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 > 1994 HQ Rulings > HQ 0112786 - HQ 0112925 > HQ 0112907

Previous Ruling Next Ruling



HQ 112907


November 12, 1993

VES-13-18-CO:R:IT:C 112907 GOB

CATEGORY: CARRIER

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

RE: Vessel Repair Entry No. H24-0014522-1; 19 U.S.C. 1466; 19 U.S.C. 1466(d)(2); Petition; ALASKA SPIRIT; Modifications; Survey

Dear Sir:

This is in response to your memorandum dated October 14, 1993, which forwarded the petition submitted on behalf of the Fishing Company of Alaska, Inc. ("petitioner") in connection with the above-referenced entry.

FACTS:

The ALASKA SPIRIT (the "vessel") is a U.S.-flag vessel owned and operated by the petitioner. In late 1992, the vessel had shipyard work performed in Japan. On January 7, 1993, the vessel arrived at the port of Dutch Harbor, Alaska. A vessel repair entry was filed on January 8, 1993.

By Ruling 112740 dated July 8, 1993, Customs allowed in part and denied in part the application for relief filed in this case. Certain of the work was determined to be modifications which are nondutiable.

Petitioner's Claims

The petitioner states that it sent the vessel to Japan in late 1992 for modifications so that it could operate as a fish processing vessel and to improve the safety of the vessel. The petitioner asserts that in order to operate the vessel as a fish processor it was required to establish a new load line. It claims that modifications were necessary for the vessel to meet new load line requirements.

The petitioner contends that the following items are non- dutiable modifications:

I. Hull Part

Item 11. Galley Fan
Item 13. Insulation
Item 20. Conveyor Bridges
Item 22. Hand Wash Stand
Item 34. Butterfly Nuts

IV. Belt Conveyors

Item 3. Bridge Conveyors
Item 4. Duster Chute Conveyors
Item 5. Duster Chute Conveyor

The petitioner states that all five items under "Hull Part" were first-time installations. It contends that: four conveyor bridges were installed for safety reasons; the hand wash stand was installed for hygienic reasons; and the butterfly nuts were installed instead of reamer bolt nuts to improve operating efficiency.

The petitioner asserts that two bridge conveyors were moved to improve operational efficiency in the reconfigured factory area. It maintains that it had to adjust the location of duster chute conveyors for the same reason. In addition, the petitioner states that a first-time installation of an additional duster chute conveyor was made.

The petitioner states that the survey which was performed was an integral and necessary element in establishing a new load line. It claims that the survey was required to meet U.S. Coast Guard and classification society stability requirements.

The petitioner contends that the cost attributable to two employees of Trans-Marine Propulsion Systems, Inc. ("Trans- Marine") is not dutiable because they are residents of the United States. It claims that this cost was incurred in the United States since two United States residents performed the work and since Trans-Marine, a United States company, billed the petitioner in the United States and was paid in the United States. The petitioner states that the two employees, an engineer and a service technician, were sent to Japan "[t]o perform shipyard supervision and necessary engineering, including work necessary to set the new load line, and to be available to be consulted about repairs performed on the vessel."

In support of its claims, the petitioner has submitted an affidavit by Mr. Herb Roeser, who is president of Trans-Marine. In
the affidavit, Mr. Roeser makes specific statements with respect to the eight items listed supra. In addition, Mr. Roeser states:

2. I regularly provide advice to the Fishing Company of Alaska, Inc. about modifications that can be made to the company's vessels to improve their operating efficiency. I specifically provided advice to the company with respect to the modifications made to the ALASKA SPIRIT in late 1992 at the Tohoku shipyard.

3. I was not present at the shipyard when the modifications were made to the vessel. However, I have reviewed the invoice of Tohoku Dock Tekko K.K., dated March 19, 1993 and I am familiar with the type of activities undertaken generally by shipyards in making modifications to vessels of the type described below. Having been involved in the planning process before the vessel entered the shipyard, I also know what types of modifications were contemplated and when a first-time installation of equipment was envisioned. After the vessel returned to the United States, I confirmed that the modifications described below had in fact been made.

ISSUE:

Whether the various items described supra are dutiable pursuant to 19 U.S.C. 1466.

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.

Items 11, 13, 20, 22, 34 (Hull Part); Items 3-5 (Belt Conveyors)

After a careful consideration of the evidence of record, we find that these items constitute nondutiable modifications to the vessel.

Survey

We affirm the finding of our application ruling, 112740, that the cost of the survey and the related shipyard survey expenses are dutiable. Ruling 112740 stated:

The load line survey in question is not a required scheduled inspection as discussed above. Furthermore, the record does not support the view that this survey was associated solely with a non-dutiable modification
inasmuch as dutiable repairs were evidenced on the shipyard invoice.

We reiterate that, in the absence of documentation that the survey was related only to nondutiable items, the survey is dutiable. Such is the case here, where there are numerous dutiable repair items for the subject work.

Trans-Marine Employees

In the specific and limited factual setting of this issue, as described supra, we concur with the petitioner that the cost of $9,123 with respect to the two Trans-Marine employees is not dutiable. We find that the factual setting involved here is not the normal type of factual setting in which we evaluate a request for remission pursuant to 19 U.S.C. 1466(d)(2) because the Trans- Marine employees do not appear to be accurately defined, pursuant to 19 U.S.C. 1466(d)(2), as "the labor necessary to install such equipments or to make such repairs." The U.S. resident employees' function appears to be more of a "consultative" function, as opposed to the normal foreign labor function. We emphasize that this determination is limited to the specific facts of this case, i.e., United States resident employees of a United States company acting in a consultative capacity where the cost of the employees' work was paid to a United States company, and where no part of such cost was paid to the foreign shipyard.

HOLDING:

As detailed supra, the petition is granted with respect to: items 11, 13, 20, 22, and 34 (hull part); items 3, 4, and 5 (belt conveyors); and the costs associated with the Trans-Marine employees. The petition is denied with respect to the survey.

Sincerely,

Arthur P. Schifflin
Chief

Previous Ruling Next Ruling