VES-13-18-RR:IT:EC 114782 GOB
Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 107
P.O. Box 2450
San Francisco, CA 94126
RE: 19 U.S.C. 1466; APL KOREA, V-31E; Vessel Repair Entry No. 110-7995905-9; Application; Modifications to vessel
Dear Madam:
This ruling is in response to your memorandum of August 5, 1999, which forwarded the application submitted by American Ship Management, LLC (“applicant”) with respect to the above-referenced vessel repair entry.
FACTS:
The APL KOREA (the “vessel”), a U.S.-flag vessel owned and operated by the applicant, arrived at the port of Seattle on April 2, 1999. The subject vessel repair entry was subsequently filed. The vessel underwent certain foreign shipyard work in China and Singapore.
ISSUE:
Whether the subject items are dutiable pursuant to 19 U.S.C. 1466(a)?
LAW AND ANALYSIS:
19 U.S.C. 1466 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.
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.
You have requested our determination with respect to the following items.
Item 101 - Drydocking and Un-docking. This item represents drydock costs which are to be prorated between dutiable and nondutiable costs in accord with our oft-stated position.
Item 316 - Life Boat Falls Renewal and Load Test. This item is dutiable because it includes certain dutiable items, e.g., “fall wires were renewed,” “rewinding back the drums,” “erected and dismantled staging ... to facilitate the fall wires renewal.”
Items 501 through 513. These items include ballast tank modifications, hatch cover counter plate replacement, bearing pad installation, skimmed housing blocks for new type bearing pad, modification of hatch coaming, structural modifications and improvements, modifications to main sea water pump systems, heeling pump system modification, emergency generator space new drain installation, structural modifications to No. 6 heeling tanks, modification to economizer safety valve drain line, modification to evaporator feed water bypass line, modification to regulator bypass line, and modification to funnel drain line. Based upon the invoice descriptions of these items, we find that they are nondutiable. The invoices reflect modifications to the vessel, and there is no indication of repairs thereon.
Item CO#12 - Bow Thruster Room Bottom Cleaning. We find that this item is dutiable as incident to the dutiable repairs in item 281, “bulkhead fracture between bow thruster and 1 dt.”
Additional Item #3 - R.H. Nocon, Structural Engineer. The letter of April 23, 1999 from Mr. Nocon to the applicant states that, with respect to the APL KOREA, his expenses related to modifications were $3,302.94 and his expenses related to repairs were $1,651.44. We determine that this breakdown should be used.
HOLDING:
As detailed above, the application is granted in part and denied in part.
Sincerely,
Jerry Laderberg
Chief,
Entry Procedures and Carriers Branch