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HQ 112808


August 16, 1993

VES-13-18-CO:R:IT:C 112808 DEC

CATEGORY: CARRIER

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

RE: Vessel Repair; Application for Relief; Twistlocks; Modification; Guarantee Work
Vessel Repair Entry No.: 110-0104416-0
Date of Arrival: February 19, 1993
Date of Entry: February 25, 1993
Port of Arrival: Tacoma, Washington
Vessel: SEA-LAND TRADER V-58

Dear Sir:

This is in response to your memorandum dated July 9, 1993, which forwards the application for relief from vessel repair duties filed in connection with the above-referenced vessel for our review.

FACTS:

The SEA-LAND TRADER is owned by the Connecticut National Bank and operated by Sea-Land Service, Inc. It is an American-flag vessel. While abroad, the SEA-LAND TRADER stopped in Kaohsiung, Taiwan where it underwent various operations. The following items have been submitted for our review.

Invoice Description

02 Twistlocks and miscellaneous items
03 Bridge raising guarantee items
04 45' container modification
05 Completion of bridge raising

An application for relief from vessel repair duties dated April 14, 1993, was timely filed.

ISSUE:

Whether the cost of foreign shipyard work completed aboard the subject vessel is dutiable pursuant to Title 19, United States Code, section 1466.

LAW AND ANALYSIS:

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

Twistlocks and Miscellaneous Articles

The applicant has submitted an invoice from Taiyo Seiki Iron Works Company, Ltd. for the acquisition of semi-automatic twistlocks, "special jigs," "handling manual books," a "handling manual video tape," and "caps for the ship" claiming that these items are non-dutiable instruments of international traffic pursuant to Title 19, United States Code, section 1322(a) (19 U.S.C. 1322(a)) and Title 19, Code of Federal Regulations, section 10.41a (19 C.F.R. 10.41a).

Title 19, United States Code, Section 1322(a) provides that "[v]ehicles and other instruments of international traffic, of any class specified by the Secretary of the Treasury, shall be excepted from the application of the customs laws to such extent and subject to such terms and conditions as may be prescribed in regulations or instructions of the Secretary of the Treasury." 19 U.S.C. 1322(a) (1992).

Section 10.41a(a)(1) specifically designates certain items as IITs and authorizes the Commissioner of Customs to designate other items as IITs in decisions to be published in the weekly Customs Bulletin. Once designated as an IIT, these items may be released without entry or the payment of duty, subject to the provisions of 10.41a.

To qualify as an IIT within the meaning of 19 U.S.C. 1322(a) and the regulation issued thereunder (19 C.F.R. 10.41a), an article must be used as a container or holder. Additionally, the article must be substantial, suitable for and capable of repeated use, and used in significant numbers in international traffic.

In Treasury Decision 82-147, it was determined that twist lock stackers are IITs within the meaning of 19 U.S.C. 1322(a) and 19 C.F.R. 10.41a. Since twist lock stackers are deemed to be an IIT, the vessel repair statute is inapplicable. Duty will not be assessed on the cost of the foreign-purchased twist-locks. However, the remaining items contained in this invoice have not been designated as IITs and, consequently, are subject to duty pursuant to 19 U.S.C. 1466.

Guarantee Items
Bridge Raising Guarantee Items
45' Container Modification
Completion of Bridge Raising

The applicant is seeking relief from the assessment of vessel repair duties arguing that the three above-referenced operations were covered under a shipyard warranty provision. These operations
were performed several years after the vessel's original construction. In Sea-Land Service, Inc. v. United States, 12 C.I.T. 287, 683 F. Supp. 1404 (1988), the Court of International Trade stated the following:

Mindful of the legislative intent and purpose of section 1466, the court sets forth the follow- ing applicable standard or criterion to be used in determining whether a specific item is part of the original construction of the vessel or is a dutiable repair, under the foreign repair statute. All work done and equipment added pursuant to the original specifications of the contract for construction of the vessel are not dutiable. Hence, all work performed and equipment added, not required by the contract, are dutiable. The basic standard is limited to work and equipment provided within a reasonable period of time after delivery of the vessel.

Sea-Land Service, 12 C.I.T. at 294, 683 F. Supp. at 1409.

Customs interprets this decision to apply only to new vessel construction warranties of one year or less. One year is sufficient time to permit the vessel owner to determine whether there has been compliance with the construction specifications, and to ascertain whether the work performed pursuant to the warranty clause is related to compliance with the specifications set forth in the original contract for the construction of the vessel.

The applicant is claiming duty-free treatment for work performed under a warranty for an alleged modification and not a warranty relating to the original construction of the vessel. Application of the Sea-Land Service decision, the theory that no duty is owed because the work performed was under a warranty for an alleged modification is, in our opinion, inapposite. Accordingly, these items are dutiable.

HOLDING:

After a thorough review of the submitted evidence, this application for relief is granted in part and denied in part for the reasons detailed in the Law and Analysis section of this ruling.

Sincerely,

Acting Chief

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