VES-13-18-CO:R:IT:C 111747 LLB
Chief, Technical Branch
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90731
RE: Vessel Repair; 19 U.S.C. 1466; Modification; Factory fish
processing vessel; M/V SEAFISHER; Vessel repair entry number
H24-0010264-4; Port of entry Anchorage, Alaska
Dear Sir:
This is in response to your memorandum of June 5, 1991,
regarding the application for relief filed on behalf of Cascade
Fishing, Inc., in regard to the above-captioned vessel repair
entry.
FACTS:
The vessel SEAFISHER proceeded to a shipyard in Japan , and
there underwent modifications to enhance its previous conversion
to a factory trawler/processor vessel. The record reflects that
the vessel arrived in the United States on January 5, 1991, and
filed a Customs Form 226 as an incomplete vessel repair entry
that same day. Cursory review of the record reveals that the
items for which relief is sought are in the nature of vessel
modifications rather than dutiable repairs. The items submitted
for our determination are:
Item No. Description
4 Work on crew quarters
5 Relocation of dust shooter
6 Relocation of fish head cutters
10 Relocation of entrance
12 Installation of chlorine system
14 Modification of fish bin
15 Relocation of conveyor belts
16 Lengthening of stainless steel table
17 Installation of new roller conveyor
18 Installation of two new head cutters
21 Installation of new fresh water makers
26 Welded extension to hood
29 Lubrication oil (segregated as related to repair and
future consumption amounts)
ISSUE:
Whether the evidence establishes that the foreign shipyard
repairs performed in the present matter may be considered to be
modifications for purposes of granting refund or remission of
duty assessed.
LAW AND ANALYSIS:
Title 19, United States Code, section 1466(a), 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 the foreign or
coastwise trade, or vessels intended to be employed 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. This element
should not be given undue weight in view of the fact that vessel
components must be welded or otherwise "permanently attached" to
the ship as a result of constant pitching and rolling. In
addition, some items, the cost of which is clearly dutiable,
interact with other vessel components resulting in the need,
possibly for that purpose alone, for a fixed and stable
juxtaposition of vessel parts. It follows that a "permanent
attachment" takes place that does not necessarily involve a
modification to the hull and fittings.
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, we are asked to review the
qualification of thirteen (13) items for designation as duty-free
vessel modifications. There can be no doubt that the evidence
submitted supports a finding that conditions for refund or
remission have been met for the entirety of the first twelve
(12), and for the segregated future use portion of the last item
(lubricating oil). As such, we have determined that the costs of
the items under review are attributable to duty-free operations
under the vessel repair statute.
HOLDING:
Following a thorough review of the evidence submitted and an
analysis of the applicable law and precedents, we have determined
that the expenditures under review, as listed in the Facts
portion of this ruling, we made for duty-free modifications
rather than dutiable repairs. As such, duty assessed on those
named items should be remitted.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch