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HQ 114985




April 7, 2000

VES-13-28-RR:IT:EC 114985 GEV

CATEGORY: CARRIER

Chief, Residual Liquidation and Protest Branch U.S. Customs Service
6 World Trade Center
New York, New York 10048-0945

RE: Vessel Repair Entry No. C46-0017034-3; COLORADO; V-2; Modification; Survey Costs; 19 U.S.C. § 1466

Dear Sir:

This is in response to your memorandum dated February 29, 2000, forwarding a petition for review of Headquarters ruling 114686, dated September 7, 1999. Our finding is set forth below.

FACTS:

The COLORADO is a U.S.-flag vessel owned by Colorado Trading Company and operated by Sabine Transportation Company of Cedar Rapids, Iowa. Subsequent to the completion of foreign shipyard work, the vessel arrived in New York, N.Y., on June 12, 1998. A vessel repair entry was filed on June 22, 1998.

Pursuant to an authorized extension of time, an application for relief with supporting documentation was submitted seeking relief for numerous costs contained within the subject entry. Customs rendered its decision on the application for relief denying it in part pursuant to Headquarters ruling letter 114686, dated September 7, 1999. By letter dated September 17, 1999, your office forwarded this ruling to the applicant.

Pursuant to an authorized extension of time, a petition for review of the aforementioned ruling with supporting documentation was timely filed. The petitioner seeks relief with respect to Items 17, 18, 51 and 52.

ISSUE:

Whether the foreign costs contained within the subject entry for which the petitioner seeks relief are dutiable under 19 U.S.C. § 1466.

LAW AND ANALYSIS:

Title 19, United States Code, § 1466 (19 U.S.C. § 1466), provides in pertinent part for the payment of an ad valorem duty of 50 percent of the cost of “equipments, or any part thereof, including boats, purchased for, or the repair parts or materials to be used, or the expenses of repairs made in a foreign country upon a vessel documented under the laws of the United States”

Items 17 and 18 cover the installation of an Emergency Towing System which is alleged by the petitioner to be a nondutiable modification. In its application of the vessel repair statute, Customs 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-à-vis work constituting repairs has evolved from judicial and administrative precedent. (See Otte v. United States, 7 Ct. Cust. Appls. 166, T.D. 36489 (1916); United States v. Admiral Oriental Line et al., 18 C.C.P.A. 137, T.D. 44359 (1930); and Customs Bulletin and Decisions, Vol. 31, Number 40, published October 1, 1997.) The factors discussed within the aforementioned authority 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.

Upon reviewing the application in light of the above-referenced authority, we noted that the record was deficient with respect to the applicability of the factors discussed therein (i.e., whether this constituted a first time installation and if so, whether it replaced a current part, fitting or structure which is not in good working order). Consequently, Items 17 and 18 were determined to be dutiable.

In response to this determination, the petitioner submitted an affidavit from the Engineering Manager for Sabine Transportation Company (the operator of the vessel). This affidavit makes clear that the installation of the Emergency Towing System was a first time installation in order for the vessel to comply with U.S. Coast Guard

Regulations (33 CFR § 155.235). The Emergency Towing System did not replace a current part, fitting or structure which was not in good working order. Accordingly, Items 17 and 18 constitute a nondutiable modification.

Item 51 covers survey costs of the American Bureau of Shipping (ABS). This item was denied relief in our prior ruling in view of the fact that we were unable to ascertain whether these costs were incurred pursuant to a required scheduled inspection by the ABS. In this regard the petitioner has submitted an affidavit of the Assistant Chief Surveyor of the ABS in Houston, Texas, who states that these costs were so incurred. Attached to this affidavit is a letter from the ABS evidencing that the subject vessel was due for drydock on March 31, 1998, and a survey status report setting forth the dates of the required scheduled ABS inspections. Accordingly, Item 51 is nondutiable.

Item 52 covers the cost of the attendance of the port captain which was denied relief based upon the fact that the submitted invoice did not specify the activities in which the port captain was engaged. The petitioner has submitted an affidavit from the port captain establishing that he was not in any way involved with the dutiable work covered by this entry. Accordingly, Item 52 is nondutiable.

HOLDING:

The foreign costs contained within the subject entry for which the petitioner seeks relief are not dutiable under 19 U.S.C. § 1466.

Accordingly, the petition is granted.

Sincerely,

Acting Chief

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