HQ 0112180 - Vessel repair; Repairs; Modifications; Survey; Application for Relief; Vessel OVERSEAS ALICE; Entry number T99- 0045990-8 - United States International Trade Commision Rulings

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HQ 112180

May 20, 1992

VES-13-18-CO:R:IT:C 112180 LLB

CATEGORY: CARRIER

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

RE: Vessel repair; Repairs; Modifications; Survey; Application for Relief; Vessel OVERSEAS ALICE; Entry number T99- 0045990-8

Dear Sir:

Reference is made to your memorandum of March 19, 1992, which forwards for our consideration the Application for Relief from the assessment of vessel repair duties filed by counsel on behalf of the operators of the vessel OVERSEAS ALICE. Duties were assessed in connection with the above-referenced vessel repair entry.

FACTS:

The record reflects that the OVERSEAS ALICE arrived in the port of San Francisco, California, on August 17, 1991, filed a timely vessel repair entry, and supplemented that entry as required by the Customs Regulations. While in Greece the vessel underwent drydocking, repair, survey, and modification operations. Headquarters recommendations have been sought on a total of five (5) invoice items, which are:

Worksheet page 2 - Item 1 - Ballast pump installation

Worksheet page 2 - Item 2 - Pumproom blind flanges

Worksheet page 2 - Item 3 - Walkway over cargo lines

Worksheet page 2 - Item 4 - Containment tray installation

Worksheet page 9 - Items 1-7 - Refueling-at-sea system

Additionally, beyond the items regarding which we were requested to provide advice, we reviewed all invoiced purchases and are in agreement with the proposed liquidation as reflected on the accompanying worksheets, with the following exceptions:

Worksheet page 1 - Item 9 - Main and atmospheric condenser

Worksheet page 2 - Item 18.01- Hull anodes

Worksheet page 9 - Item 77 - Swivel block port king post

Worksheet page 9 - Item 80 - Anchor windlass

ISSUE:

Whether the items under review constitute non-dutiable operations due to association with modification or inspectional operations rather than repair services.

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.

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.

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.

With specific reference to the items for which our review was requested, we find that worksheet items 2 (1), 2 (2), 2 (3), and 9 (1-7) represent charges for modification procedures. These items all represent first time installations, permanently installed. No repair elements are present and, given the prevailing circumstances, the items are considered duty-free modifications. Worksheet item 2 (4) (containment tray installation), also the subject of a specific request for review, is a dutiable item. The invoice covering the operation indicates that the tray is portable, thus revealing it to be vessel equipment. As such, it is specifically dutiable under subsection (a) of the vessel repair statute.

With regard to those additional items which we identified above, we find that they are dutiable because of information gleaned from the accompanying invoices. The invoices show, "wasted zinc anodes renewed" ( worksheet item 1 (9)), hull anodes "renewed" (worksheet item 2 (18.01)), "swivel block freed up and all grease connections and lines cleared" (worksheet item 9 (77)), and "cleaning in way of to [sic] carrying out hot work" (worksheet item 9 (80)).

HOLDING:

Following a thorough review of the evidence as well as analysis of the applicable law and precedents, we have determined that, for the reasons set forth in the Law and Analysis portion of this ruling, the Application for Relief is allowed in part and denied in part.

Sincerely,

B. James Fritz

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