VES-13-18-RR:IT:EC 113826 GOB
Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 415
P.O. Box 2450
San Francisco, CA 94126
RE: Vessel Repair Entry No. C31-0015715-6; CORNUCOPIA, V-357; 19
U.S.C. 1466
Dear Madam:
This is in response to your memorandum of January 23, 1997,
which forwarded the application for relief submitted on behalf of
West Coast Shipping Company ("applicant") with respect to the
above-referenced vessel repair entry.
FACTS:
The evidence of record indicates the following. The
CORNUCOPIA ("vessel"), a U.S.-flag vessel owned and operated by
the applicant, arrived at the port of Kenai, Alaska on October
10, 1996. The subject vessel repair entry was timely filed. The
vessel underwent certain foreign shipyard work in Yokohama, Japan
in September of 1996.
You request our determinations with respect to numerous
items contained within the application.
ISSUE:
Whether the costs of the subject items are 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 its 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). However, we note that a permanent
incorporation or attachment does not necessarily involve a
modification; it may involve a dutiable repair.
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.
We will respond in the same format and order as you used in
your forwarding memorandum.
Items 101-115, 117, and 120. These items are drydock or
general services costs. They include deck and bulkhead
protection, signage, tugs and pilots, berthage, fire and security
protection, etc. The cost of these items should be prorated
between the dutiable and nondutiable costs associated with the
drydocking. This proration concept with respect to drydock costs
and general services costs was enunciated in Ruling 113474 dated
October 24, 1995, as well as in numerous subsequent rulings.
Items 121 and 122. Deck Utility Piping Extension (121) and
Coating of Deck Utility Piping Extension (122). The invoice
reflects that item 121 involves the modification of the utility
line on deck. Item 122 involves the sand blasting and coating of
the new pipe supports and hangers. We find that these are
nondutiable modifications.
Items 124 and 125. Access Improvements on Main Deck (124)
and Coating of Access Improvements on Main Deck (125). The
invoice reflects that item 124 involves the fabrication and
installation "by welding catwalks, railings, ladders, and steps
facilitating access to areas of main deck and cargo tank domes
within deck girder area." Item 125 involves the sand blasting,
coating, and cleaning of all new areas. We find that these are
nondutiable modifications.
Item 130. Services for Auxiliary Circulating Pump
Overboard. This item is dutiable because it is incident to item
129, which is a dutiable item involving the repair of the
auxiliary circulating pump.
Items 131 and 132. No. 1 and 2 Cargo Tank Bottom Insulation
Modification (131) and No. 2 Cargo Tank Vertical Side Insulation
Modification (132). The invoices reflect that these items
involve the modification of two of the vessel's insulation
systems. We find that these are nondutiable modifications.
Item 133. New Access Rungs to Bottom of Cargo Tanks in
Interbarriers One and Two. The invoice indicates that this item
reflects an addition to the existing structure. We find that it
is a nondutiable modification.
Item 134. Services for Insulation Modification in
Interbarriers One and Two. This item is nondutiable because it
is a cost incident to items 131 and 132, which are themselves
nondutiable.
Items 137, 139, 142, 145, 150, 152, and 156. These items
are for services, such as lighting and temporary staging, which
are incident to specific dutiable repairs. Accordingly, these
items are dutiable.
Item 135. New Pipe Support - Dome No. 1. We find that this
pipe support is a nondutiable modification.
Item 140. Inspection of Void Spaces Around Cargo Tanks No.
1, 2, 3, and 4. The applicant states that this inspection of
void spaces is an ABS requirement. The invoice reflects that
this item includes a non-segregated sub-item for gas freeing,
which is a cost which is prorated between dutiable and
nondutiable items. Accordingly, we find that this entire item
should be prorated.
Items 146, 147, 148, 153, 157, and 158. Various Structural
Modifications. The invoices reflect that these items involve
modifications. Therefore, they are nondutiable.
Item 162. Deck Crane Load Test. The invoice reflects that
this item involves a "five year retesting of both port and
starboard deck cranes." This item is nondutiable as a periodic
test which does not involve and is not related to a repair.
Item 163. Assistance for Loading Liquid Nitrogen. This
item is similar to drydock costs or general service costs and
should be prorated in the same manner as those costs.
Item 164. Assistance for Loading Bunkers. This item is not
a repair or repair-related item. Further, it does not appear to
be a cost appropriately included with the drydock costs.
Accordingly, we find that it is nondutiable.
ABS Surveys. The damage repair survey is dutiable because
it is related to repairs. The continuous hull survey, continuous
machinery survey, modified insulation survey, modified bulkhead
plate survey, and crane testing are nondutiable as surveys or
tests unrelated to repairs. The costs of overhead and "expenses"
are dutiable in the absence of a break-out showing which survey
they relate to.
HOLDING:
As detailed above, the application is granted in part and
denied in part.
Sincerely,
Jerry Laderberg
Acting Chief,
Entry and Carrier Rulings Branch