VES-13-18 CO:R:P:C 110665 BEW
Chief, Technical Assistant
Pacific Region
U. S. Customs Service
Los Angeles, California 90831
Re: Protest No. 890002702; Vessel Repair Entry No. C2700-3-
4914-8 dated June 13, 1988; Date of Arrival: June 13, 1988;
Port of Arrival: Long Beach, California; Vessel: SEA-LAND
ENDURANCE, Voyage No. 83
Dear Sir:
Reference is made to your memorandum of November 8, 1989,
which forwarded the above-captioned protest from the assessment
of vessel repair duties for our determination.
FACTS:
On May 23, 1988, while in Yokohama, Japan,, the vessel SEA-
LAND ENDURANCE underwent various shipyard operations. The
dutiability of these operations has previously been considered
by your office. The protestant elected not to file an
Application for Relief. The entry was liquidated on May 26,
1989. The protest was timely filed on August 23, 1989.
Included in your considerations was the matter of whether the
cost associated with the installation of the following items is
dutiable under the statute:
Item 7/87-1(2) - Rope Guard,
Item 7/87-1(1) - Stern Frame Boss,
Item 7/87-11 - Stern Tube Seal Modification,
Item 7/87-3 - New door on Economizer preheating casing,
Item 7/87-4 - Stern Tube Bearing Lube Oil System
Item 7/87-6 - Gas Economizer drain,
Item 7/87-10 - Propeller modification,
Item 7/87-13 - Purifier Separator Driven Feed pumps,
Item 7/87-18 - Lube Oil Filing Line,
Item 7/88-10 - Rudder Lower Pintle Nut Access,
Item 7.88-1 - Modification of Sea Chests Strainers for
Diver Access,
Item 7.88-2 - Modification of Rudder Pintle inspection
access plate,
Item 7.88-3 - Modification of under water hull painted
markings for diver indentifications,
Item 7.88.4 - Furnish Video Camera services,
Page 4 - Exhaust Gas Economizer, and
2-1 Economizer Cleaning
Hydro Pressure Test.
These are the only items which are presently being
protested. The protestant claims that all of the above items
except the Exhaust Gas Economizer, Economizer Cleaning and Hydro
Pressure Test are modifications/alterations/additions to the hull
and fittings of the vessel. It claims that the repair work
associated with the Exhaust Gas Economizer was necessitated by a
casualty, i.e. a fire caused by crew negligence.
ISSUES:
Whether certain work performed in a foreign country
constitutes modifications/alterations/additions to the hull and
fittings rather than equipment purchases or repairs within the
meaning of 19 U.S.C. 1466?
Whether a video recording of the vessel's hull which is
used as a survey for a hull frame markings modification, is
considered a survey under the provisions of C.S.D. 79-277 so as
to render the cost nondutiable?
Whether the costs of certain repairs due to damage caused
by crew negligence are dutiable under 19 U.S.C. 1466?
LAW AND ANALYSIS:
Title 19, United States Code, section 1466, provides in
part for payment of an ad valorem duty of 50 percent of the cost
of foreign repairs to vessels documented under the laws of the
United States to engage in the foreign or coastwise trade.
Section 1466 (d)(1) provides that the Secretary of the
Treasury is authorized to remit or refund such duties if the
owner or master of the vessel was compelled by stress of weather
or other casualty to put into such foreign port to make repairs
to secure the safety and seaworthiness of the vessel to enable
her to reach her port of destination.
In its application of the vessel repair statute (19 U.S.C.
1466), Customs has consistently held that modifications/altera-
tions/additions to the hull and fittings of a vessel which allow
the vessel to operate more efficiently are not subject to vessel
repair duties. Alterations to the hull and fittings of vessels
are not within the purview of section 1466, and the cost of the
work is not subject to duty. An article must be permanently
attached to the vessel and it most be essential to the successful
operation of the vessel (see Otte v. United States, 7 C.C.P.A.
166 (1916), and United States v. Richard & Co., 8 Ct. Cust. App.
231, T. D. 37496 (1917). To be found non-dutiable as a
modification/alteration/addition, the work must involve no
element of repair due to damages, deterioration or wear and tear.
If those are present, the work will be considered a repair and
dutiable. After reviewing the record and Mitsubishi Heavy
Industries, Ltd. (MHI), bill No. 3142-473350, dated July 28,
1988, we consider the work done under the following items to be
in the nature of non-dutiable modifications/alterations/additions
to the hull and fittings rather than dutiable repairs to the
vessel due to damage or deterioration:
Item 7/87-1(2) - Rope Guard,
Item 7/87-1(1) - Stern Frame Boss,
Item 7/87-11 -Stern Tube Seal Modification,
Item 7/87-3 - New door on Economizer preheating casing,
Item 7/87-4 - Stern Tube Bearing Lube Oil System
Item 7/87-6 - Gas Economizer drain,
Item 7/87-10 - Propeller modification,
Item 7/87-13 - Purifier Separator Driven Feed pumps,
Item 7/87-18 - Lube Oil Filing Line,
Item 7.88-1 - Modification of Sea Chests Strainers for
Diver Access,
Item 7.88-2 - Modification of Rudder Pintle inspection
access plate,
Item 7.88-3 - Modification of under water painted markings
for diver identification,
In Headquarters ruling 106543 JM, we held that mere cleaning
operations are not dutiable. However, cleaning operations which
remove rust and deterioration or worn parts, and which are a
necessary factor in the effective restoration of a vessel to its
former state of preservation, constitute vessel repairs (See
C.I.E. 429/61). Accordingly, the cost associated with the
inspection of Item 7/88-10 - Rudder Lower Pintle Nut Access,
is nondutiable.
Customs has held that where periodic surveys are undertaken
to meet the specific requirements of a classification society,
insurance carrier, etc., the cost of the surveys is not dutiable
even when dutiable repairs are effected as a result thereof;
however, in the liquidation process Customs should go beyond the
mere labels of "continuous" or "ongoing" before deciding whether
the item is dutiable. If an inspection or survey is conducted as
a part of an ongoing maintenance and repair program labelled
"continuous" or "ongoing" the cost is dutiable. Also, if the
survey is to ascertain the extent of damage sustained, or to
ascertain if the work is adequately completed, the costs are
dutiable as part of the repairs which are accomplished pursuant
to the holdings in C.I.E. 429/61, C.S.D. 79-2, and C.S.D. 79-
277. Item 7/88.4 is for video services which were performed to
survey the condition of the underwater hull to qualify for 3 + 2
year extended term drydock per USGA requirements. Since no
repairs followed this survey, the video camcorder service is in
the nature of a periodic survey. Accordingly, the cost of this
service is a non-dutiable expense.
The term "casualty", as it is used in the vessel repair
statute (19 U.S.C. 1466), has been interpreted by the Customs
Court as something which, like stress of weather, comes from
unexpected force or violence, such as from a fire, explosion, or
collision (see Dollar Steamship Lines, v. United States, 5 Cust.
Ct. 28-29, C.D. 362 (1940)).
A clear requirement of the statute is that the vessel be
compelled by such a casualty to seek foreign shipyard service to
secure the safety and seaworthiness of the vessel and to enable
her to safely reach her port of destination.
The documents submitted with the protest substantiates that
the a fire in the exhaust gas boiler caused damage to the
economizer in that the duty engineer blew exhaust gas boiler
tubes and shortly thereafter high pressures was indicated in 7 K
system. At this time, the high pressure dump valve was opened
and it was controlled to the full open position in order to
increase the dump. However, when the assistant engineer went
down below he found that the dump outlet value was closed.
Upon reviewing the record in its entirety, we find that the
damage sustained to the subject vessel which occurred on February
15,1986, was the result of a "casualty" within the meaning of
section 1466. The Customs Service has ruled that single acts of
negligence of crewmembers which cause damage to vessels, whether
attributable to officers or not, will be considered "other
casualties" within the meaning of section 1466(d)(1), provided no
evidence of owner direction or inducement is present (see C.S.D.
82-42).
The cost on MHI bill No. 3142-473350 relating to the work on
the exhaust gas economizer shows that the work was done in May
1988. There is no authority under title 19, United States Code,
section 1466, to remit duty assessed on the cost of repairs
effected in foreign ports because the work load at the only
United States port said to be capable of serving the vessel,
precluded performance of the necessary work within a specific
time. We have in the past declined to grant remission on repairs
obtained in a foreign shipyard for reasons of commercial
expediency (see case No. 105884 LLB). Accordingly, the repair
work performed on the subject vessel is dutiable. In view of
foregoing, the protest is denied as to the exhaust gas
economizer, the cleaning, and Hydro pressure test relating to
this repair.
HOLDINGS:
1. The installation of Items Nos. 7/87-1(2), 7/87-1(1),
7/87-11 7/87-3, 7/87-4, 7/87-6, 7/87-10, 7/87-13, 7/87-18,
7.88-1, 7.88-2, and 7.88-3 constitutes modifications/
alterations/additions to the hull and fittings rather than
repairs. As such, the cost of this work in not dutiable
under 19 U.S.C. 1466. The protest is granted.
2. The record shows that no repairs were accomplished as a
result of the video camcorder survey. The camcorder video
survey is in the nature of a periodic survey. Under the
circumstances, the cost of the survey is not subject to duty
under 19 U.S.C. 1466. The protest is granted as to Item
7.88-4.
3. The cost associated with the inspection in item No.
7/88/-10 is non-dutiable. The protest is granted.
4. Repairs necessitated by crew negligence where there is
no owner direction or inducement are "other casualties"
under the statute, however, there is no authority under the
provisions of the statute to grant relief for repairs which
are deferred for commercial expediency. The protest is
denied as to the subject items associated with the casualty.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch