VES-13-18-CO:R:P:C 110833 LLB
Chief, Technical Branch
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90831
RE: Vessel Repair; Cleaning; Survey; Modification; Repair;
Vessel SYOSSET, V-184; Entry Number C27-0034962-7
Dear Sir:
Reference is made to your memorandum of January 30, 1990,
which forwards for our consideration the application for relief
from vessel repair duties filed by Liberty Maritime Corporation,
seeking relief from the assessment of vessel repair duties in
connection with the March 14, 1989, arrival of the vessel SYOSSET
in the port of Los Angeles, California.
FACTS:
The vessel, upon arrival, filed a declaration and entry of
vessel repairs as required under section 4.14, Customs
Regulations (19 CFR 4.14), reporting work which had been
performed in a foreign shipyard. The application for relief
from duties seeks relief on numerous items for the claimed reason
that they involved non-repair-related expenses (modification,
cleaning, survey, etc.). Customs Headquarters advice is sought
on twenty-two such items. These items are:
Invoice item no. Description
1). 601 Hi level alarm
2). 602 Vapour recovery
3). 603 Mooring arrangement
4). 605 Panama chock
5). 606 Heating coils
6). 607 Cargo manifold
7). 608 Stack sampling ports
8). 609 Cargo piping pump suction
9). 610 Main feed pump suction
10). 611 Fuel oil deep tank
11). 612 Sitor system
12). 613A Satellite communication system
13). 613B Reserve communication system
14). 614 Cargo tank bulkhead
15). 615 Radar system
16). 616 Cargo tank expansion
17). 617 Anodes
18). 618 Longitudinal and connection
19). 619 Inert gas line
20). 620 IGS sliding blank
21). 1103 Pintle pin
22). 4404 Exhaust dump noise dampening
ISSUE:
Whether the items claimed as free and forwarded for review
and advice are considered duty-free under either court or
administrative interpretations of 19 U.S.C. 1466(a).
LAW AND ANALYSIS:
Section 466, Tariff Act of 1930, as amended (19 U.S.C. 1466)
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
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 Line 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 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.
Customs has held that for an item to be characterized as a
nondutiable modification, it must encompass the installation of
an item as a new design feature, not as a replacement for, or
restoration of, parts now performing a similar function. We have
also held that the decision in each case as to whether an
installation constitutes a nondutiable addition to the hull and
fittings of the vessel depends to a great extent on the detail
and accuracy of the drawings and invoice descriptions of the
actual work performed. Even if an article is considered to be
part of the hull and fittings of a vessel, the repair of that
article, or the replacement of a worn part of the hull and
fittings, is subject to vessel repair duties.
Customs also holds that the costs for certain surveys and
inspections are not dutiable, even though dutiable repair may be
performed in connection with their execution. Such operations
are generally limited to surveys required to keep a vessel in
class. Other surveys or inspections, such as those performed to
ascertain whether repairs are either necessary or adequately
accomplished, are dutiable.
One early case (United States v. George Hall Coal Co., 134
F. 1003 (1905)), was the first to find any of various types of
expenses associated with foreign shipyard operations to be
classifiably free from the assessment of vessel repair duties.
We have reviewed the evidence regarding the items for which
relief is sought and find that the operations constitute
permanent duty-free modifications to the hull and fittings of the
vessel, with the following exceptions:
Items 12 (613A) and 15 (615) detail the installation of a
new satellite communication system and radar system,
respectively. Normally, some of the items installed (wiring, for
instance) would be considered permanent modifications and the
cost of that portion would be duty-free. In this case, however,
there is no segregation within the items. Since portions of the
items concern the installation of sensitive electronic equipment
which would in all likelihood be removed from the vessel during
extended lay-up, the entire cost of both items should be
considered subject to duty.
Item 21 (1103) concerns the fabrication and installation of
a new pintle pin nut and sleeve for the missing upper pintle.
This is a clear repair process which should be considered subject
to duty.
HOLDING:
In light of the foregoing facts and analysis of the law, we
are of the opinion that the items for which relief is sought are
subject to duty under section 1466(a) only to the extent
specified above.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch
CO:R:P:CLLB:VDT:7/20/90