VES-13-18-CO:R:P:C 110957 GV
Chief, Technical Branch
Commercial Operations
Pacific Region
1 World Trade Center
Long Beach, California 90831
RE: Protest No. 27040-000149; SEA-LAND LIBERATOR V-99
Dear Sir:
Your undated memorandum forwarded a protest regarding vessel
repair entry no. C27-0075233-3. Our findings are set forth
below.
FACTS:
The SEA-LAND LIBERATOR is a U.S.-flag vessel owned by Sea-
Land Service, Inc. of Oakland, California. The subject vessel
had shipyard work performed on her in Japan, Taiwan, and Hong
Kong during May and June, 1989. Subsequent to the completion of
this work the subject vessel arrived in the United States at Long
Beach, California on June 18, 1989.
A vessel repair entry marked as full and complete was filed
on the date of arrival. The protestant elected not to file an
application for relief. The entry was liquidated on October 20,
1989. A timely protest was filed on January 11, 1990. The
protestant contends that the installation of a ground detection
monitor constitutes a nondutiable modification. It is further
claimed that this same item was installed on all twelve Sea-Land
D-9J class vessels and that remission was granted on nine of the
vessels.
The only evidence submitted in support of the protestant's
claim is a shipyard invoice containing the total cost of the item
broken down into the following itemized expenses: "material
fee", "engineering fee", "travel fee" (for which no duty was
assessed), and "discount". The invoice also contains the
statement, "Refer to the attached work report for more details."
We note, however, that no such report was attached to the
invoice.
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ISSUE:
Whether the foreign work for which the applicant seeks
relief is dutiable under 19 U.S.C. 1466.
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 costs of foreign repairs to vessels documented
under the laws of the United States to engage in the foreign or
coastwise trade, or vessels intended to engage in such trade.
In its application of the vessel repair statute (19 U.S.C.
1466), Customs has held that modifications/alterations/additions
to the hull and fittings of a vessel are not subject to vessel
repair duties. A leading case in the interpretation and
application of section 1466 is United States v. Admiral Oriental
Line et al., T.D. 44359 (1930) where the court considered the
issue of whether steel swimming tanks installed on a U.S.-flag
vessel in a foreign port constituted equipment or repairs within
the meaning of section 1466. In holding that the installation of
these tanks did not constitute either equipment or repairs and
therefore was not dutiable, the court in Admiral Oriental cited
earlier court decisions which define equipment, promulgations by
the Board of Naval Construction, and regulations of the Treasury
Department, as well as opinions of the Attorney General.
Accordingly, for purposes of section 1466, dutiable
equipment has been defined as:
...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 authority cited above formulated criteria which distinguish
those items deemed to be modifications/alterations/additions to
the hull and fittings and therefore not dutiable under section
1466. These item include:
...those applications 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)
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Furthermore, the court in Otte v. United States, T.D. 36489
(1916), stated that before an item can be regarded as part of a
vessel, it must be "essential to the successful operation" of the
vessel.
Upon reviewing the record, it is apparent that the evidence
submitted is insufficient to support the protestant's claim that
the installation of a ground detection monitor on the subject
vessel constitutes a nondutiable modification. The invoice makes
no reference to such an item and the report detailing the work in
question was not submitted. Notwithstanding a finding of
nondutiability with regard to the installation of this item on
other Sea-Land vessels of the same class, we note that each
application, petition, and/or protest seeking relief on duties
assessed pursuant to 19 U.S.C. 1466 must include the requisite
supporting documentation for the particular entry involved (see
19 CFR 4.14(d) and 19 CFR 174.13(a)).
HOLDING:
The foreign work for which the protestant seeks relief
(i.e., the installation of a ground detection monitor) is
dutiable under 19 U.S.C. 1466 in view of the fact that the
evidence submitted does not support a finding that it constituted
a nondutiable modification.
Accordingly, the protest is denied.
Sincerely,
Edward T. Rosse
Acting Director, Regulatory
Procedures and Penalties Division