VES-13-18-CO:R:P:C 110636 LLB
Chief, Technical Branch
Pacific Region
One World Trade Center
Long Beach, California 90831
RE: Protest No. 27049-002932: Vessel Repair Entry No. C27-
0032467-9; Date of Arrival March 26, 1988, Long Beach,
California; M/V SEA-LAND QUALITY
Dear Sir:
Reference is made to your memorandum of October 30, 1989,
forwarding for our consideration the above-captioned protest from
the assessment of vessel repair duties.
FACTS:
Between March 3 and March 22, 1988, the vessel underwent
extensive operations in a Canadian shipyard. Entry was made on
March 26, 1988, and the normal 60-day period for filing complete
entry documents and any desired application for relief would have
expired on May 26, 1988. A request for a 30-day extension of
that time period was made on May 20, 1988, and, as provided under
regulations, the Vessel Repair Liquidation Unit granted until
June 24, 1988, to file. A request for an additional 30-day
extension of time was made to Customs Headquarters as provided by
regulations, this second request being made on June 14, 1988.
Headquarters granted until July 25, 1988, to file necessary
documentation. Partial invoices to support the entry were
received by Customs on July 28, 1988. The remainder of the
necessary invoices, as well as the document submitted as an
application for relief, were received by Customs on September 7,
1988, over six weeks beyond the second extension deadline.
Based upon the applicant's failure to adhere to regulatory
time limits, it was determined that the entry should be referred
for liquidation without consideration on the merits. Following
liquidation the vessel operator filed the timely protest now
under consideration.
ISSUE:
Whether the foreign shipyard expenditures in this case are
largely duty-free modifications rather than repairs, as is
claimed by the protestant.
LAW AND ANALYSIS:
Section 1466 provides, in pertinent part, for payment of
duty in the amount of 50 percent ad valorem of 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 Lines 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 the 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.
For purposes of section 1466, dutiable equipment has been
defined as:
...portable articles necessary or appropriate
for the navigation, operation, or maintenance
of a vessel, but not permanently incorporated
in or permanently attached to its hull or
propelling machinery, and not constituting
consumable supplies. (T.D. 34150 (1914)).
It should be noted that the fact that a change or addition
of equipment is made to conform with a new design scheme, or for
the purpose of complying with the requirements of statute or
code, is not a relevant consideration. Therefore, any change
accomplished solely for these reasons, and which does not
constitute a permanent addition to the hull and fittings of the
vessel, would be dutiable under section 1466.
The Customs Regulations clearly provide at section
4.14(b)(2)(ii)(B) (19 CFR 4.14 (b)(2)(ii)(B)), that:
The 60-day time period to submit evidence of
cost on the entry is concurrent with the 60-
day time period to submit an application for
relief under paragraph (d)(1)(ii) of this
section and will not operate to provide
additional time to submit an application for
relief. A request for additional time to
submit evidence of cost may include a request
for additional time to submit an application
for relief.
As previously stated, an Application for Relief was finally
submitted on September 7, 1988. Except for the extensive
experience of this vessel operator in entering vessel repairs and
seeking refund or remission of assessed duties, such tardy filing
might be ascribed to the mistaken belief that application might
be made at any time prior to liquidation. Such could not be true
in this case however, and the entry was properly liquidated with
all pre-liquidation appeals cut off.
The right to protest the liquidation of an entry is provided
in section 514, Tariff Act of 1930, as amended (19 U.S.C. 1514).
Even though no pre-liquidation prayer for relief might be
submitted, there is a statutory right to seek refund of duties
assessed under subsection (a) of the vessel repair statute (19
U.S.C. 1466(a)), and a section 1514 protest seeking such refund
must be considered on its merits.
In this case, the assessment of duty on eight invoice items
is protested. These items are:
Invoice No. Description
1. Croon Post 652 (1) Bilge water separator
2. Croon Post 652 (2) Reefer transformers
3. Croon Post 550 Reefer receptacles
4. Croon Post 562 Reefer outlet boxes
5. Croon Post 650 Container transformers
6. Croon Post 710 Reefer transformers
7. King Brothers, Ltd. Various services
8. Sulzer 13407 Various machine parts
9. Sulzer 14421 Travel/accommodation
10. Deep Sea Seals, Ltd. Post-survey replacements
11. Versatile Pacific Shipyards 7-43 (V001-V11)
12. Versatile Pacific Shipyards 5-52 (400-443)
After reviewing the evidence, we find that the listed items
are largely duty-free modifications or classifiably free
expenditures, with the following two exceptions:
a. Item 7, King Brothers, Ltd. The charge listed for
"Prices Lock, Islnd Blueprint, Custom Rubber Stamp,
Richard's Mens, and Canex for Mster", are either
clearly dutiable or so ill-defined as to render refund
impossible.
b. Item 8, Sulzer 13407. The charges are all for engine
parts. The fact that they may have been previously
imported into the U.S. and entered for consumption,
duty paid, does not convert their status to U.S.-
origin materials for purposes of remission of duty.
HOLDING:
Following thorough review of the evidence, we have
determined that the protest should be allowed in part and denied
in part, as detailed in the Law and Analysis section of this
ruling. Please reliquidate accordingly.
Sincerely,
Stuart P. Seidel
Director, Regulatory Procedures
and Penalties Division
cc: VRLU New York
VRLU New Orleans