Vessel Repair Entry No. C27-0082390-2; 19 U.S.C. 1466; SEA-LAND EXPLORER, V-130-132; Modification; Cleaning

HQ 112833 March 14, 1995 VES-13-18-CO:R:IT:C 112833 GOB CATEGORY: Carriers Deputy Regional Director Commercial Operations Pacific Region One World Trade Center Long Beach, California 90831-0700 RE: Vessel Repair Entry No. C27-0082390-2; 19 U.S.C. 1466; SEA-LAND EXPLORER, V-130-132; Modification; Cleaning Dear Sir: This is in response to your memorandum dated August 3, 1993, which forwarded the application for relief submitted by Sea-Land Service, Inc. ("applicant") with respect to the above-referenced entry. FACTS: The record reflect that the SEA-LAND EXPLORER ("the vessel") arrived at the port of Los Angeles, California on April 19, 1993 and filed the subject vessel repair entry on April 21, 1993. You request our determination with respect to the following items: Item No. Description 1-1-4 cleaning 5-1-29A #1 hold aft cell guide H1 hatch cover liner H2 foremast foam modification H3 #1 and #2 web frame H9 #10 faceplate H10 #8 faceplate H11 #8 hinge frame - 2 - Item No. Description H12 remove 35 foot frames H14A ultra sonic inspection of hatch covers H15A video of hull H16A #7 faceplate M7 piston alignment inspection M9 valve inspection ISSUE: Whether the subject items 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. In its application of the vessel repair statute, the Customs Service 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-a-vis work constituting repairs has evolved from judicial and administrative precedent. In considering whether an operation has resulted in a nondutiable modification, the following factors have been considered: 1. Whether there is a permanent incorporation into the hull or superstructure of a vessel, either in a structural sense or as demonstrated by means of attachment so as to be indicative of a permanent incorporation. See United States v. Admiral Oriental Line, 18 C.C.P.A. 137 (1930). However, we note that a permanent incorporation or attachment does not necessarily involve a modification; it may involve a dutiable repair. 2. Whether in all likelihood an item would remain aboard a vessel during an extended lay-up. 3. Whether an item constitutes a new design feature and does not merely replace a part, fitting, or structure that is performing a similar function. 4. Whether an item provides an improvement or enhancement in operation or efficiency of the vessel. - 3 - After a consideration of the record, we find that, with the exception of item 1-1-4 (cleaning), all of the subject items constitute nondutiable modifications to the vessel rather than dutiable repairs. We find that item 1-1-4 (cleaning) is dutiable because it appears to pertain to certain dutiable repairs (which are not the subject of this ruling) as well to as nondutiable modification items. In Texaco Marine Services, Inc. v. United States, Case No. 93-1354, decided on December 29, 1994, the Court of Appeals for the Federal Circuit affirmed the "but for" test adopted by the Court of International Trade in the Texaco case, 815 F. Supp. 1484 (1993). That test provides that if certain expenses would not have been incurred but for dutiable repairs, such expenses are dutiable. The Court of Appeals specifically found that post-repair cleaning was dutiable pursuant to 19 U.S.C. 1466. HOLDING: As detailed supra, the application is granted in part and denied in part. Sincerely, Arthur P. Schifflin Chief Carrier Rulings Branch