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

HQ 114747 August 5, 1999 VES-13-18-RR:IT:EC 114747 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; 19 U.S.C. § 1466 Dear Sir: This is in response to your memorandum dated June 25, 1999, forwarding a petition for review of Headquarters ruling letter 114659, dated April 21, 1999. Our finding is set forth below. FACTS: The PRESIDENT HOOVER is a U.S.-flag vessel which incurred foreign costs 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 applicant sought relief with respect to Item no. 2 of the entry which references an alarm printer for the engine control console. The applicant contended that this article was a modification and therefore not subject to duty under the vessel repair statute. With respect to this claim, the applicant stated that since the printer model being replaced was no longer supported by the manufacturer, it was decided to upgrade to a newer model recommended by the same manufacturer. Customs rendered its decision on the application for relief denying it pursuant to Headquarters ruling letter 114659. A petition for relief was timely filed wherein the petitioner reiterates his claim that Item no. 2 constitutes a non-dutiable modification. In addition to addressing the substantive merits of this case pertaining to the issue of vessel modification, the petition sets forth the following occurrences with which the petitioner takes great umbrage and upon which he bases an allegation of a lack of due diligence on the part of the Customs Service in this matter:  - 2 - (1) - a typographical error on a letter from your office dated May 14, 1999, wherein the year of the vessel’s arrival was typed 1997 instead of 1998; (2) - the subject vessel being mistakenly referred to in the the first sentence of Customs ruling letter 114659 as the PRESIDENT ROOSEVELT rather than the PRESIDENT HOOVER (notwithstanding the correct reference in the RE: line at the beginning of the ruling); (3) - the fact that the first sentence of Customs ruling letter 114659 states that the subject vessel “underwent foreign shipyard work” when the work in question was performed at the APL Cargo terminal at the Port of Hakata, Japan, and not in any shipyard. In view of the above administrative errors, coupled with Customs denial of the application claiming that the work in question constituted a non-dutiable modification, the petitioner states, “We strongly object to this treatment and expect a full and comprehensive review of Customs procedures in this matter.” 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. 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..." With respect to the above-referenced administrative errors, we will seek to eliminate them in the future. Regrettably, given the volume of work performed by Customs personnel, such errors, particularly those of a typographical nature, sometimes occur. In regard to the specific typographical error by Customs to which the petitioner refers (i.e., the typing of the year 1997 instead of 1998), we disagree with his allegation that it is indicative of a dismissal of the application without proper review.  - 3 - With respect to the second and third of the above-enumerated points, while we also regret their occurrence, in view of the fact that they had no impact, either singularly or collectively, on Customs decision on the application, they can collectively be characterized as “harmless error” which in no way affected our decision on the merits of this case. In view of the fact that the administrative errors raised by the petitioner are not substantive either procedurally or otherwise, they provide no basis for a reversal of Customs holding in the application for relief. With respect to the substantive legal merits of this case (i.e., whether the work in question constitutes a non-dutiable modification), we note that 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 application in light of the above-referenced authorities, we found 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...” Consequently, our ruling on the application stated that 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 vessel equipment. Item no. 2 was therefore held to be dutiable. In response to Customs decision on the application, the petitioner submitted additional documentation (enclosures “a” and “b”), not previously submitted at the application stage, to support his claim that the work in question constituted a modification. Enclosure “a” is Section 41 of the publication entitled, “American Bureau of Shipping, Rules for Building and Classing Steel Vessels, 1988.” Enclosure “b” is a copy of the vessel’s certificate of classification.  - 4 - With respect to this additional documentation, the petitioner draws our attention to “page 41/2" of enclosure “a” where the petitioner states “...the definition of the ACCU symbol is presented.” Section 41.2, entitled “Periodically Unattended Machinery Spaces”, contains no such definition but merely provides as follows: Where it is intended that a vessel of 500 tons gross tonnage or greater be operated with periodically unattended propulsion machinery spaces, the vessel is to comply with the requirements for ? ACCU or ? ABCU. We do note, however, that the ACCU symbol is defined in Section 41.7 (i.e., the “Automatic Control System for Unattended Engine Room Certified”). With respect to this symbol, the petitioner directs our attention the lower left portion of enclosure “b” which “shows the ACCU symbol as being on record as the class of vessel, as certified by the American Bureau of Shipping.” The petitioner further draws our attention to enclosure “a” on “page” 41.19 which states in part, “The main control station is to be fitted with alarms and emergency trips as required together with indicators and is to have means for the assessment of the operational status of all machinery and systems vital to the propulsion of the vessel.” The petitioner goes on to state that, “Table 41.1 is referenced and we encourage Customs to review this entire section as it is quite informative.” We have heeded the petitioner’s advice and reviewed Table 41.1 and while we agree that it is informative, we also note that it makes no reference whatsoever to an alarm printer, the item currently under consideration in this petition. In regard to the petitioner’s discourse as to the subject alarm printer being a “part”, we note that such statements are of no consequence to a modification claim. Furthermore, the petitioner’s statements in support of his modification claim are not corroborated by his cites to the documentation submitted (enclosures “a” and “b”). Conclusory statements offered in support of a position which are unsupported by evidentiary facts are not determinative as to the issue under consideration. Andy Mohan, Inc. v. United States, 74 Cust. Ct. 105, 396 F.Supp. 1280 (1975), aff’d, 63 CCPA 104, 537 F.2d 516 (1976). The petitioner has therefore not met his burden of proof in this matter.  - 5 - 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, Sandra L. Bell Director International Trade Compliance Division