VES-13-18-RR:IT:EC 115255 GEV
Chief, Liquidation Branch
U.S. Customs Service
Post Office Box 2450
San Francisco, CA 94126
RE: SEA-LAND EXPRESS; V-002; Vessel Repair Entry No. C27-
0171448-0; Modification; Survey; 19 U.S.C. § 1466
Dear Sir:
This is in response to your memorandum dated December 15, 2000, which forwards for our consideration an application for relief from vessel repair duties assessed pursuant to 19 U.S.C. § 1466. Your office requests our review with respect to certain of the applicant’s claims marked HDQ on the far right-hand side of the spreadsheets. Our findings are set forth below.
FACTS:
The SEA-LAND EXPRESS is a U.S.-flag vessel operated by U.S. Ship Management, Inc., which incurred foreign costs in August and September of 2000. Subsequent to the completion of the work, the vessel arrived at the port of Los Angeles, California, on September 14, 2000. A vessel repair entry was timely filed as was an application for relief with supporting documentation.
ISSUES:
Whether the documentation submitted substantiates the applicant’s claim that the costs contained within the subject vessel repair entry specified for our review were incurred pursuant to modification work and therefore are non-dutiable under 19 U.S.C. § 1466.
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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-à-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.
Item 5 for our consideration covers the costs listed on Hyundai Mipo Dockyard Co., Ltd. invoice no. 001291 for material and labor for the installation of 12 floodlights with junction boxes and a cable tray for hatches 1-5 with protection bars fitted around the floodlights. This work, which will enable lashing operations to be conducted at night, is alleged to be done pursuant to the reconfiguration of the subject vessel’s method of securing containers on deck described within this entry. This reconfiguration includes the removal of the current outdated stacking frames, hinge frames and associated structure and replacement of same with a modern system of securing containers using semi-automatic twistlocks and lashing rods which will improve vessel productivity, lower operating costs and enhance vessel market value. Upon reviewing the record in its entirely, we have determined that Item 5 was done in conjunction with the aforementioned reconfiguration work and is therefore a nondutiable modification.
(see Customs ruling letter 114984, dated April 10, 2000)
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Item 7 for our consideration is listed on the spreadsheets as “Portable container securing equipment” and “Lashing gear”. However, Buffers USA invoice no 1283 itemizing these costs is merely a two-page listing of various articles purported to be included in the above-
described reconfiguration of the container securing system. Furthermore, there is no discussion of Item 7 in the application for relief. A mere listing of articles, without more, is insufficient to substantiate a modification claim. Accordingly, Item 7 is dutiable.
Item 9 covers work done to hatch covers 1-5 and also covers the grinding of new lashing eyes to the correct dimensions pursuant to the lashing modification work referenced in the entry. Upon reviewing the record, specifically the invoices from Maritec Engineering Co. covering these costs, we have determined Item 9 to be a nondutiable modification.
Item 14 covers work done to the shell plate and is alleged to be a structural modification. Specifically, the work involved the removal of the current steel bottom which, although in good working order and not in need of repair, will be replaced with steel of a higher grade and thickness which will improve the safe operation of the vessel and extend the vessel’s useful life. Accordingly, we have determined that Item 14 is a nondutiable modification.
Item 20 covers the cost of an ABS modification survey. Upon reviewing ABS Survey Report No. UL11011, we have determined that the survey was done pursuant to nondutiable modification work. Accordingly, Item 20 is nondutiable.
HOLDING:
With the exception of Items 7, the documentation submitted substantiates the applicant’s claim that certain costs contained within the subject vessel repair entry specified for our review were incurred pursuant to modifications and therefore are non-dutiable under 19 U.S.C. § 1466.
Sincerely,
Larry L. Burton
Chief
Entry Procedures and Carriers Branch