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 > 1993 HQ Rulings > HQ 0112399 - HQ 0112591 > HQ 0112591

Previous Ruling Next Ruling

---

HQ 112591

August 10, 1993

VES-13-18-CO:R:IT:C 112591 DEC

CATEGORY: CARRIER

Deputy Regional Director
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90831

RE: Vessel Repair; 19 U.S.C. 1466; Petition for Review; Modification; Alteration;
Vessel Repair Entry No. H24-0012499-4
Date of Entry: January 7, 1992
Date of Arrival: January 7, 1992
Port of Arrival: Anchorage, Alaska
Vessel: F/V ALASKA RANGER

Dear Sir:

This letter is in response to your memorandum dated February 2, 1993, which forwards for our consideration a petition for review filed in connection with the assessment of vessel repair duties on the above-referenced vessel.

FACTS:

The F/V ALASKA RANGER, an American-flag vessel, underwent various foreign shipyard operations while in Tokyo, Japan, at the NKK Corporation Shimizu Works. Subsequent to the completion of the work performed in Tokyo, the vessel arrived in the United States at Anchorage, Alaska, on January 7, 1992. A vessel repair entry covering the work was filed on the day of arrival.

An application for relief from vessel repair duties was timely filed. Subsequently, a petition challenging certain determinations from the application was, also, timely filed. Initially, the petitioner did not submit any supplementary documentation with respect to the items at issue except for the petition letter itself. On April 14, 1993, representatives from the petitioner (Fishing Company of Alaska, Incorporated) met with Customs officials. At that meeting, the petitioner's representatives indicated that they would submit affidavits from individuals with actual knowledge of the operations performed upon the vessel together with other documentary evidence to supplement their petitions for review. The additional evidence consisted of one affidavit from Mr. Herb Roeser of Trans-Marine Propulsion Systems, Incorporated in which Mr.Roeser
stated that he did not see any of the operations performed nor was he certain of how his recommendations were implemented. The following items have been submitted to this office for review.

Item Sub-Item Worksheet Description

I 4-1 Page 1 Hull
III 10 Page 4 Wiring
I 5 Page 1 Nozzles
I 6 Page 1 Bilge pumps
I 15-2 Page 2 Chain pipes
I 15-3 Page 2 Installation
I 11 Page 3 Pan Racks
IV 1,2,3, Page 8 Belt conveyors

Our ruling on the above-mentioned matters is set out below.

ISSUE:

Whether the above-referenced items constitute duty-free modifications/alterations to the hull and fittings rather than dutiable equipment and repairs.

LAW AND ANALYSIS:

Title 19, United States Code, section 1466, provides, in pertinent part, for payment of an ad valorem duty of 50 percent on the cost of foreign repairs to a vessel documented under the laws of the United States to engage in the foreign or coasting trade, or a vessel intended to be employed in such trade.

In United States v. Admiral Oriental Lines et al., 18 C.C.P.A. 137 (T.D. 44359 (1930)), the court distinguished equipment and repairs (dutiable) from permanent additions to the hull and fittings (non-dutiable). For purposes of section 1466, Customs has adopted the definition of dutiable equipment as

. . . 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 (1914).

For equipment to become part of the hull and fittings of a vessel, it must

. . .become a permanent part of the hull, the installation of which caused the superstructure of the vessel to be changed, or where there is
proof that at the time the change was made it was the intention of the owners that such alteration or addition become a permanent part of the vessel. In either case the permanency of such equipment should be, and in most cases is, evidenced by changes in conformity therewith in the official blue prints of the vessel.

T.D. 43585 (1929).

Over the course of years, the identification of modification processes has evolved from judicial and administrative precedents. 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.

(2) Whether the 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.

Before an item is to be construed as a part of the vessel, it must be (1) a permanent attachment and (2) essential to the successful operation of the vessel. Otte v. United States, 7 C.C.P.A. 166, 169 (1916).

Customs has determined that even though an operation might, under normal circumstances, be considered a permanent duty-free modification, the benefit of such a finding is not extended to operations which encompass the replacement of existing structures which are in need of repair at that time. If a permanent addition is a first-time installation, or if it replaces an existing structure which is in good working order at the time of its replacement and an enhancement in operating efficiency is provided, the operation may be considered a bona fide duty-free modification. Headquarters Ruling 111224 (Feb. 19, 1991).

I. HULL PART
4-1. Bottom Keel Ballast.........................?3,827,000 4-2 Water Thermometer and Speed Log...............?786,000 III. ELECTRIC PART
10. Wiring.......................................?194,000

Based on the additional evidence that the petitioner has submitted, we find that item 4-1 (bottom keel ballast) is a duty- free modification. The submitted drawings and the ABS survey that were submitted with the petition when read in conjunction with the invoices satisfies Customs that this item is a permanent incorporation into the vessel's superstructure. Accordingly, no duty is owed with respect to item 4-1.

Upon further review, Customs is satisfied that the evidence initially presented regarding items 4-2 (water thermometer) and 10 (wiring) is sufficient to establish that these items are permanently incorporated into the hull and fittings of the vessel and, accordingly, meet the standards for being classified as a modification. As such, items 4-2 and 10 are not subject to duty.

I. HULL PART
4-3 Related Work for Keel Ballast................?750,000

Our review of this item combined with the fact that no new evidence was introduced leads us to the same conclusion as expressed in the application. Absent an item-by-item cost for each item listed in the invoices as well as a more detailed description of the work performed, the cleaning, painting, and restoration referred to in the invoice make this entire amount dutiable. Accordingly, relief with respect to this item is denied.

I. HULL PART
5. Kort Nozzles.................................?1,813,000 6. Bilge Pumps (accessory work)..................?611,400

In Headquarters Ruling 112366 (Oct. 8, 1992), the application that preceded this petition, Customs determined that absent certain drawings which would assist in the determination of the dutiability of these items, they would remain dutiable. The petitioner has not submitted the referenced drawings that pertain to these items nor has the petitioner presented additional authenticated evidence to assist Customs in altering its initial determination. While the narrative of the petitioner's attorney is a welcomed complement to the submission, it, alone, is not determinative. Unless and until such evidence is presented, these items shall remain dutiable.

I. HULL PART
15-2 Washing Chain Pipes..........................?130,000 15-3 Related Installation.........................?692,100

These items were initially deemed to be dutiable because the documentation provided to Customs did not sufficiently detail the nature of the work performed with respect to these two items. The petitioner seeks a reversal of our initial determination, but provides no authenticated evidence which further details the work performed for our review. Until additional evidence is submitted for our consideration, these items shall remain dutiable.

I. HULL PART
11. Pan Racks....................................?259,700

Initially, these items were deemed dutiable because there was some confusion as to how the separate items listed in the relevant invoice related to one another. Absent a breakdown of the costs associated with each item in the invoice, the entire amount was held dutiable. Specifically, Customs determined that items 11-a and 11-b were modifications involving the pan racks. However, items 11-c and 11-d, which detailed work done to the fluish pump and the installation of a switchboard guard were found to be unrelated to the pan racks modification. While the explanation provided in the petition assists our understanding of the work performed to some extent, it is not wholly satisfactory. Unless a bona fide breakdown of the costs of each item can be ascertained from the shipyard or an authenticated elaboration of the work performed provided, this item shall remain dutiable. Accordingly, relief is denied with respect to this item.

IV. BELT CONVEYORS...................................?2,017,700

Relief from duty was initially denied because Customs was not provided with sufficient information for the items associated with the belt conveyors. The invoices provided are vague and do not describe in any detail the nature of the work performed. While Customs appreciates the petitioner's narrative offering an elaboration of the work performed on the belt conveyors and the reasons for it, this information unaccompanied by additional authenticated evidence of a modification does not justify remission of duty. Unless and until Customs receives sufficient evidence that the work performed on the belt conveyors is a modification, this item shall remain dutiable.

HOLDING:

After a thorough review of the record and the additional evidence presented, the petition for relief is granted in part and denied in part as detailed in the Law and Analysis portion of this ruling. The petitioner should be informed of the right to file a protest following liquidation of this entry, as evidenced by the posting of the bulletin notice of liquidation.

Sincerely,

Stuart P. Seidel

Previous Ruling Next Ruling