Vessel Repair Entry No. C20-0038546-1; CSX CHALLENGER; V-049; Modification; 19 U.S.C. § 1466

HQ 115681 July 15, 2002 VES-13-18-RR:IT:EC 115681 GEV CATEGORY: Carriers Chief, Vessel Repair Unit U.S. Customs Service 423 Canal Street New Orleans, Louisiana 70130 RE: Vessel Repair Entry No. C20-0038546-1; CSX CHALLENGER; V-049; Modification; 19 U.S.C. § 1466 Dear Sir: This is in response to your memorandum dated May 16, 2002, forwarding an application for relief from vessel repair duties assessed pursuant to 19 U.S.C. § 1466. You specifically inquire as to the merits of the applicant’s modification claims covering work listed on Invoice 1b. Our ruling on this matter is set forth below. FACTS: The CSX CHALLENGER is a U.S.-flag vessel which incurred foreign shipyard costs. Subsequent to the completion of the work in question, the vessel arrived at San Juan, Puerto Rico, on June 30, 2001. A vessel repair entry was timely filed. Pursuant to an authorized extension of time, an application for relief with supporting documentation was timely filed. The application seeks relief for a myriad of costs, including Item nos. 5.1-35, 5.1-37, and 8.9000-27 listed on one of the Jurong Shipyard Limited invoices included in the record (Invoice 1b). It is alleged that the work covered by these items constitutes non-dutiable modifications. It is these claims for which you seek our advice. - 2 - ISSUES: Whether the work in question for which the applicant seeks relief constitutes modifications to the subject vessel and are therefore nondutiable under 19 U.S.C. § 1466. LAW AND ANALYSIS: Title 19, United States Code, § 1466(a) (19 U.S.C. § 1466(a)), provides in pertinent part for the payment of an ad valorem duty of 50 percent of the cost of “…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…” In its application of the vessel repair statute, Customs 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-à-vis work constituting repairs has evolved from judicial and administrative precedent. (See Otte v. United States, 7 Ct. Cust. Appls. 166, T.D. 36489 (1916); United States v. Admiral Oriental Line et al., 18 C.C.P.A. 137, T.D. 44359 (1930); and Customs Bulletin and Decisions, Vol. 31, Number 40, published October 1, 1997.) The factors discussed within the aforementioned authority are not by themselves necessarily determinative, nor are they the only factors which may be relevant in a given case. However, in a given case, these factors may be illustrative, illuminating, or relevant with respect to the issue of whether certain work may be a modification of a vessel which is nondutiable under 19 U.S.C. § 1466. Our review of the supporting documentation covered the following work listed on Invoice 1b: Item nos. 5.1-35 (Main Engine Lube Oil Piping Drop Line Modification); 5.1-37 (Modification to the Clean Ballast System Piping); and 8.9000-27 (Modification to the Engine Room Supply Air Plenum). In each instance the work in question was a first-time installation constituting a reconfiguration of the vessel to enable more efficient use or greater options in such use. In the absence of repairs or a state of disrepair, which is the case with respect to these items, such work is in accordance with the factors discussed within the above-referenced authority and is typically held to be modifications. The work items listed on Invoice 1b for which our review is sought are therefore nondutiable. - 3 - HOLDING: The work in question for which the applicant seeks relief constitutes modifications to the subject vessel and is therefore nondutiable under 19 U.S.C. § 1466 Sincerely, Jeremy Baskin Acting Chief Entry Procedures and Carriers Branch