VES-13-18 CO:R:P:C 110888 BEW
Chief, Technical Assistant
Pacific Region
U. S. Customs Service
One World Trade Center
Long Beach, California 90831
RE: Tacoma Vessel Repair Entry No. 110-0103885-7 dated
December 17, 1989; M/V SEALAND DEVELOPER, Voyage No. 122.
Application; modifications; 19 U.S.C. 1466; 19 CFR 4.14
Dear Sir:
This is in reference to a memorandum dated March 1, 1990,
from your office which transmitted an application for relief from
duties filed by Sea-Land Services, Inc., relating to vessel
repair entry No. 110-0103885-7 concerning foreign repairs
performed on the SEALAND DEVELOPER, voyage 122.
FACTS:
The record shows that the shipyard work in question was
performed on the subject vessel in Kobe, Japan, during the month
of December 1989. The subject vessel arrived in the United
States at the port of Tacoma, Washington, on December 17, 1989.
The entire vessel repair entry involves a potential duty of
$2,378.
The applicant claims that relief for the subject items
should be granted because the items should be classified as
nondutiable items covered under title 19, United States Code,
section 1466 and sections 4.14 of the Customs Regulations.
You have requested our advice concerning repairs to the
after house doors on 12 of Sea-Land's vessels (D-9J). This entry
covers only the SEALAND DEVELOPER. It claims that the work
performed is a permanent modification to the vessel hull and
fittings.
ISSUE:
Whether the foreign work performed on the subject vessel is
dutiable under 19 U.S.C. 1466.
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
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 1466.
The Court in Admiral Oriental, supra., cited with approval
an opinion of the Attorney General (27 Op. Atty. Gen 228). That
opinion interpreted 17 of the Act of June 26, 1884 (23 Stat.
57), which allowed drawback on vessels built in the United States
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 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.
Under long-standing and consistently applied administrative
policy, an installation, even one of a permanent nature, is
considered to be a dutiable repair rather than a modification if
the installation addresses a repair need. Thus, if an area of a
vessel is enhanced by the replacement of one permanent
installation with another, the operation is considered dutiable
if evidence reveals that a defect or wastage was present in the
former installation, which condition was cured by replacement.
In the present case, the applicant claims that the
installation of the panic-proof locks is a design and operational
improvement over the old locks. It is claimed that the old locks
were not found to be damaged at the time they were replaced, and
that the permanent installation of the panic proof locks is to
improve security and crew safety and should be properly
considered a non-dutiable modification.
Examination of the entire record, including that portion of
the invoice relating to the subject items, reveals that the
panic-proof locks are permanent installations to the vessel's
hull and fittings. Accordingly, the subject item is a non-
dutiable modification to the vessel's hull and fittings.
HOLDING:
1. In light of our present findings based upon the evidence
as stated in the law and analysis section of this ruling, we
find that the installation of panic-proof locks to the
outside doors to be a non-dutiable permanent modification to
the hull and fittings of the vessel. The said items
constitute 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.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch