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HQ 112941

November 12, 1993

VES-13-18 CO:R:IT:C 112941 GOB

CATEGORY: CARRIER

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

RE: Vessel Repair; 19 U.S.C. 1466; Entry No. 514-3004582-6; SEA- LAND VALUE, V-38; Modification; Repairs

Dear Sir:

This is in response to your memorandum dated October 22, 1993, which forwarded the application for relief submitted by Sea-Land Service, Inc. ("applicant") in connection with the above-referenced vessel repair entry.

FACTS:

The record reflects that the vessel SEA-LAND VALUE ("vessel") arrived at the port of Elizabeth, New Jersey on September 29, 1991. The subject vessel repair entry was filed on October 1, 1991.

Your memorandum references the following items: Wilton Fijenoord ("WF") invoice no. 6983/10822 dated September 11, 1991 - items 25b, 26a, 28a, 29a, 73a, 79 (renumbered 82), 79a (renumbered 82a), 85f, 89f, 92e, and 96d; WF invoice no. 6983/10.967 dated October 22, 1991 - item 101; and W.B. Arnold invoice nos. 21197 dated November 5, 1991 and 19600 dated April 10, 1990.

ISSUE:

Whether the items at issue are repairs which are subject to duty 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.

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, either in a structural sense or as demonstrated by means of attachment so as to be indicative of a permanent incorporation. See United States v. Admiral Oriental Line, 18 C.C.P.A. 137 (1930).

2. Whether in all likelihood an item would remain aboard a vessel during an extended lay-up.

3. Whether an item 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 provides an improvement or enhancement in operation or efficiency of the vessel.

By an advisory letter dated May 2, 1990 (110993), Customs informed the applicant that certain proposed shipyard work "would constitute modifications to the hull and fittings so as to render the work nondutiable under 19 U.S.C. 1466." The work at issue there was as follows: the upgrading of the existing seven bar service compressor to a 30 bar topping-up air compressor; the installation of an additional topping-up air compressor as a back- up; and the installation of an automated control system to interface the main air compressor and the new topping-up air compressor.

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

The work described in items 82 and 82a of WF invoice no. 6983/10822, i.e. air compressor modification and electrical modification, constitutes nondutiable modifications.

The work described on W.B. Arnold invoice nos. 21197 dated November 5, 1991 and 19600 dated April 10, 1990, i.e., "Charges for Hamworthy Engineer to uprate 2TM6 Compressor" and "Modification Kits to Modify existing Teikoku Model 2TM6 Compressor", constitutes nondutiable modifications.

The work described in the following items of WF invoice 6983/10822 dated September 11, 1991 is dutiable as inspection items related to dutiable repairs: 25b, 26a, 28a, 29a, 73a, 85f, 89f, 92e, and 96d.

The work described in item 101 of WF invoice no. 6983/10.967 dated October 22, 1991 is dutiable inasmuch as the invoice reflects repairs and the precise nature of the work in item 101 is not clear. On the basis of the evidence of record, we are unable to conclude that the work described in this item is the same work described in our advisory letter dated February 3, 1992 (111849), which pertained to the reconfiguration of vessels to carry twenty foot containers.

HOLDING:

The application is granted in part and denied in part, as detailed supra.

Sincerely,

Arthur P. Schifflin
Chief

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