VES-13-18-RR:IT:EC 114676 GOB
Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 107
P.O. Box 2450
San Francisco, CA 94126
RE: 19 U.S.C. 1466; PRINCE WILLIAM SOUND; Vessel Repair Entry No. H24- 0030792-0; Application
Dear Madam:
This ruling is in response to your memorandum dated March 26, 1999, which forwarded the application submitted by Keystone Shipping Company (“applicant”) with respect to the above-referenced vessel repair entry.
FACTS:
The PRINCE WILLIAM SOUND (the “vessel”), a U.S.-flag vessel owned and operated by the applicant, arrived at the port of Valdez, Alaska on October 18, 1998. The subject vessel repair entry was timely filed. The vessel underwent certain foreign shipyard work in Korea.
ISSUE:
Whether the subject items are dutiable pursuant to 19 U.S.C. 1466(a)?
LAW AND ANALYSIS:
19 U.S.C. 1466 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.
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.
Reference to these and other authorities should not obscure the basic premise of 19 U.S.C. 1466 - vessel repairs performed in a foreign country and vessel equipment purchased in a foreign country are subject to duty under that statute.
We note that the narrative information provided by the applicant is extremely limited. With respect to future submissions, we advise the applicant that it should submit a thorough narrative explanation with respect to the work performed. This explanation is best provided within the body of the submission, i.e., within the application, petition, or protest. The submission of invoices, blueprints, and the like is not a substitute for a thorough narrative explanation in the application, petition, or protest.
You have requested our determination on the following items.
19. sea chests and strainers. The invoice provides: “... remove all marine growth, fouling and corrosion ... removal of existing wasted anodes ... sandsweep all sea chests ... spot blast to near white metal in way of corroded areas ... renew all damaged or defective fasteners.” We find that this item includes repair and maintenance work. Accordingly, it is subject to duty under 19 U.S.C. 1466.
213. pipe line crossover. The invoice provides: “Fabricate and install a step and handrail on the pipe line crossover for access to the 24" drop valve (Orange) to the group II tanks.” We find that this item is a nondutiable modification to the vessel.
235. wing void tanks coating. The applicant states: “Required as part of conversion of void tanks to ballast tanks.” Based upon the evidence of record, we find that this item is dutiable under 19 U.S.C. 1466. The applicant has not provided satisfactory documentary information which would establish that this item is nondutiable. If the applicant wishes to assert that this item is an item incident to a nondutiable modification, it must provide satisfactory documentary evidence in support of that claim. Such evidence would include, but not necessarily be limited to, statements or affidavits of parties with firsthand knowledge of the work, including the condition of the vessel in the affected area prior to the performance of the work. See item 247 below.
245. oil/water separator upgrade. The applicant states: “Existing unit removed and replaced with newer, more reliable and maintainable unit.” We find that this item is dutiable as equipment of the vessel. Vessel equipment is dutiable under 19 U.S.C. 1466.
247. wing void tanks conversion to ballast tanks. The applicant states: “Converted existing void tanks to ballast service to add ballast flexibility and heavy weather safety.” Based upon the evidence of record, we find that this item is dutiable under 19 U.S.C. 1466. The applicant has not provided satisfactory documentary information which would establish that this item is nondutiable. If the applicant wishes to assert that this item, and related item 235 above, are nondutiable modifications, it must provide satisfactory documentary evidence in support of that claim. Such evidence would include, but not necessarily be limited to, statements or affidavits of parties with firsthand knowledge of the work, including the condition of the vessel in the affected area prior to the performance of the work.
248. governor control upgrade. The applicant states: “Removed existing governor and replaced with more reliable and modern equipment to improve SSTG operation and safety.” We find that this item is dutiable as equipment of the vessel. Vessel equipment is dutiable under 19 U.S.C. 1466.
249. covered lifeboats and gravity davit installation. The applicant states: “Removed existing lifeboat and davits and replaced same with new enclosed lifeboat with companion davits.” We find that this item is dutiable as equipment of the vessel. Vessel equipment is dutiable under 19 U.S.C. 1466.
It is our view that lifeboats are equipment of the vessel. If the applicant wishes to assert that some of the work involved here is a nondutiable modification, it must make this claim in narrative fashion in its submission, preferably within the body of the application, petition, or protest. Further, because the lifeboats themselves are dutiable equipment, the applicant would have to separate the costs of the lifeboats from the other costs within this item in order for Customs to best consider any claim of the applicant with respect to such other costs.
250. emergency generator replacement. The applicant states: “Removed existing diesel generator and replaced same with new larger unit for improved serviceability and safety.” We find that this item is dutiable as equipment of the vessel. Vessel equipment is dutiable under 19 U.S.C. 1466.
It is our view that a generator is equipment of the vessel. If the applicant wishes to assert that some of the work involved in this item is a nondutiable modification, it must make this claim in narrative fashion in its submission, preferably within the body of the application, petition, or protest. Further, because the generator itself is dutiable equipment, the applicant would have to separate the cost of the generator from the other costs within this item in order for Customs to best consider any claim of the applicant with respect to such other costs.
293. safe access walkway to bow. The applicant states: “Added as new rule requirement and to provide safe access by crew members to the bow in heavy weather.” We find that this item is a nondutiable modification to the vessel.
297. cargo tank fracture repair - fire watch and 298. ballast tank fracture repair - fire watch. The invoices reflect that these items are items incident to dutiable repairs. Accordingly, they are dutiable under 19 U.S.C. 1466.
HOLDING:
As detailed above, the application is granted in part and denied in part.
Sincerely,
Jerry Laderberg
Chief,
Entry Procedures and Carriers Branch