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 > 1996 HQ Rulings > HQ 113366 - HQ 225206 > HQ 113487

Previous Ruling Next Ruling
HQ 113487

---

November 29, 1995

VES-13-18-R:IT:EC 113487 BEW

CATEGORY: CARRIER

Chief, Residual Liquidation and Protest Branch Commercial Operations
U.S. Customs Service
6 World Trade Center
New York, N.Y. 10048-002980

RE: Petition for Review; Vessel Repair Entry No. C46-0015886-8; M/V KANSAS TRADER; V-008; Modification; 19 U.S.C. § 1466

Dear Sir:

This is in response to your memorandum dated June 23, 1995 (VES-13-18-O:R: ATC), which forwarded for our review a petition for review filed in conjunction with our ruling No. 113378 GEV relating to the above-referenced vessel repair entry.

FACTS:

The M/V KANSAS TRADER is a U.S.-flag vessel operated by Penn-Attransco Corp. The vessel had foreign shipyard work performed in Germany and Greece in October and November 1994, respectively. Subsequent to the completion of the work the vessel arrived in the United States at New York, New York, on December 13, 1994. A vessel repair entry was timely filed on December 19, 1994.

By decision of March 28, 1995, 113378 GEV, acting on the application for relief, we held:

In reviewing the record in its entirety, it is apparent that while the documentation generated by the applicant and the applicant's counsel tend to support the claim that the work in question constitutes non-dutiable modifications, the invoices submitted do not. They are devoid of any description of the work done and essentially constitute a mere listing of various parts and expenses (e.g., travel costs, freight charges, etc.). Accordingly, the applicant's claims with respect to the work alleged to be non-dutiable modifications is denied. The petition for review centers around work which the petitioner contends is non-dutiable modifications to the hull and fittings of the vessel that were necessary to prepare and enable the vessel to carry ammunition cargo for the Military Sealift Command. In support of this contention, the petitioner has submitted an affidavit of Mark Amundsen in which he discusses the modifications, and plans that were used to install the modifications. The invoices that were submitted are the same as those submitted with the application.

ISSUE:

Whether evidence is presented sufficient to prove that the foreign work performed on the subject vessel for which the applicant seeks relief constitutes modifications so as to render the work non-dutiable under 19 U.S.C. § 1466.

LAW AND ANALYSIS:

Title 19, United States Code, § 1466, provides in pertinent part for payment of duty in the amount of 50 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 engage 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. Over the course of years, the identification of modification processes has evolved from judicial and administrative precedent. In considering whether an operation has resulted in a modification that 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, 18 C.C.P.A. 137 (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. This element should not be given undue weight in view of the fact that vessel components must often be welded or otherwise "permanently attached" to the ship because ships are subject to constant pitching and rolling. In addition, some items, the cost of which is clearly dutiable, operate with other vessel components, resulting in the need, possibly for that purpose alone, for a fixed and stable attachment to those vessel parts. It follows that a "permanent attachment" may take place that does not necessarily involve a modification to the hull and fittings.

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

Very often when considering whether an addition to the hull and fittings took place for the purpose of 19 U.S.C. § 1466, we have considered the question from the standpoint of whether the work involved the purchase of "equipment" for the vessel. It is not possible to compile a complete list of items that might be aboard a ship that constitute its "equipment". An unavoidable problem in that regard stems from the fact that vessels differ as to their services. What is required equipment on a large passenger vessel might not be required on a fish processing vessel or offshore rig.

"Dutiable equipment" has been defined to include:

. . . portable articles necessary or appropriate for the navigation, operation, or maintenance of a vessel, but not permanently incorporated in or permanently attached to its hull or propelling machinery, and not constituting consumable supplies. Admiral Oriental, supra., (quoting T.D. 34150, (1914))

By defining what articles are considered to be equipment, the Court attempted to formulate criteria to distinguish non-dutiable items which are part of the hull and fittings of a vessel from dutiable equipment, as defined above. These items might be considered to include:

. . . those appliances which are permanently attached to the vessel, and which would remain on board were the vessel to be laid up for a long period... Admiral Oriental, supra., (quoting 27 Op. Atty. Gen. 228).

A more contemporary working definition might be that which is used under certain circumstances by the Coast Guard; it includes a system, accessory, component or appurtenance of a vessel. This would include navigational, radio, safety and, ordinarily, propulsion machinery.

The Customs Service has held that the decision in each case as to whether an installation constitutes a non-dutiable modification/alteration/addition to the hull and fittings of a vessel depends to a great extent on the detail and accuracy of the drawings and invoice descriptions of the actual work performed. Even if an article is considered to be part of the hull and fittings of a vessel, the repair of that article, or the replacement of a worn part of the hull and fittings, is subject to vessel repair duties.

After a complete review of the additional documents submitted, we affirm our decision of March 28, 1995. In reviewing the record in its entirety, including the new documentation, it is apparent that while the documentation generated by the petitioner and counsel for the petitioner, tend to support the claim that the work in question constitutes non-dutiable modifications, the documents and invoices submitted are devoid of any description of the work that was actually performed. As stated in our ruling on the application the documents submitted essentially constitute a mere listing of various parts and expenses (e.g., travel costs, freight charges, etc.). We cannot determine from the plans that were submitted, that the alleged modifications have taken place due to an insufficient description of the what work was actually done at the shipyard. Accordingly, the petition for review with respect to the work alleged to be non-dutiable modifications is denied.

HOLDING:

The evidence presented is insufficient to prove that the foreign work performed on the subject vessel constitutes modifications so as to render the work non-dutiable under 19 U.S.C. § 1466. The petition is denied. Sincerely,

William G. Rosoff

Previous Ruling Next Ruling