VES-13-18-RR:IT:EC 114259 GOB
Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 107
P.O. Box 2450
San Francisco, CA 94126
RE: Vessel Repair Entry No. C27-01477659-3; 19 U.S.C. 1466;
R.J. PFEIFFER, V- 93; Petition
Dear Madam:
This is in response to your memorandum dated January 30,
1998, which forwarded the petition submitted by Matson Navigation
Company ("petitioner" or "Matson") with respect to the above-referenced vessel repair entry.
FACTS:
The R.J. PFEIFFER (the "vessel"), a U.S.-flag vessel owned
and operated by the petitioner, arrived at the port of Los
Angeles, California on April 29, 1996. The subject vessel repair
entry was timely filed. The vessel underwent certain shipyard
work in Korea in April 1996.
ISSUE:
Whether the subject items are dutiable pursuant to 19 U.S.C.
1466(a).
LAW AND ANALYSIS:
19 U.S.C. 1466(a) provides for the payment of duty at a rate
of fifty percent ad valorem on the cost of foreign repairs to,
and equipment purchased in a foreign country for, vessels
documented under the laws of the United States to engage in
foreign or coastwise trade, or vessels intended to be employed in
such trade.
The subject entry is a "post-Texaco" entry, i.e., an entry
filed after the appellate decision in Texaco Marine Services,
Inc., and Texaco Refining and Marketing, Inc. v. United States,
44 F.3d 1539 (CAFC 1994), aff'g 815 F.Supp. 1484 (CIT 1993).
Accordingly, the Texaco decision applies to this entry.
In its application of 19 U.S.C. 1466, Customs has held that
(contrary to the treatment of vessel repairs and vessel
equipment) modifications, alterations, and additions to the hull
of a vessel are not subject to duty under the vessel repair
statute. The identification of work constituting modifications
vis-a-vis work constituting repairs has evolved from judicial and
administrative precedent. See, for example, Otte v. U.S., 7 Ct.
Cust. Appls. 166, T.D. 36489 (1916); U.S. v. Admiral Oriental
Line et al., 18 C.C.P.A. 137, T.D. 44359 (1930), and Customs
Bulletin and Decisions of June 18, 1997 (Vol. 31, No. 24/25, p.
23) and October 1, 1997 (Vol. 31, No. 40, p. 13). The various
factors discussed within those authorities are not by themselves
necessarily determinative, nor are they the only factors which
may be relevant in a given case.
In its submission, the petitioner requests relief with
respect to certain items which were not the subject of its
application, i.e. item 016, rudder bearing readings and item 017,
sea chest inspection. 19 CFR 4.14(d)(2)(i) states, in pertinent
part:
(2) Petition for review on a denial of an application
for relief-(i) Form. If an applicant is dissatisfied
with the decision on its application for relief, the
applicant may file a petition for review of that
decision. The petition for review need not be in any
particular form. The petition for review must identify
the decision on the application for relief and must
detail the exceptions taken to that decision ...
[Emphasis supplied.]
Pursuant to 19 CFR 4.14(d)(2)(i), a party may not petition
for relief with respect to vessel repair items which were not
included in the application for relief. Accordingly, no relief
is available with respect to these items.
General Services Items. The petitioner contends that
general services items should not be prorated. It is Customs
oft-repeated position that general services costs and drydock
costs are to be prorated between dutiable and nondutiable costs.
This position has been fully explained in many rulings, e.g.,
Ruling 113908 which involved a different Matson vessel repair
entry. Our position remains in full force and effect.
Accordingly, this claim of the petitioner is denied.
Item 012. The invoice states: "Clean hull using high
pressure water blast to enable inspection of underwater surfaces
by ABS/USCG." We find that this item is nondutiable as incident
to a nondutiable ABS inspection.
Item 028. The invoice states: "Install new fuel oil tank
level indicating system probes ..." The petitioner states: "This
work item was the installation of a new redundant tank level
indicating system to insure that fuel oil tanks have a second
means of determining their capacity as they are being filled ...
Matson views this work as a modification because it is an
entirely new system that is now a permanent part of the ship, and
is in addition to the original fully operational system."
[Emphasis in original.] We find that this item is dutiable under
19 U.S.C. 1466 as vessel equipment. The fuel oil tank level
indicating system is more akin to equipment of the vessel than to
a modification to the hull of the vessel. Vessel equipment is
dutiable under 19 U.S.C. 1466.
Item 040. The invoice states: "ABS[.] Range anchors and
chain, clean for ABS inspection." The petitioner asserts: "This
item was part of the ABS Special Survey ... The chain is flaked
out on the drydock floor in preparation for visual inspection by
ABS/USCG." We find that this item is nondutiable as incident to
a nondutiable ABS inspection.
Item 048. The invoice states: "Install new thermometer and
pressure gauge bosses on each generator engine exhaust." The
petitioner asserts: "The installation of instrumentation bosses
in the exhaust trunks of the diesel generators was a new
installation to monitor the diesel engine performance and compare
this information with the manufacturer's guidelines for optimum
safe operation and fuel consumption." We find that this item is
dutiable under 19 U.S.C. 1466 as vessel equipment. This item is
more akin to equipment of the vessel than to a modification to
the hull of the vessel. Vessel equipment is dutiable under 19
U.S.C. 1466.
Item 10151. The petitioner states: "The conversion of MV
R.J. PFEIFFER at Hyundai Mipo Dockyard involved the
reconfiguration of cargo hold no. 3 below deck from three rows of
24' container stowage to two rows of 40' container stowage... The
new 40' hatch covers were required in place of the existing 24'
covers." It has submitted a drawing showing a comparison between
the previous stowage and the current stowage. The invoices are
generally supportive of the petitioner's description of this
work. Accordingly, we find that this item is a nondutiable
modification.
HOLDING:
As stated above, the petition is granted in part and denied
in part.
Sincerely,
Jerry Laderberg
Chief,
Entry Procedures and Carriers
Branch