HQ 0112725 - Vessel Repair; 19 U.S.C. 1466; Application for Relief; Modification; Survey; - United States International Trade Commision Rulings

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HQ 112725

October 20, 1993

VES-13-18-CO:R:IT:C 112725 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; Application for Relief; Modification; Survey;
Vessel Repair Entry No. H24-0014520-5
Date of Entry: January 7, 1993
Date of Arrival: January 7, 1993
Port of Arrival: Dutch Harbor, Alaska
Vessel: ALASKA JURIS

Dear Sir:

This letter is in response to your memorandum dated May 4, 1993, which forwards for our consideration an application for relief filed in connection with the assessment of vessel repair duties on the above-referenced vessel.

FACTS:

The ALASKA JURIS, an American-flag vessel, underwent various foreign shipyard operations while in Shiogama, Japan, at the Tohoku Dock Tekko K.K. shipyard. Subsequent to the completion of the work performed in Shiogama, the vessel arrived in the United States at Dutch Harbor, Alaska, on January 7, 1993. 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. The following items have been submitted to this office for review.

Item Sub-Item Description

I 8 factory area
9 hatch coamings
10 pan racks
12 bath tub
16 fish pond
17 packing table
18 fish factory equipment
20 ORCA sewage

21 holding tank
III 5 belt conveyor
6 head cutter
7 cutting machine
9 heater

IV 1 tail roller
2 belt conveyor
3 hydraulic motor
4 hydraulic pump
5 change valve
6 miscellaneous

Miscellaneous Trans-Marine Propulsion

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

ISSUE:

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

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.

Factory Area (Item I, Number 8)
Pan Racks (Item I, Number 10)
Bath Tub (Item I, Number 12)
Fish Pond (Item I, Number 16)
Packing Table (Item I, Number 17)
Fish Factory Equipment (Item I, Number 18) ORCA Sewage (Item I, Number 20)

Belt Conveyor (Item III, Number 5)
Relocated Cutting Machine (Item III, Number 7) Installation of Heater (Item III, Number 9)

Installed Belt Conveyor (Item IV, Number 2) Checked Change Valve (Item IV, Number 5)
Miscellaneous Expenses (Item IV, Number 6)

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 is satisfied that these operations (Item I, Numbers 8, 10, 12, 16, 17, 18, 20; Item III, Numbers 5, 7, and 9; and Item IV, Numbers 2, 5, and 6) improve the efficiency of the vessel and represent a permanent incorporation into the vessel's structure. Accordingly, no duty shall be assessed on these items.

Hatch Coamings (Item I, Number 9)
Holding Tank (Item I, Number 21)

Head Cutter (Item III, Number 6)

Tail Roller (Item IV, Number 1)
Hydraulic Motor (Item IV, Number 3)
Hydraulic Pump (Item IV, Number 4)

Applying the standards set forth above, it is Customs position that the applicant has not provided sufficient evidence supporting a finding that these items (Item I, Numbers 9 and 21; Item III, Number 6; Item IV, Numbers 1, 3, and 4) are modifications. The Customs Service has held that the decision in each case as to whether an installation constitutes a non-dutiable addition to the hull and fittings of the vessel depends to a great extent on the detail and accuracy of the drawings and invoice descriptions of the actual work
performed. No drawings were submitted and the invoice descriptions provided an insufficient amount of detail precluding the Customs Service to make a decision.

The stated reason for the work performed on the hatch coamings (Item I, Number 9) was to keep water out of the factory area. It appears that water leakage into the factory area was a preexisting problem and that this operation was a repair which solved the problem.

The invoice that describes the work performed on the holding tank (Item I, Number 21) is indicative of a restoration operation. Customs has consistently determined that work performed to restore deteriorating items are repairs. It appears that the holding tank, in its pre-operative condition was under strain which necessitated its renewal and reinforcement.

The invoice description of the work performed with respect to the head cutter (Item III, Number 6) and the tail roller (Item IV, Number 1) are inadequate. They simply state that the head cutter and the tail roller, respectively, were modified. This claim is a legal conclusion and should be left to the Customs Service to determine. The applicant is instructed to provided details of the operations. No such details of the operation were provided.

Item IV, Numbers 3 and 4 specifically state that these items were overhauled. This invoice description is indicative of a dutiable repair process. Absent a more detailed description of the work, this item is dutiable.

The items discussed above shall remain dutiable unless and until evidence detailing the work performed is provided and found to be a bona fide modification.

Trans Marine Propulsion (Year End Repairs) Elliott Bay Design Group

Two invoices from Trans Marine Propulsion and one invoice from Elliott Bay Design Group were submitted. Trans Marine Propulsion Invoices 003977 (Nov. 30, 1992), 004089 (Jan. 19, 1993), and Elliott Bay Design Group (Apr. 6, 1993, facsimile) are dutiable because the applicant has not demonstrated that the work invoiced is non- dutiable. Based on the brief descriptions contained in the invoices, it is apparent that the work performed relates to repair operations. The Elliott Bay Design Group facsimile offers no explanation of the work performed. Customs cannot grant relief absent a description of the work performed.

Transportation charges are non-dutiable. Accordingly, the air and travel expenses noted on the Elliott Bay Design facsimile is not dutiable.

HOLDING:

After a thorough review of the record, this application for relief is granted in part and denied in part as detailed in the Law and Analysis portion of this ruling.

Sincerely,

Arthur P. Schifflin

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