Vessel Repair; 19 U.S.C. 1466; Entry No. 514-3004582-6; SEA- LAND VALUE, V-38; Petition

HQ 113013 February 10, 1994 VES-13-18 CO:R:IT:C 113013 GOB CATEGORY: Carriers Chief, Residual Liquidation and Protest Branch New York Region Six World Trade Center New York, New York 10048-0945 RE: Vessel Repair; 19 U.S.C. 1466; Entry No. 514-3004582-6; SEA- LAND VALUE, V-38; Petition Dear Sir: This is in response to your memorandum dated January 28, 1994, which forwarded the petition for relief submitted by Sea-Land Service, Inc. ("petitioner") with respect to the above-referenced vessel repair entry. FACTS: The record reflects the following. The SEA-LAND VALUE ("vessel") is a U.S.-flag vessel owned and operated by the petitioner. Certain foreign shipyard work was performed on the vessel on voyage 38. The vessel arrived at the port of Elizabeth, New Jersey on September 29, 1991 and filed a vessel repair entry. By letter dated December 17, 1993, your office denied the application for relief with respect to certain items. Petition The petition pertains to only one item, #101 on the petitioner's spreadsheet. Item 101 is described on the spreadsheet only as "attachment G", with the word "modifications" being written in hand next to that phrase. One invoice sheet has been submitted with the documentation which we have received. That sheet, which is a Wilton-Fijenoord b.v. invoice and which pertains to the subject vessel, describes work pertinent to the "Forward Seachest Modification" and "A new stainless steel strainer." There is no indication of any repair on this invoice. Additional documentation includes the following: (a) A letter dated May 6, 1991 from the petitioner to the U.S. Coast Guard, which discusses the relocation of "the existing forward sea chest on the subject class vessels." This letter does not refer to specific vessels. The modification drawings were not included with the submission; (b) A three-page - 2 - description of a sea chest "modification specification" with respect to "Atlantic Class Vessels" which are not specified by name. These pages describe the installation of a new sea chest; (c) Petitioner's inter-office correspondence dated February 6, 1991 with respect to the "forward sea chest relocation modification" for Atlantic Class Vessels; and (d) A letter dated January 30, 1991 from ABS Americas to petitioner. This letter pertains to the "NEDLLOYD HOLLAND ID# 8401896 and Class Vessels." ISSUE: Whether the item at issue is dutiable pursuant to 19 U.S.C. 1466. 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 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 our 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. The identification of work constituting modifications vis- a-vis work constituting repairs has evolved from judicial and administrative precedent. In considering whether an operation has resulted in a nondutiable modification, the following factors have been considered: 1. Whether there is a permanent incorporation into the hull or superstructure of a vessel, either in a structural sense or as demonstrated by means of attachment so as to be indicative of a permanent incorporation. See United States v. Admiral Oriental Line, 18 C.C.P.A. 137 (1930). We note, however, that a "permanent attachment" does not necessarily involve a modification to the hull and fittings. 2. Whether in all likelihood an item would remain aboard a vessel during an extended lay-up. 3. Whether an item constitutes a new design feature and does not merely replace a part, fitting, or structure that is performing a similar function. 4. Whether an item provides an improvement or enhancement in operation or efficiency of the vessel. After a consideration of the evidence of record, we find that the subject item is a nondutiable modification. We make this - 3 - determination based upon the Wilton Fijenoord b.v. invoice described above. For the purpose of future vessel repair entry submissions, the petitioner should be advised as follows: (a) all pertinent documentation, including invoices, drawings, and attachments should be submitted and properly labelled; and (b) it should be clear from the submitted documentation that such documentation pertains to the specific vessel and foreign shipyard work which is at issue in that entry. HOLDING: The petition is granted based on the determination that item 101 is a nondutiable modification. Sincerely, Arthur P. Schifflin Chief Carrier Rulings Branch