VES-13-18-RR:IT:EC 114829 GOB
Port Director of Customs
Attn: Vessel Repair Liquidation Unit
423 Canal Street, Room 303
New Orleans, LA 70130-2341
RE: Vessel Repair Entry No. C14-0039209-3; STELLA LYKES, V-1; 19 U.S.C. 1466; Petition
Dear Sir:
This is in response to your memorandum of September 29, 1999, which forwarded the petition submitted by American Ship Management LLC (the “petitioner”) with respect to the above-referenced vessel repair entry.
FACTS:
The STELLA LYKES (the “vessel”) is a U.S.-flag vessel subject to 19 U.S.C. 1466. The numerous CF 226's (forms for vessel repair entry) state American President Lines, Ltd. to be the owner of the vessel. Your memorandum states that Lykes Brothers Steamship Company, Inc. was the owner and operator of the vessel when it entered at the port of Norfolk on May 29, 1996. The subject vessel repair entry was subsequently filed.
Your office decided the application with respect to the subject entry.
ISSUE:
The dutiability of the subject costs under 19 U.S.C. 1466.
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.
Much of the petition relates to the applicability of 19 U.S.C. 1466(h)(3) which provides:
The duty imposed by subsection (a) of this section shall not apply to-
...
(3) the cost of spare parts necessarily installed before the first entry into the United States, but only if duty is paid under appropriate commodity classifications of the Harmonized Tariff Schedule of the United States upon first entry into the United States of each such spare part purchased in, or imported from, a foreign country.
After a consideration of the evidence of record, we find that the articles in the following items are eligible for treatment under 19 U.S.C. 1466(h)(3): 18-101; 18-110; 18-109; 20-106; 171302; 19-102; 18-166; 20-115; 19-112; 19-111; 21-107; 19-161; 17-146; and 22-126.
We find that the petitioner has not established eligibility for 19 U.S.C. 1466(h)(3) with respect to the following items: 18-148 (the petitioner has not established that the articles are parts); 18-137 (the petitioner has not established that the articles are parts); 19-100 (the petitioner has not established that the articles are parts); 23-113 (lamps are not parts); 19-101 (the petitioner has not established that the articles are parts); 19-106 (the steam trap appears to be equipment); 21-111 (labor is not eligible for 19 U.S.C. 1466(h)(3)); 19-109/110 (your office granted treatment under 19 U.S.C. 1466(h)(3) for most of the articles at the application stage; the petitioner has not established eligibility with respect to the remaining items); 18-102 (the petitioner has not established that the articles are parts); 23-107 (the motor appears to be equipment); 23-132 (but the o-rings are eligible for 19 U.S.C. 1466(h)(3)); 19-118 (the petitioner has not established that the articles are parts); 22-123 (video cassettes are not parts); 25-151 (the petitioner has not established that the articles are parts); and 25-102 (the petitioner has not established that the articles are parts).
We find that the cost of item 20-124 is nondutiable as a modification.
We find that the cost of items 20-125 and 20-127 are nondutiable because they are consumables.
We find that item 23-115 is nondutiable as an item unrelated to a repair.
We find that the petitioner has not established that items 24-131, 25-136, and 25-125 are nondutiable modifications as claimed. Accordingly, they are dutiable under 19 U.S.C. 1466(a).
Your office advises that the incorrect rate of exchange was used with respect to item 25-126 and that this will be corrected.
We find that item 25-146 is dutiable as an item incident to repairs.
HOLDING:
As detailed above, the petition is granted in part and denied in part.
Sincerely,
Jerry Laderberg
Chief,
Entry Procedures and Carriers Branch