VES-13-18-CO:R:P:C 111042 KVS
Chief
Residual Liquidation and Protest Branch
6 World Trade Center
New York, NY 10048-0954
RE: Vessel repair; modification; steel plate
Vessel: AMERICAN CONDOR V-31
Vessel Repair Entry No. C110002124-0
Date of Arrival: June 28, 1988
Port of Arrival: Pennsauken, New Jersey
Dear Sir:
This is in response to your memorandum dated April 13, 1990,
which forwards for our consideration a petition for review filed
in connection with the AMERICAN CONDOR, vessel repair entry no.
C110002124-0. Our findings are set forth below.
FACTS:
The AMERICAN CONDOR, an American-flag vessel, underwent
certain foreign shipyard operations in the United Kingdom, the
Netherlands and West Germany between June 13 and 20, 1988.
Shortly thereafter, the vessel arrived in the United States at
Pennsauken, New Jersey on June 28, 1988 and made formal entry.
An application for relief from vessel repair duties was
filed on August 25, 1988. The application for relief was denied
in part in Customs Ruling Letter 110761 PH, dated February 14,
1990. The applicant was notified of this decision in a letter
dated February 28, 1990. The petition for review currently under
consideration was timely filed on March 30, 1990.
ISSUE:
Whether certain foreign shipyard work performed on the
subject vessel involving the installation of a new steel plate is
dutiable under 19 U.S.C. 1466.
- 2 -
LAW AND ANALYSIS:
Title 19, United States Code, section 1466(a) provides, in
pertinent part, for payment of duty in the amount of 50 percent
ad valorem on the cost of foreign repairs to vessels engaged,
intended to engage, or documented under the laws of the United
States to engage in the foreign or coastwise trade.
In its applicaiton of the vessel repair statute, Customs
follows the old and well-established rule that alteration or
modifications to the hull and fittings of a vessel are not
considered equipment or repairs under 19 U.S.C. 1466 and
therefore, are not dutiable (see United States v. Admiral
Oriental Line et al., 18 C.C.C.P. 137, T.D. 44359 (1930), and
C.I.E. 1294/58).
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. Customs
Memorandum 108871 (4-16-87). Customs has 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.
Customs Memorandum 108871 (4-16-87), citing C.S.D. 83-35. 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. See, C.I.E. 233/60.
The evidence before us indicates that the original steel
plates aboard the subject vessel were malfunctioning. The
Fleetserve invoice listing the alleged plate modification
specifies that repairs to the plate section were necessary.
Specifically, the invoice states, "Welding repairs, cracked plate
section." Furthermore, the Senior Port Engineer for Crowley
Maritime Corporation state, in a letter to Customs dated March
28, 1990, that the purpose of the alleged modifiction was "to
remedy cracking problems."
More importantly, the drawing of the work to be performed
(entitled "Hull Plating Modification F&A") indicates that the
alleged modification involved nothing more than placing a new
plate a short distance above the old plate.
Furthermore, although the petitioner asserts that the work
was done to comply with American Bureau of Shipping requirements,
we find no evidence of A.B.S. involvement. The documentation
submitted in support of the petition does not contain a copy of
any A.B.S. requirements pertaining to the work performed. Nor do
- 3 -
we find an invoice indicating that the vessel was surveyed by the
A.B.S. pursuant to these requirements. Lastly, no A.B.S. report
indicating lack of compliance with such requirements has been
submitted.
In light of these facts, we are unable to conclude that the
work carried out aboard the subject vessel was a new design
feature and not a replacement for, or restoration of parts
currently performing the same or similar function, albeit
improperly. Therefore, we find the costs incurred in the
installation of the steel plates to be dutiable. Accordingly,
the petition is denied in full.
HOLDING:
Where installations are made to a vessel for the purpose of
replacing malfunctioning parts currently performing the same or
similar function, the costs incurred in the installation cannot
be characterized as a non-dutiable modification and are held to
be dutiable.
Sincerely,
Stuart P. Seidel
Director, Regulatory Procedures
and Penalties Division