VES-13-18-CO:R:P:C 110814 LLB
Chief, Technical Branch
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90831
RE: Vessel Repair; Cleaning; Survey; Modification; Repair;
Vessel LIBERTY BELL, V-2; Entry Number C27-0012580-3
Dear Sir:
Reference is made to your memorandum of January 19, 1990,
which forwards for our consideration the application for relief
from vessel repair duties filed by Liberty Maritime Corporation,
seeking relief from the assessment of vessel repair duties in
connection with the March 14, 1989, arrival of the vessel LIBERTY
BELL in the port of Long Beach, California.
FACTS:
The vessel, upon arrival, filed a timely declaration and
entry of vessel repairs as required under section 4.14, Customs
Regulations (19 CFR 4.14), reporting extensive work which had
been performed in a foreign shipyard. The application for relief
from duties, also timely filed, seeks relief on numerous items
for the claimed reason that they involved non-repair-related
expenses (modification, cleaning, survey, etc.). Customs
Headquarters advice is sought on eleven such items. These items
are:
Invoice item no. Description
1). 30 Work on the double bottom tanks
2). 33 Cargo pipeline repairs
3). 52 Port and starboard boiler survey
4). 57 Cargo gear survey
5). 62 Work on COW machines
6). 63 Change in stack insignia
7). 74 D.O. piping modification
8). 85 Work on deck machinery
9). 95 Cargo lighting modification
10). 101 Steering linkage modification
11). 108 Scupper modification
ISSUE:
Whether the items claimed as free and forwarded for review
and advice are considered duty-free under either court or
administrative interpretations of 19 U.S.C. 1466(a).
LAW AND ANALYSIS:
Section 466, Tariff Act of 1930, as amended (19 U.S.C. 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.
A leading case in the interpretation and application of
section 1466 is United States v. Admiral Oriental Line et al., 18
C.C.P.A. 137 (T.D. 44359 (1930)). That case distinguished
between equipment and repairs on one hand and permanent additions
to the hull and fittings on the other, the former being subject
to duty under section 1466.
The Court in Admiral Oriental, supra., cited with approval
an opinion of the Attorney General (27 Op. Atty. Gen. 288). That
opinion interpreted section 17 of the Act of June 26, 1884, (23
Stat. 57), which allowed drawback on vessels built in the U.S.
for foreign account, wholly or in part of duty-paid materials.
In defining equipment of a vessel, the Attorney General found
that items which are not equipment are:
...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...[and] are
material[s] used in the construction of the vessel...
While the opinion of the Attorney General interpreted a provision
of law other than section 1466 or a predecessor thereto, it is
considered instructive and has long been cited in Customs Service
rulings as defining permanent additions to the hull and fittings
of a vessel.
Customs has held that for an item to be characterized as a
nondutiable modification, it must encompass the installation of
an item as a new design feature, not as a replacement for, or
restoration of, parts now performing a similar function. We have
also held that the decision in each case as to whether an
installation constitutes a nondutiable addition to the hull and
fittings of the 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.
Customs also holds that the costs for certain surveys and
inspections are not dutiable, even though dutiable repair may be
performed in connection with their execution. Such operations
are generally limited to surveys required to keep a vessel in
class. Other surveys or inspections, such as those performed to
ascertain whether repairs are either necessary or adequately
accomplished, are dutiable.
One early case (United States v. George Hall Coal Co., 134
F. 1003 (1905)), was the first to find any of various types of
expenses associated with the foreign shipyard operations to be
classifiably free from the assessment of vessel repair duties.
We have reviewed the evidence regarding the items for which
relief is sought and find as follows:
Item one (30) is, for the most part, a cleaning operation
which is non-dutiable. The exceptions to this finding are the
segregated charges for "specified" and "additional" work, and for
access hole/access plate work totalling $4,497.
Item two (33) is dutiable with the exception of the
segregated crane/rigging and transport charges.
Item three (52) details a boiler survey and repairs. Unlike
some other of the survey elements, there is no indication that
this was an annual survey for retention in class. As such, the
survey and repair costs for this item are dutiable.
Item four (57) is an annual cargo gear survey for which a
certificate is supplied. This cost, along with those for
transportation, staging, and rigging, are free. The segregated
repair cost for splicing replacement wires is, however, dutiable.
Item five (62) concerns work on the COW machines. Only the
segregated rigging and transportation associated with this item
are non-dutiable. The remainder of the costs are considered
dutiable repairs.
Item six (63) concerns the stack insignia. If necessary to
change the insignia from one to another, it is non-dutiable under
authority of H.C. Gibbs v. United States, 28 Cust Ct. 318, C.D.
1430 (1952). The same case holds, however, that if it is merely
a repainting of the same logo or insignia, it is a dutiable
repair. We note that the operation also involves changing a bow
insignia from an "S" to an "L" which is clearly non-dutiable.
Since the cost of the bow operation is not segregated from the
stack insignia, however, the entire cost is dutiable unless the
stack portion is demonstrated to have involved a change and not
merely a refurbishment.
Item seven (74) involves a change in piping to feed
"vacuvators" on grain cargoes. There are segregated crane,
rigging, and transport costs which are considered non-dutiable,
but the reason for the new piping is not stated. We do not know
whether existing piping was in a state of deterioration or
disrepair at the time of replacement. If so, even a permanent
replacement, such as is present in this case, would be considered
a dutiable repair. Therefore, subject to the submission of
further proof, the balance of this item is considered dutiable.
Item eight (85) involves work on deck machinery, the
segregated winch coaming portion of which, along with transport
and rigging charges, is non-dutiable since a permanent first time
installation is involved. The remainder, however (fabrication of
new hydraulic storage tanks and work on the hydraulic control
valve), constitutes dutiable repairs.
Item nine (95) involves the installation of electrical cable
and outlets where none had previously been installed. As such,
the operation is a duty-free modification.
Item ten (101), work on the steering gear linkage, is
claimed to be a modification. We note, however that the linkage
had been sticking and since this problem was addressed in the
course of modifying the linkage, the operation is a dutiable
repair.
Item eleven (108) involves the cutting of new scuppers (deck
drains) where none had previously existed. As a permanent first
time installation, the item is a duty-free modification.
HOLDING:
In light of the foregoing facts and analysis of the law, we
are of the opinion that the items for which relief is sought are
subject to duty under section 1466(a) to the extent specified
above.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch