VES-13-18 CO:R:P:C 110899 BEW
Chief, Technical Assistant
Pacific Region
Commercial Operations
One World Trade Center
Long Beach, California 90853
RE: Petition for Review on Valdez Vessel Repair Entry No. C31-
0005010-4 dated November 11, 1988, vessel TT BROOKLYN.
Modifications; owner-supplied spare parts
Dear Sir:
This is in reference to a memorandum from your office which
forwards a petition for relief filed by Texaco Marine Services,
Inc., on a partial denial of an application for relief for duties
assessed on repairs made to the vessel TT BROOKLYN.
FACTS:
The petitioner's request for review centers on the cost for
repairs on L.F. Gaubert Invoice Nos. 77019, 77689, 77723 and
77724 - owner-supplied spare parts, and Panalpina Air freight,
Inc. Invoice Nos. 154-600675 and 154-600690 - air freight and
packing material, alleged to be repairs associated with the
installation of modifications/alterations/additions to the hull
and fittings, and items which are non-dutiable under the
provisions of 19 U.S.C. 1466.
In a decision dated November 30, 1989 (HQ 110434 LLB) we
ruled that:
Of the forty-four items which we have reviewed, we find
that they consist entirely of duty-free modifications
and/or classifiably free items, with the following
exceptions:
... 4. Items III (2), (3), (5), (11a), (11b), (12a),
(12b), (12c), (17), (18a), (18b), and (24), are all
claimed as U.S.-made and purchased parts. This, by
itself, is not sufficient to satisfy subsection (d)(2)
of section 1466 (19 U.S.C. 1466 (d)(2)). In order [to]
qualify for remission, it would be necessary to show
that the qualifying materials were installed with the
use of crew or U.S. resident labor. In the
alternative, if the materials were shown to be those
used in a modification rather than a repair, duty
assessed on their cost would be refundable. Failing
further evidence, the approximate $286,000 cost is
found to be dutiable.
ISSUE:
Whether sufficient evidence is presented to establish that
the subject repairs were used in a modification which is
remissible under the vessel repair statute (19 U.S.C. 1466).
LAW AND ANALYSIS:
Title 19, United States Code, section 1466, provides in
part for payment of an ad valorem duty of 50 percent of the cost
of foreign repairs to vessels documented under the laws of the
United States to engage in the foreign or coastwise trade.
Section 1466 (d)(1) provides that the Secretary of the Treasury
is authorized to remit or refund such duties if the owner or
master of the vessel was compelled by stress of weather or other
casualty to put into such foreign port to make repairs to secure
the safety and seaworthiness of the vessel to enable her to reach
her port of destination.
In its application of the vessel repair statute (19 U.S.C.
1466), Customs has consistently held that modifications/altera-
tions/additions to the hull and fittings of a vessel which allow
the vessel to operate more efficiently are not subject to vessel
repair duties. Alterations to the hull and fittings of vessels
are not within the purview of section 1466, and the cost of the
work is not subject to duty. In order to be considered a
modification an article must be permanently attached to the
vessel and it must be essential to the successful operation of
the vessel (see Otte v. United States, 7 C.C.P.A. 166 (1916), and
United States v. Richard & Co., 8 Ct. Cust. App. 231, T. D. 37496
(1917). To be found non-dutiable as a
modification/alteration/addition, the work must involve no
element of repair due to damages, deterioration or wear and tear.
If those are present, the work will be considered a repair and
dutiable.
A review of L.F. Guabert invoice Nos. 77019, 77689, 77723
and 77724 and the documentation submitted with the petition
reveals that items are U.S. owner supplied parts which were used
in a modification/addition/alteration to the hull and fittimgs of
the vessel. Accordingly, the petition is granted as to these
invoices.
A review of Panalpina Airfreight Invoice Nos. 154-600675 and
154-600690, reveals that the costs associated with these invoices
are costs for air freight and packing.
Pursuant to C.D. 1830, expenses incurred for shipping,
crating and packing are not expenses of repair, and as such are
not subject to duty under section 1466. Accordingly, all items
of costs for freight, courier, packing and customs clearance are
nondutiable. The petition is granted as to all items of cost
listed on the Panalpina Airfreight Invoices for freight, courier,
packing and customs clearance.
HOLDING:
Based on the foregoing, the petition is granted as set forth
above.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch