VES-13-18-RR:IT:EC 113233 BEW
Chief, Residual Liquidation and Protest Branch
Commercial Operations
U.S. Customs Service
6 World Trade Center
New York, N.Y. 10048-002980
RE: Petition for Review; Vessel Repair Entry No. CO-4-001493-9; M/T FREDERICKSBURG; 19 U.S.C. § 1466
Dear Sir:
This is in response to your memorandum dated September 11,1994 (VES-13-18-O:R: ATC), which forwarded for our review a petition for review filed in conjunction with your decision of September 1, 1994, relating to the above-referenced vessel repair entry.
FACTS:
The M/V FREDERICKSBURG is a U.S.-flag vessel operated by World Agencies Inc.. The vessel had foreign shipyard work performed in Haifa, at sea, Lavera, France and at sea in April and May 1994, respectively. Subsequent to the completion of the work the vessel arrived in the United States at New York, New York, on May 19, 1994. A vessel repair entry was timely filed on May 20, 1994.
By your decision of September 1, 1994, acting on the application for relief, you held:
Your application has been reviewed and has been denied in part; the invoice does not segregated the labor charges for the period covered by the entry.
In the petition for review, the petitioner contends that contrary to your decision of September 1, 1994, the labor charges for the period covered by the entry were segregated, and has again submitted copies of both Pro-forma invoices and original invoices.
ISSUE:
Whether the evidence presented is sufficient to prove that the foreign work performed on the subject vessel for which the petitioner seeks relief is remissible under the 19 U.S.C. § 1466.
LAW AND ANALYSIS:
Title 19, United States Code, § 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.
Furthermore, pursuant to section 4.14(d)(1)(ii), Customs Regulations, the application for relief, with supporting evidence, shall be filed within 90 days from the date of first arrival of the vessel, unless Customs grants an extension. Applications for relief are to be submitted for each vessel repair entry for which relief is sought.
Although an application for relief need not be in any particular form, pursuant to section 4.14(d)(1)(i), Customs Regulations, it should allege that an item or a repair expense is not subject to duty under either paragraph (a) of section 4.14 (items that are not subject to duty) and/or paragraph (c) circumstances allowing remission of duty otherwise due). The applicant should be informed that absent Customs authorized extensions of time, failure to submit a timely application for relief and supporting documentation for each individual entry for which relief is sought will result in the entry being forwarded for immediate liquidation.
In the petition, the petitioner's only contention is that the labor charges were segregated. The costs associated with the Protecno LTD., Invoice 017/94 appear to relate to labor of a riding crew which performed work on 13 of the vessel's staterooms. Based on a review of the documents submitted, we cannot determine what work was performed on the staterooms. The documents submited are not sufficient to show whether the work was for the purposes of modifications to the vessel's staterooms, or whether the work was to repair damage.
In its application of the vessel repair statute, the Customs Service has held that modifications, alterations, or additions to the hull and fittings of a vessel are not subject to vessel repair duties. Over the course of years, the identification of modification
processes has evolved from judicial and administrative precedent. In considering whether an operation has resulted in a modification that is not subject to duty, the following elements may be considered:
1. Whether there is a permanent incorporation into the hull or superstructure of a vessel (see United States v. Admiral Oriental Line, 18 C.C.P.A. 137 (1930)), either in a structural sense or as demonstrated by the means of attachment so as to be indicative of the intent to be permanently incorporated. This element should not be given undue weight in view of the fact that vessel components must often be welded or otherwise "permanently attached" to the ship because ships are subject to constant pitching and rolling. In addition, some items, the cost of which is clearly dutiable, operate with other vessel components, resulting in the need, possibly for that purpose alone, for a fixed and stable attachment to those vessel parts. It follows that a "permanent attachment" may take place that does not necessarily involve a modification to the hull and fittings.
2. Whether in all likelihood, an item under consideration would remain aboard a vessel during an extended lay-up.
3. Whether, if not a first-time installation, an item under consideration replaces a current part, fitting, or structure which is not in good working order.
4. Whether an item under consideration provides an improvement or enhancement in operation or efficiency of the vessel.
Very often when considering whether an addition to the hull and fittings took place for the purpose of 19 U.S.C. § 1466, we have considered the question from the standpoint of whether the work involved the purchase of "equipment" for the vessel. It is not possible to compile a complete list of items that might be aboard a ship that constitute its "equipment". An unavoidable problem in that regard stems from the fact that vessels differ as to their services. What is required equipment on a large passenger vessel might not be required on a fish processing vessel or offshore rig.
"Dutiable equipment" has been defined to include:
. . . 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. Admiral Oriental,
supra., (quoting T.D. 34150, (1914))
By defining what articles are considered to be equipment, the Court attempted to formulate criteria to distinguish non-dutiable items which are part of the hull and fittings of a vessel from dutiable equipment, as defined above. These items might be considered to include:
. . . 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... Admiral Oriental,
supra., (quoting 27 Op. Atty. Gen. 228).
A more contemporary working definition might be that which is used under certain circumstances by the Coast Guard; it includes a system, accessory, component or appurtenance of a vessel. This would include navigational, radio, safety and, ordinarily, propulsion machinery.
The Customs Service has held that the decision in each case as to whether an installation constitutes a non-dutiable modification/alteration/addition to the hull and fittings of a 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.
After a complete review of the documents submitted with the petition, we affirm your decision of September 1, 1994. In reviewing the record in its entirety, it is apparent that while the documentation generated by the petitioner, tend to support the claim that the work in question might be non-dutiable modifications, the documents and invoices submitted are devoid of any description of the work that was actually performed. The documents submitted essentially constitute a mere listing of various parts and expenses (e.g., travel costs, freight charges, etc.). We cannot determine, from the documents that were submitted, that the work performed is a modification due to an insufficient description of the what work was actually done.
First, the basis under which relief is claimed is unclear. The letter of May 20, 1994, states that the repairs were required for the seaworthiness and integrity of the vessel. That indicates that the basis for the exemption is asserted under 19 U.S.C. 1466(d). However, the invoice of June 25, 1994, states that the purpose of the work was to upgrade staterooms and corridors. There is nothing in the file which connects an apparent exemption claim under 19 U.S.C. 1466(d) with work performed to upgrade staterooms and corridors.
Second, while the letter of September 9, 1994, disputes the statement that there was no separation of labor charges, that letter does not express a specific basis for relief. If the basis for relief is the assertion that the work was a modification rather than a repair, the evidence is insufficient to support that assertion. The entry documents themselves state that the work consisted of repairs to crew quarters. The invoice already noted states that it is to upgrade staterooms and corridors, a description that does not clearly show a modification under the criteria noted above. Further the description in the time sheets "reconditioning of crew staterooms" also does not clearly support the assertion that the work was a modification under the criteria noted above. Accordingly, the petition for review is denied.
HOLDING:
The evidence presented is insufficient to prove that the foreign work performed on the subject vessel constitutes modifications so as to render the work non-dutiable under 19 U.S.C. § 1466. The petition is denied.
Sincerely,
William G. Rosoff
Chief
Entry and Carrier Rulings Branch