HQ 111425
June 26 1991
VES-13-18-CO:R:P:C 111425 LLB
Chief, Technical Branch
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90831
RE: Vessel Repair; Modification; Repair; Vessel SYOSSET, V-184;
Entry Number C27-0034962-7
Dear Sir:
Reference is made to your memorandum of November 21, 1990,
which forwards for our consideration the Petition for Review
from vessel repair duties filed by counsel on behalf of Mobile
Oil Corporation, seeking relief from the assessment of vessel
repair duties in connection with the March 14, 1989, arrival of
the vessel SYOSSET in the port of Los Angeles, California.
FACTS:
The vessel, upon arrival, filed a declaration and entry of
vessel repairs as required under section 4.14, Customs
Regulations (19 CFR 4.14), reporting work which had been
performed in a foreign shipyard. An application for relief from
duties sought relief on numerous items for the claimed reason
that they involved non-repair-related expenses (modification,
cleaning, survey, etc.). Customs Headquarters rendered advice on
twenty-two such items in the ruling on case number 110833. These
items included the installation of new satellite communications
and radar systems (invoice items 613A and 615, respectively).
In ruling on these items we found that, "Items 12 (613A)
and 15 (615) detail the installation of a new satellite
communication system and radar system, respectively. Normally,
some of the items installed (wiring, for instance) would be
considered permanent modifications and the cost of that portion
would be duty-free. In this case, however, there is no
segregation within the items. Since portions of the items
concern the installation of sensitive electronic equipment which
would in all likelihood be removed from the vessel during
extended lay-up, the entire cost of both items should be
considered subject to duty."
ISSUE:
Whether the evidence presented on appeal cures the
deficiencies noted in the record regarding the Application for
Relief, to include sufficient cost segregation and evidence of
permanency.
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.
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 which 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 et al., T.D. 44359 (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.
2. Whether in all likelihood, an item under consideration would
remain aboard a vessel during an extended layup.
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.
In the present matter, the petitioner has submitted
additional evidence for consideration. Shipyard invoices are
supplied which provide a segregated cost breakdown covering the
installation of the radar and communications systems. Also
provided is the sworn statement of the Engineering Superintendent
for the U.S. Fleet of Mobil Oil Corporation, the person
responsible for the supervision of vessel lay-up operations for
the company. The statement indicates that the systems are
permanently installed on the vessel and, were the vessel to be
laid up, the systems would not be removed. Rather, dehumidifiers
would be installed on the vessel in order to maintain the systems
in good operational condition during any such lay-up period.
These additional submissions satisfy the deficiencies noted in
our response to the initial Application for Relief.
HOLDING:
Following a thorough review of the facts and evidence, and
after analysis of the law and applicable precedents, we have
determined to allow the Petition for Review as specified in the
Law and Analysis portion of this decision.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch