Vessel Repair Entry No. 514-3005786-2; 19 U.S.C. 1466; M/V TILLIE LYKES;Petition

HQ 114799 September 7, 1999 VES-13-18-RR:IT:EC 114799 GOB CATEGORY: Carriers Port Director of Customs Attn.: Residual Liquidation and Protest Branch, Room 761 Six World Trade Center New York, N.Y. 10048 RE: Vessel Repair Entry No. 514-3005786-2; 19 U.S.C. 1466; M/V TILLIE LYKES; Petition Dear Madam: This is in response to your memorandum of August 20, 1999, which forwarded the petition submitted by Nicholas Bachko Co. Inc. (“petitioner”) with respect to the above-referenced vessel repair entry. FACTS: The M/V TILLIE LYKES(the “vessel”), a U.S.-flag vessel, arrived at the port of New York on August 13, 1998. The subject vessel repair entry was timely filed. The vessel underwent certain foreign shipyard work in March and April of 1998. By letter of July 2, 1999, the application for relief with respect to the subject entry was granted in part an denied in part. 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 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. The petitioner requests relief with respect to six items. Item 118. The petitioner states that this item is a modification which allows the vessel to participate in the “Underwater Survey in Lieu of Drydocking” program. It states that the work “consists of the fabrication and installation of hinged covers on the vessel’s sea chests and the fabrication and installation of bolted covers on the salt water intake lines in each sea chest. The invoice description is consistent with the petitioner’s statement and does not reflect repairs. We find that this item is a nondutiable modification. Item 155. The petitioner claims that this item is a nondutiable inspection. However, the invoice for this item reflects both an “auxiliary and exhaust gas boiler mounting inspection” and the repair of boiler safety valves. The cost of these two items is not segregated, i.e., the petitioner has not provided a statement of the vendor which would establish the cost of the inspection separate from the cost of the repairs. Accordingly, the cost of this item is dutiable. Item 188. The petitioner states that this is a nondutiable modification which “entails the installation of reinforced Teflon ‘load’ pads on the vessel’s hatch covers.” The invoice description is consistent with this claim. We find that this item is nondutiable. Gebruder Specht invoice of July 1, 1998. The invoice refers to “ ... expenses for Husbandry/Agency Fees ...” The petitioner states that “[t]hese charges pertain to attendance by a local agent who performed husbanding services, as well as watchman services.” We find that this cost is a drydock and/or general services cost which should be prorated between dutiable and nondutiable costs. ABS invoice no. 98/0389 dated July 8, 1998. We find that all of the survey items are nondutiable as non-repair inspection or survey items with the exception of the “damage and repair” item which is dutiable. MacGregor invoice 231004827 of July 13, 1998. The petitioner claims that the costs herein are nondutiable as they “pertain to a modification to the vessel’s cargo lashing system.” However, this is not supported by the invoice which merely refers to items such as dual twistlocks, stackers, and operating rods. We find that this item is dutiable. HOLDING: As detailed above, the petition is granted in part and denied in part. Sincerely, Jerry Laderberg Chief, Entry Procedures and Carriers Branch