VES-13-18-RR:IT:EC 226688 GOB
Port Director of Customs
Attn: Vessel Repair Liquidation Unit
423 Canal Street, Room 303
New Orleans, LA 70130-2341
RE: Vessel Repair Entry No. C15-0019194-0; 19 U.S.C. 1466; M/V
NOBLE STAR, V-34; Petition; Radar system; Equipment
Dear Sir:
This is in response to your memorandum dated January 19,
1996, which forwarded the petition for relief submitted on behalf
of Sealift Tankships, Inc. (the "petitioner") with respect to the
above-referenced vessel repair entry.
FACTS:
The M/V NOBLE STAR (the "vessel") is a U.S.-flag vessel
owned and operated by the applicant. Certain foreign shipyard
work was performed on the vessel prior to its arrival at Sunny
Point, North Carolina on June 29, 1994. The subject vessel
repair entry was subsequently filed.
ISSUE:
Whether the costs involved with respect to the items at
issue 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.
The subject entry is a "pre-Texaco" entry, i.e., an entry
filed before the appellate decision in Texaco Marine Services,
Inc., and Texaco Refining and Marketing, Inc. v. United States,
44 F.3d 1539 (CAFC 1994), aff'g 815 F.Supp. 1484 (CIT 1993).
Items 55.2 and 55.20. The petitioner claims that item 55.2,
transportation of hatch board sections, is nondutiable.
As your memorandum points out, the transportation charge in
item 55.2 (2.078) is nondutiable as a transportation cost with
respect to a pre-Texaco entry. Your memorandum indicates that
your office agreed at the application stage that this item was
nondutiable.
Your memorandum further states that there may be some
confusion between item 55.2, described above, and item 55.20,
which was found to be dutiable because it was "for accessing
dutiable repair work." We concur with your determination that
item 55.20 (5.141) is dutiable as an item related to dutiable
repair work.
To summarize, item 55.2 is nondutiable and item 55.20 is
dutiable.
Items 83.03 and 83.04. The petitioner claims that these
items for ultrasonic thickness testing are nondutiable because
they are required by periodic survey. The pertinent invoice for
these items reflects "...ultrasonic thickness tested by use of
crane for periodic survey" and "frames 11-23 PS ultrasonic
thickness tested as per periodic survey instructions by use of
crane."
However, one of the surveys listed on ABS invoice no.
SP009173 is described as "Hull Repairs." ABS Report No. CZ 5889-H is entitled "Damage/Repair Survey Report" and lists "Hull
Repairs." Item #13 of the report provides:
In Way of Port F.O. Settling Tank
13. Port side shell plating 1st, 2nd and 3rd below
shear found wasted and holed between frames 12/13 and
15/16. Affected area was thickness gauged to ascertain
plating condition and cropped out and part renewed as
found necessary as per original butts. New plats
thickness 13 mm.
The ABS report indicates that the thickness testing was
performed incident to a "Damage/Repair Survey Report" and that
the testing resulted from dutiable repairs.
Accordingly, we find that items 83.03 and 83.04 are
dutiable.
We note additionally that the invoice items immediately
preceding (item 83.02) and immediately following (item 84)
reflect the renewal of shell plating and the renewal of steel.
While this is not dispositive, it suggests that the subject items
were incident to the steel repairs.
ABS items. The petitioner asserts that the following items
are nondutiable as required periodic surveys: ABS (4), item 9
(technical fees gauging review); ABS (5), item 1 (cargo gear
statement of fact); ABS (4), item 10 (SAF: 24 & 25/5/94) and ABS
(5). Item 2 (SAF: 24 & 25/5/94).
We agree with the petitioner's claim. The record indicates
that these items are nondutiable survey items. Accordingly, we
find that they are nondutiable.
Items 60.01 and 60.02, Radar. The petitioner states:
The radar was a modification to the vessel and as such
is nondutiable. Therefore items 60.01 and 60.02
together with the radar equipment purchase are
nondutiable.
A new and improved radar system was installed during
the shipyard period. Although the old radar was fully
operational, it was decided to move up to a better
system...
...
... A radar is not a temporary installation as the
scanner is matched for each radar and removal of the
scanner is a large job. This piece of equipment must
be secured to withstand the rigors at sea. Every part
of the radar is permanently attached...
In Ruling 113798 dated January 9, 1997, we thoroughly
considered the issue of radar installation with respect to its
dutiability or nondutiability under 19 U.S.C. 1466. We stated:
We find that this item [radar installation] is dutiable
under 19 U.S.C. 1466 as vessel equipment. This finding
is based on the following authorities.
In Otte v. United States, 7 Ct. Cust. Appls. 166, T.D.
36489 (1916), the court stated:
That the Congress intended to distinguish between
equipment and the vessel itself is apparent from a
reading of the two subsections above quoted. The
line of distinction between equipment and the
vessel is somewhat difficult to mark.
The question was considered by the Board of Naval
Construction, and their report in part reads as
follows:
Equipment, used in a general sense, may be defined
as any portable thing that is used for, or
provided in, preparing a vessel whose hull is
already finished for service. It is the furniture
of whatsoever nature which is put into a finished
ship in equipping her. The Queen's Regulations
and Admiralty Instructions give the following
definition: "Equipment, in relation to a ship,
includes the furnishing a ship with any tackle,
apparel, furniture, provisions, arms, munitions,
or stores, or any other thing that is used in or
about a ship for the purpose of fitting or
adapting her for the sea or for naval service."
In estimating the displacement of a ship naval
constructors use the term "hull and fittings" in
contradistinction to "equipment," the fittings of
the hull being understood to be any permanent
thing attached to the hull which would remain on
board were the vessel to be laid up for a long
period.
Adopting these definitions, the board is of the
opinion that the term "equipment" would not
include donkey engines, pumps, windlasses, steam
steerers, and other machinery but that it would
include anchors, chain cables, boats, life-saving
apparatus, nautical instruments, signal lights,
and similar articles.
In Ruling 105414 dated May 24, 1982, we stated:
It should be noted that the fact that a change or
addition of equipment is made to conform with a
new design scheme, or for the purpose of complying
with the requirements of statute or code, is not a
relevant consideration. Therefore, any change
accomplished solely for these reasons, and which
does not constitute a permanent addition to the
hull and fittings of the vessel, would be dutiable
under section 1466.
Any new areas to the vessel, that is, bulkheads,
permanent ballast, decks, staterooms, bars,
storerooms. etc., are considered to be qualifying
additions to the hull and fittings. Likewise, the
extension of existing services into new areas
would also be free of duty. This would include
piping, air conditioning, ventilation, electrical
service, glazing, etc., as well as final finishing
for the new areas (such as painting).
On the other hand, among the dutiable operations
would be providing furniture for any of the areas
(new and old); providing new electronic navigation
equipment; providing new lifesaving apparatus ...
providing computer apparatus... [Emphasis
supplied.]
In Memorandum 105807 dated December 28, 1982, we
stated:
The characterization of an article as vessel
equipment, as opposed to fittings or
hull/structural parts, is manifestly difficult in
cases where the article has many of the attributes
of both classes cited in the leading cases. For
example, because a vessel pitches and rolls when
at sea all radio gear is securely fastened, yet is
classified as equipment even when such articles
are usually too large to be considered (in
ordinary parlance) "portable". [Emphasis
supplied.]
[End of excerpt from Ruling 113798.]
19 U.S.C. 1466(a) provides in pertinent part:
The 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 to engage in the foreign or coasting
trade, or a vessel intended to be employed in such
trade, shall, on the first arrival of such vessel in
any port of the United States, be liable to entry and
the payment of an ad valorem duty of 50 per centum on
the cost thereof in such foreign country. [Emphasis
supplied.]
As the above excerpt from 19 U.S.C. 1466(a) indicates,
"equipment" is dutiable under 19 U.S.C. 1466(a).
We find that the radar equipment involved in the subject
vessel repair entry is dutiable.
HOLDING:
As detailed supra, the petition is granted in part and
denied in part.
Sincerely,
Jerry Laderberg
Acting Chief,
Entry and Carrier Rulings Branch