Vessel Repair Entry No. 808-0515512-6; PRESIDENT HOOVER; V-007E; Modification; Equipment; 19 U.S.C. § 1466

HQ 114659 April 21, 1999 VES-13-18-RR:IT:EC 114659 GEV CATEGORY: Carriers Chief, Liquidation Branch U.S. Customs Service Post Office Box 2450 San Francisco, California 94126 RE: Vessel Repair Entry No. 808-0515512-6; PRESIDENT HOOVER; V-007E; Modification; Equipment; 19 U.S.C. § 1466 Dear Sir: This is in response to your memorandum dated March 25, 1999, forwarding an application for relief from duties assessed pursuant to 19 U.S.C. § 1466. You request our review of Item no. 2 for which relief is sought. Our finding is set forth below. FACTS: The PRESIDENT ROOSEVELT is a U.S.-flag vessel which underwent foreign shipyard work in December of 1998. Subsequent to the completion of such work the vessel arrived in the United States at Oakland, California, on December 27, 1998. A vessel repair entry was timely filed as was an application for relief with supporting documentation. The only cost at issue is that covered by Item no. 2 of the entry which references an alarm printer for the engine control console. The applicant contends that this article is a modification and therefore not subject to duty under the vessel repair statute. With respect to this claim, the applicant states that since the printer model being replaced is no longer supported by the manufacturer, it was decided to upgrade to a newer model recommended by the same manufacturer. ISSUE: Whether the foreign costs covered by Item no. 2 contained within the subject entry for which our review is sought are dutiable under 19 U.S.C. § 1466.  - 2 - LAW AND ANALYSIS: Title 19, United States Code, § 1466 (19 U.S.C. § 1466), provides in pertinent part for the payment of an ad valorem duty of 50 percent of the cost of "...equipments, or any part thereof, including boats, purchased for, or the repair parts or materials to be used, or the expenses of repairs made in a foreign country upon a vessel documented under the laws of the United States..." In its application of the vessel repair statute, Customs 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. (See Otte v. United States, 7 Ct. Cust. Appls. 166, T.D. 36489 (1916); United States v. Admiral Oriental Line et al., 18 C.C.P.A. 137, T.D. 44359 (1930); and Customs Bulletin and Decisions, Vol. 31, Number 40, published October 1, 1997.) The factors discussed within the aforementioned authority are not by themselves necessarily determinative, nor are they the only factors which may be relevant in a given case. However, in a given case, these factors may be illustrative, illuminating, or relevant with respect to the issue of whether certain work may be a modification of a vessel which is nondutiable under 19 U.S.C. § 1466. Upon reviewing the applicant’s claim in light of the above-referenced authorities, we find the court’s decision in Otte, supra, to be particularly instructive. While acknowledging that “[t]he line of distinction between equipment and the vessel is somewhat difficult to mark,” the decision provides that, “[e]quipment, used in a general sense, may be defined as any portable thing that is used for, or provided in, preparing a vessel whose hull is already finished for service.” It further provides that equipment is “[t]he furniture of whatsoever nature which is put into a finished ship...” Accordingly, in view of the portability of the alarm printer in question, as well as the finished state of the vessel into which it was installed, it is readily apparent that Item no. 2 is dutiable as vessel equipment.  - 3 - HOLDING: The foreign costs covered by Item no. 2 contained within the subject entry for which our review is sought are dutiable under 19 U.S.C. § 1466 as discussed in the Law and Analysis portion of this ruling. Sincerely, Jerry Laderberg Chief Entry Procedures and Carriers Branch