer that the damage--a six-foot long, two to three inch deep gouge in the shear strake--impaired the safety and seaworthiness of the vessel. As part of the petition, the petitioner included an explanation from Sea-Land's General Manager, Fleet Engineering, regarding the need for immediate repairs. The General Manager stated that the shear strake is a critical strength member of the hull and requires immediate attention when damaged. With such damage, he stated that it is not recommended that a vessel proceed on a trans-Pacific winter crossing. These conclusions are supported by the recommendation of the American Bureau of Shipping that the sheer strake plate be cropped and partly renewed with a new seam and new butts at the gouge. Based on this information, we conclude that the repairs made to the shear strake were necessary to secure the safety and seaworthiness of the vessel to enable her to reach her port of destination. The duty paid on the cost of such repairs may therefore be remitted.

HOLDINGS:

(1) We find that certain work, as detailed in our analysis above, constitutes modifications to the vessel, the cost of which is not subject to duty under 19 U.S.C. 1466.

(2) From the information presented, we conclude that the repairs made to the shear strake were necessary to secure the safety and seaworthiness of the vessel to enable her to reach her port of destination. The duty paid on the cost of such repairs may therefore be remitted.

Sincerely,

B. James Fritz
Chief

Previous Ruling Next Ruling