HQ 114092 - Vessel Repair Entry No. C27-0034962-7; SYOSSET, V-184; 19 U.S.C. 1466; Ruling 111425 revoked; Radar system and satellite communications system dutiable as vessel equipment - United States International Trade Commision Rulings

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HQ 114092

September 12, 1997

VES-13-18-RR:IT:EC 114092 GOB

CATEGORY: CARRIER

Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 415 P.O. Box 2450
San Francisco, CA 94126

RE: Vessel Repair Entry No. C27-0034962-7; SYOSSET, V-184; 19 U.S.C. 1466; Ruling 111425 revoked; Radar system and satellite communications system dutiable as vessel equipment

Dear Madam:

FACTS:

The purpose of this ruling is to revoke Ruling 111425 dated June 26, 1991 with respect to the above-referenced vessel repair entry.

In Ruling 111425, we granted the petition for relief of Mobil Oil Corporation ("Mobil") with respect to the dutiability under 19 U.S.C. 1466 of a radar system and a satellite communications system.

ISSUE:

Whether the satellite communications system and the radar system 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.

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. These factors are not by themselves necessarily determinative, nor are they the only factors which may be relevant in a given case. However, in a given case, these factors may be illustrative, illuminating, or relevant with respect to the issue of whether certain work may be a modification of a vessel which is nondutiable under 19 U.S.C. 1466:

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). However, we note that a permanent incorporation or attachment does not necessarily involve a modification; it may involve a dutiable repair or dutiable equipment.

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.

In Ruling 113798 dated January 9, 1997, we ruled on, and thoroughly discussed, the dutiability under 19 U.S.C. 1466 of a radar system. We stated:

Item 908. Radar Installation. The invoice states: "remove existing radar system and install new upgraded system." The applicant states: "The purpose of the new radar installation is to upgrade the navigation equipment on the bridge. The new radar system has the ability to provide electronic charting in addition to enhanced collision avoidance technology. The older radars although still operating could not be modified or upgraded to provide the same level of technology as the new system."

We find that this item is dutiable under 19 U.S.C. 1466 as vessel equipment. This finding is based on the following authorities.

In Otte v. United States, 7 Ct. Cust. Appls. 166, T.D. 36489 (1916), the court stated:

That the Congress intended to distinguish between equipment and the vessel itself is apparent from a reading of the two subsections above quoted. The line of distinction between equipment and the vessel is somewhat difficult to mark.

The question was considered by the Board of Naval Construction, and their report in part reads as follows:

Equipment, used in a general sense, may be defined as any portable thing that is used for, or provided in, preparing a vessel whose hull is already finished for service. It is the furniture of whatsoever nature which is put into a finished ship in equipping her. The Queen's Regulations and Admiralty Instructions give the following definition: "Equipment, in relation to a ship, includes the furnishing a ship with any tackle, apparel, furniture, provisions, arms, munitions, or stores, or any other thing that is used in or about a ship for the purpose of fitting or adapting her for the sea or for naval service."

In estimating the displacement of a ship naval constructors use the term "hull and fittings" in contradistinction to "equipment," the fittings of the hull being understood to be any permanent thing attached to the hull which would remain on board were the vessel to be laid up for a long period.

Adopting these definitions, the board is of the opinion that the term "equipment" would not include donkey engines, pumps, windlasses, steam steerers, and other machinery but that it would include anchors, chain cables, boats, life-saving apparatus, nautical instruments, signal lights, and similar articles.

In Ruling 105414 dated May 24, 1982, we stated:

It should be noted that the fact that a change or addition of equipment is made to conform with a new design scheme, or for the purpose of complying with the requirements of statute or code, is not a relevant consideration. Therefore, any change accomplished solely for these reasons, and which does not constitute a permanent addition to the hull and fittings of the vessel, would be dutiable under section 1466.

Any new areas to the vessel, that is, bulkheads, permanent ballast, decks, staterooms, bars, storerooms. etc., are considered to be qualifying additions to the hull and fittings. Likewise, the extension of existing services into new areas would also be free of duty. This would include piping, air conditioning, ventilation, electrical service, glazing, etc., as well as final finishing for the new areas (such as painting).

On the other hand, among the dutiable operations would be providing furniture for any of the areas (new and old); providing new electronic navigation equipment; providing new lifesaving apparatus ... providing computer apparatus... [Emphasis supplied.]

In Memorandum 105807 dated December 28, 1982, we stated:

The characterization of an article as vessel equipment, as opposed to fittings or hull/structural parts, is manifestly difficult in cases where the article has many of the attributes of both classes cited in the leading cases. For example, because a vessel pitches and rolls when at sea all radio gear is securely fastened, yet is classified as equipment even when such articles are usually too large to be considered (in ordinary parlance) "portable". [Emphasis supplied.]
[End of excerpt from Ruling 113798.]

It is our determination that Ruling 113798 and the rulings cited therein are applicable to the radar system and the satellite communications system ruled upon in Ruling 111425.

Accordingly, the radar system and the satellite communications system ruled upon in Ruling 111425 are dutiable as vessel equipment under 19 U.S.C. 1466.

HOLDING:

The radar system and the satellite communications system are dutiable as vessel equipment under 19 U.S.C. 1466.

Ruling 111425 is revoked.

Sincerely,

Jerry Laderberg
Chief,
Entry Procedures and Carriers

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