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HQ 114259




October 15, 1998
VES-13-18-RR:IT:EC 114259 GOB

CATEGORY: CARRIER

Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 107 P.O. Box 2450
San Francisco, CA 94126

RE: Vessel Repair Entry No. C27-01477659-3; 19 U.S.C. 1466; R.J. PFEIFFER, V- 93; Petition

Dear Madam:

This is in response to your memorandum dated January 30, 1998, which forwarded the petition submitted by Matson Navigation Company ("petitioner" or "Matson") with respect to the above-referenced vessel repair entry.

FACTS:

The R.J. PFEIFFER (the "vessel"), a U.S.-flag vessel owned and operated by the petitioner, arrived at the port of Los Angeles, California on April 29, 1996. The subject vessel repair entry was timely filed. The vessel underwent certain shipyard work in Korea in April 1996.

ISSUE:

Whether the subject items are dutiable pursuant to 19 U.S.C. 1466(a).

LAW AND ANALYSIS:

19 U.S.C. 1466(a) provides for the payment of duty at a rate of fifty percent ad valorem on the cost of foreign repairs to, and equipment purchased in a foreign country for, 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.

The subject entry is a "post-Texaco" entry, i.e., an entry filed after the appellate decision in Texaco Marine Services, Inc., and Texaco Refining and Marketing, Inc. v. United States, 44 F.3d 1539 (CAFC 1994), aff'g 815 F.Supp. 1484 (CIT 1993). Accordingly, the Texaco decision applies to this entry.

In its application of 19 U.S.C. 1466, Customs has held that (contrary to the treatment of vessel repairs and vessel equipment) modifications, alterations, and additions to the hull of a vessel are not subject to duty under the vessel repair statute. The identification of work constituting modifications vis-a-vis work constituting repairs has evolved from judicial and administrative precedent. See, for example, Otte v. U.S., 7 Ct. Cust. Appls. 166, T.D. 36489 (1916); U.S. v. Admiral Oriental Line et al., 18 C.C.P.A. 137, T.D. 44359 (1930), and Customs Bulletin and Decisions of June 18, 1997 (Vol. 31, No. 24/25, p. 23) and October 1, 1997 (Vol. 31, No. 40, p. 13). The various factors discussed within those authorities are not by themselves necessarily determinative, nor are they the only factors which may be relevant in a given case.

In its submission, the petitioner requests relief with respect to certain items which were not the subject of its application, i.e. item 016, rudder bearing readings and item 017, sea chest inspection. 19 CFR 4.14(d)(2)(i) states, in pertinent part:

(2) Petition for review on a denial of an application for relief-(i) Form. If an applicant is dissatisfied with the decision on its application for relief, the applicant may file a petition for review of that decision. The petition for review need not be in any particular form. The petition for review must identify the decision on the application for relief and must detail the exceptions taken to that decision ... [Emphasis supplied.]

Pursuant to 19 CFR 4.14(d)(2)(i), a party may not petition for relief with respect to vessel repair items which were not included in the application for relief. Accordingly, no relief is available with respect to these items.

General Services Items. The petitioner contends that general services items should not be prorated. It is Customs oft-repeated position that general services costs and drydock costs are to be prorated between dutiable and nondutiable costs. This position has been fully explained in many rulings, e.g., Ruling 113908 which involved a different Matson vessel repair entry. Our position remains in full force and effect. Accordingly, this claim of the petitioner is denied.

Item 012. The invoice states: "Clean hull using high pressure water blast to enable inspection of underwater surfaces by ABS/USCG." We find that this item is nondutiable as incident to a nondutiable ABS inspection.

Item 028. The invoice states: "Install new fuel oil tank level indicating system probes ..." The petitioner states: "This work item was the installation of a new redundant tank level indicating system to insure that fuel oil tanks have a second means of determining their capacity as they are being filled ... Matson views this work as a modification because it is an entirely new system that is now a permanent part of the ship, and is in addition to the original fully operational system." [Emphasis in original.] We find that this item is dutiable under 19 U.S.C. 1466 as vessel equipment. The fuel oil tank level indicating system is more akin to equipment of the vessel than to a modification to the hull of the vessel. Vessel equipment is dutiable under 19 U.S.C. 1466.

Item 040. The invoice states: "ABS[.] Range anchors and chain, clean for ABS inspection." The petitioner asserts: "This item was part of the ABS Special Survey ... The chain is flaked out on the drydock floor in preparation for visual inspection by ABS/USCG." We find that this item is nondutiable as incident to a nondutiable ABS inspection.

Item 048. The invoice states: "Install new thermometer and pressure gauge bosses on each generator engine exhaust." The petitioner asserts: "The installation of instrumentation bosses in the exhaust trunks of the diesel generators was a new installation to monitor the diesel engine performance and compare this information with the manufacturer's guidelines for optimum safe operation and fuel consumption." We find that this item is dutiable under 19 U.S.C. 1466 as vessel equipment. This item is more akin to equipment of the vessel than to a modification to the hull of the vessel. Vessel equipment is dutiable under 19 U.S.C. 1466.

Item 10151. The petitioner states: "The conversion of MV R.J. PFEIFFER at Hyundai Mipo Dockyard involved the reconfiguration of cargo hold no. 3 below deck from three rows of 24' container stowage to two rows of 40' container stowage... The new 40' hatch covers were required in place of the existing 24' covers." It has submitted a drawing showing a comparison between the previous stowage and the current stowage. The invoices are generally supportive of the petitioner's description of this work. Accordingly, we find that this item is a nondutiable modification.

HOLDING:

As stated above, the petition is granted in part and denied in part.

Sincerely,

Jerry Laderberg
Chief,

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