VES-13-18-CO:R:IT:C 111653 GEV
Chief, Technical Branch
One World Trade Center
Long Beach, California 90731
RE: Vessel Repair; Entry No. C31-0007659-6; S.S. CORNUCOPIA;
Modifications; 19 U.S.C. 1466
This is in reference to your memorandum dated April 16,
1991, forwarding an application for relief from duties assessed
pursuant to 19 U.S.C. 1466. You ask that we review ten (10)
items listed in the application. Our findings are set forth
The S.S. CORNUCOPIA is a U.S.-flag vessel owned by Union Oil
Company of Los Angeles, California. The subject vessel had
shipyard work performed on her in Yokohama, Japan, during the
period of November 11 - December 2, 1990. Subsequent to the
completion of this work the vessel arrived in the United States
at Kenai, Alaska, on December 13, 1990. A vessel repair entry
was filed on the date of arrival.
Pursuant to an authorized extension of time, an application
for relief, dated March 11, 1991, received by the San Francisco
Vessel Repair Liquidation Unit on March 12, 1991, was timely
filed. The applicant contends that the work items in question
are non-dutiable modifications rather than dutiable repairs.
Whether evidence is presented sufficient to prove that the
foreign work performed on the subject vessel for which the
applicant seeks relief constitutes modifications or costs that
are otherwise nondutiable under 19 U.S.C. 1466.
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LAW AND ANALYSIS:
Title 19, United States Code, section 1466, provides in
pertinent part for payment of duty in the amount of 50 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 engage in such trades.
In its application of the vessel repair statute, Customs has
held that modifications to the hull and fittings of a vessel are
not subject to vessel repair duties. Over the course of years,
the identification of modification processes has evolved from
judicial and administrative precedent. In considering whether an
operation has resulted in a modification which is not subject to
duty, the following elements may be considered.
1. Whether there is a permanent incorporation into the hull or
superstructure of a vessel (see United States v. Admiral Oriental
Line et al., T.D. 44359 (1930)), either in a structural sense or
as demonstrated by the means of attachment so as to be indicative
of the intent to be permanently incorporated. This element
should not be given undue weight in view of the fact that vessel
components must be welded or otherwise "permanently attached" to
the ship as a result of constant pitching and rolling. In
addition, some items, the cost of which is clearly dutiable,
interact with other vessel components resulting in the need,
possibly for that purpose alone, for a fixed and stable
juxtaposition of vessel parts. It follows that a "permanent
attachment" takes place that does not necessarily involve a
modification to the hull and fittings.
2. Whether in all likelihood, an item under consideration would
remain aboard a vessel during an extended lay up.
3. Whether, if not a first time installation, an item under
consideration replaces a current part, fitting or structure which
is not in good working order.
4. Whether an item under consideration provides an improvement
or enhancement in operation or efficiency of the vessel
Very often when considering whether an addition to the hull
and fittings took place for the purpose of 19 U.S.C. 1466, we
have considered the question from the standpoint of whether the
work involved the purchase of "equipment" for the vessel. It is
not possible to compile a complete list of items that might be
aboard a ship that constitute its "equipment". An unavoidable
problem in that regard stems from the fact that vessels differ as
to their services. What is required equipment on a large
passenger vessel might not be required on a fish processing
vessel or offshore rig.
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"Dutiable equipment" has been defined to include:
...portable articles necessary or appropriate
for the navigation, operation, or maintenance
of a vessel, but not permanently incorporated
in or permanently attached to its hull or
propelling machinery, and not constituting
consumable supplies. Admiral Oriental,
supra., (quoting T.D. 34150, (1914))
By defining what articles are considered to be equipment,
the Court attempted to formulate criteria to distinguish non-
dutiable items which are part of the hull and fittings of a
vessel from dutiable equipment, as defined above. These items
might be considered to include:
...those appliances which are permanently
attached to the vessel, and which would
remain on board were the vessel to be laid
up for a long period... Admiral Oriental,
supra., (quoting 27 Op. Atty. Gen. 228).
A more contemporary working definition might be that which
is used under certain circumstances by the Coast Guard; it
includes a system, accessory, component or appurtenance of a
vessel. This would include navigational, radio, safety and,
ordinarily, propulsion machinery.
In regard to the items specified for our review, we note
that the following constitute non-dutiable modifications:
Item 16 - Fairleader Modification
Item 17 - New Safety Grab-Rail for Compressor House
Item 18 - New Safety Grab-Rail for Bridge Wings
Item 27 - Nitrogen Tank Service Platform extension
Item 44 - Fire Main Drain Modification
Item 54 - Lower Main L.O. Cooler New Temp. Regulating
Item 3 covers the cost of obtaining a gas free certificate.
Pursuant to C.I.E.'s 1188/60 and 429/61, Customs has held the
cost of obtaining a gas free certificate is an ordinary and
necessary expense of obtaining repairs. Accordingly, such costs
are apportioned with duty assessed on the portion attributable to
repairs determined to be dutiable.
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We note that the applicant claims the gas free certificate
in Item 3 discussed above was necessitated by the work done in
Item 11 described on the invoice as a "Main Deck Reinforcement"
and claimed to be a non-dutiable modification. Upon reviewing
the shipyard invoices, however, including Item 11A on the invoice
described as "Main Deck Repair" which references the same
drawings as does Item 11, it is apparent that the work claimed to
be a modification under Item 11 is done in conjunction with
dutiable repairs and therefore is dutiable.
Item 39 covers the installation of a lifeboat access
platform. The record is insufficient to enable Customs to render
a determination that this item constitutes a modification.
Accordingly, in the absence of evidence to the contrary Item 39
Item 40 covers work entitled, "Port & Starboard
Accommodation Ladder Radial Arm Modification." Upon reviewing
the invoice, it is apparent that this work constitutes dutiable
repairs/maintenance rather than a non-dutiable modification.
Accordingly, the work done under Item is dutiable.
With the exception of those items noted above, the evidence
presented is insufficient to prove that the foreign work
performed on the subject vessel for which the applicant seeks
relief constitutes modifications or costs that are otherwise non-
dutiable under 19 U.S.C. 1466.
B. James Fritz
Carrier Rulings Branch