HQ 0112890 - Protest No. 1001-2-106045; Vessel Repair Entry No. 458- 0006594-3 dated October 8, 1991; Date of Arrival: October 2, 1991; Port of Arrival: Staten Island, New York; Vessel Name: ITB GROTON. - United States International Trade Commision Rulings

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HQ 112890

October 12, 1993

VES-13-18:CO:R:IT:C 112890 GOB

CATEGORY: CARRIER

Chief, Residual Liquidation and Protest Branch New York Region
Six World Trade Center
New York, New York 10048-0945

RE: Protest No. 1001-2-106045; Vessel Repair Entry No. 458- 0006594-3 dated October 8, 1991; Date of Arrival: October 2, 1991; Port of Arrival: Staten Island, New York; Vessel Name: ITB GROTON.

Dear Sir:

This is in response to your memorandum dated September 16, 1993, which forwarded the above-referenced protest seeking reliquidation of the above-referenced entry.

FACTS:

The record reflects that the subject vessel, the ITB GROTON ("the vessel"), which is owned by First Tug and Barge Corporation ("protestant"), arrived at Staten Island, New York on October 2, 1991 and filed a vessel repair entry on October 8, 1991. Certain repairs and modifications were effected at the Viktor Lenac Shipyard in Rijeka, Yugoslavia.

In Ruling 112168 dated May 21, 1992, Customs denied relief from the assessment of vessel repair duties because an application for relief was not filed in a timely fashion as required by 19 CFR

The entry was liquidated on June 26, 1992, with duties in the amount of $2,014,997 owing.

The protestant makes numerous claims, which will be discussed infra.

LAW AND ANALYSIS:

19 U.S.C. 1466 provides for the payment of duty at a rate 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 be employed 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. The identification of work constituting modifications vis- a-vis work constituting repairs has evolved from judicial and administrative precedent. In considering whether an operation has resulted in a nondutiable modification, the following factors have been 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 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 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.

After a consideration of the evidence of record, we make the following findings.

The following items in the protest are nondutiable. The item numbers refer to the item number stated in the Memorandum in Support of Protest dated September 24, 1992.

Item Invoice No. Description

2 G-1X Gas-freeing tug storage tank
3 H-14 IGS sea chest and piping modif.
6-8 S-1-A-3,4,5 Modifications to No. 3 starboard wing ballast tank
9-11 S-1-B-3,4,5 Modification to No. 3 port wing ballast tank
21 S-4 Davit fabrication & installation
22 S-6 Installation of davits and access hatches port and starboard forward pontoons of tug
23 S-7 Installation of new hose and accomodation ladder rack

Item Invoice No. Description

24 S-8 Installation of new lighting stands in cargo manifold area
25 S-10 Modification of ladders and platforms at cargo manifold
26 S-14 Tug mast modifications
28 S-58X Rewelding of rungs on ladder to boom vert. support stanchion
29 S-70X Modification of hydraulic crane vert. support boom extension
30 IG-7 Inspection of inert gas system non-return check valve
31 M-12X Modification of control valve for constant tension winches
32 M-13X Capstan modifications
34 P-4 Modification of king gauge line to forepeak tank
35 P-10 Main engine air intake modifications
36 P-13 Modification of ballast pump eductor system
37 P-14 Cargo manifold and fill valve replacement
38 P-15 Mooring winch and capstan control box relocation
39 P-16 Installation of new fresh water system
40 P-18 Hydraulic crane installation
41 P-21 Port capstan hydraulic piping modification
42 P-24 Main engine, generator engine, and boiler exhaust pipe modification
43 P-32 Installation of new slop line
44 P-34 Barge exhaust pipe modification
45 P-35 Fuel oil purification system modification
46 P-36 Diesel oil purification system modification
47 P-48 Slop line manifold valve replacement
48 P-16X VGO starboard tank suction valve reach rod modification

The following items are dutiable.

Item #1, G-1, Gas-free certificate. The cost of this item is to be apportioned between dutiable and nondutiable items

Item #4, H-22, Barge tongue recess inspection. This item is dutiable because the invoice indicates the inspection was incident to a repair.

Item #5, S-1-(B)(1), Link arm - removal of cylinders for inspection. The invoice states that this is a repair item.

Items #12-14, S-1-C(3), (4), and (7), Modifications to forward port and starboard wing ballast tank. The invoices indicate that the work performed with respect to these items were repairs, e.g., "[t]he aft center section is now fractured and wasted." The protestant claims that the actual repair cost of these items is $180 out of the total cost of $74,516. We find that the protestant's estimate of the repair cost of $180, when viewed in the context of the evidence of record, i.e., the invoices and the American Bureau of Shipping ("ABS") documentation, is not acceptable. The evidence of record indicates that the entire cost of these items is properly treated as dutiable repairs. We note that the replacement of existing structure which has deteriorated is a repair item. Segregated costs for transportation and cranage are nondutiable.

Items #15-19, S-1-D(2), (3), (5), (6), and (7), Forepeak tank. The evidence of record indicates that the work performed constitutes repairs, e.g., the ABS report states: "fore peak tank was internally close examined and internals found excessively wasted."

Item 20, S-1(I), Tank top repairs. The evidence of record indicates that these costs are for repairs. The invoice describes these costs as "Tank Top Repairs." Further, the part of the invoice at issue refers to "damaged coating."

Item #27, S-20X, Engine room supply fan plenum modification. The invoice states in part: "Cleared and repaired drains as necessary." The protestant states: "the invoice indicates that the drains were `repaired.' However, the statement is inaccurate. As part of the modification process, the existing drains were blanked and new drains added." With the presence of a clear and unambiguous statement on the invoice, and in the absence of any other evidence other than the protestant's statement, we find this cost to be dutiable. The bare statement of the protestant is not sufficient to overcome the clear and unambiguous language of the invoice.

Item #33, M-24X, Modification of tug anchor windlass. The invoice for this item is entitled: "TUG ANCHOR WINDLASS - REPAIRS." One part of the invoice states: "...upwelded cracks in area." The protestant states: "The reference to `repairs' on the invoice is inaccurate." Once again, with the presence of clear and unambiguous statements on the invoice, and in the absence of any
other evidence other than the protestant's statement, we find this cost to be dutiable.

The protestant claims that the cost of services provided under Hydrospace Systems, Inc. ("Hydrospace") invoice #740-1 in the amount of $17,157 is nondutiable because the clerical and drafting work was performed in the United States by United States residents and that any assistance provided by Hydrospace with respect to the specifications and sketches was performed by a United States resident. The protestant has not substantiated this claim. Accordingly, this cost is dutiable.

HOLDING:

As detailed supra, the protest is granted in part and denied in part.

Sincerely,

Stuart P. Seidel
Director, International

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