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HQ 111940

March 15, 1995

VES-13-18-CO:R:IT:C 111940 GEV


Port Director
U.S. Customs Service
Vessel Repair Liquidation Unit, Room 303
423 Canal Street
New Orleans, Louisiana 70130-2341

RE: Vessel Repair Entry No. VR-C53-0012167-6; M/V AMERICAN CONDOR; V-85; Post-Repair Cleaning; Modification; 19 U.S.C. ? 1466

Dear Sir:

This is in response to a memorandum from the Acting DARC, Commercial Operations Division, dated October 3, 1991, forwarding for our review an application for relief from duties assessed pursuant to 19 U.S.C. ? 1466. Our findings on this matter are set forth below.


The M/V AMERICAN CONDOR is a U.S.-flag vessel owned by Crowley Maritime Corporation. The subject vessel had foreign shipyard work performed on her in Lisbon, Portugal during February of 1991. The vessel arrived in the United States at the port of Houston, Texas on April 28, 1991. A vessel repair entry was filed on the date of arrival.

Pursuant to an authorized extension of time, an application for relief with supporting documentation was timely filed on July 26, 1991. The applicant requests relief for a myriad of items contained within the above-referenced entry. The New Orleans Vessel Repair Liquidation Unit seeks guidance regarding the following: the sufficiency of the shipyard invoice; the notation "ABS/USCG Inspection" appearing throughout the Lisnave invoice; cleaning after repairs and removal of debris; modification claims regarding Items 109 (and the related Cedervall invoice), 306 and 307; a request for credit on the Rentsch-Motoren invoice; and a waiver of all duty because the Military Sealift Command (MSC) allegedly refused to grant a waiver which would have allowed the vessel to return to the U.S. for the drydocking.


Whether the foreign shipyard costs for which the applicant seeks relief are dutiable pursuant to 19 U.S.C. ? 1466.


Title 19, United States Code, ? 1466, provides in pertinent part for payment of duty in the amount of 50 percent ad valorem on the cost 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.

At the outset we note that although the Lisnave invoice in question is other than exemplary in terms of clarity of cost breakdown, we are not of the opinion that it is flawed to the point where this deficiency alone necessitates it being denied in its entirety. However, the aforementioned deficiency will, where appropriate, be construed contra to the applicant's claims for relief.

Further in regard to the lack of clarity discussed above, the notation "ABS/USCG Inspection" appearing throughout the entire Lisnave invoice is in fact non-specific as to what work was actually done. Consequently, those costs associated therewith are dutiable.

The Lisnave invoice is also replete with references to "cleaning after repairs" and "removal of debris." Pursuant to the "but for" test enunciated by the U.S. Court of Appeals for the Federal Circuit in Texaco Marine Services, Inc. and Texaco Refining and Marketing, Inc. v. United States, Docket No. 93-1354, decided December 29, 1994 (affirming the decision of the U.S. Court of International Trade at 815 F.Supp. 1484 (1993)), post-repair cleaning and protective coverings (the latter of which is also contained within the Lisnave invoice at Item 002.3(L)) for repair work are dutiable under 19 U.S.C. ? 1466. Although the costs for "removal of debris" are segregated from those for "cleaning after repairs", the invoice is devoid of any detailed description supporting a meaningful distinction. Accordingly, the costs for "cleaning after repairs", "removal of debris" and protective coverings are dutiable.

Items 109 (and the related Cedervall invoice), 306 and 307 (and the related Cedervall invoice) are claimed to be modifications. In its application of the vessel repair statute, Customs has held that modifications to the hull and fittings of a vessel are not subject to vessel repair duties. Over the course of years, the identification of modification processes has evolved from judicial and administrative precedent. In considering whether an operation has resulted in a modification which is not subject to duty, the following elements may be considered.

1. Whether there is a permanent incorporation into the hull or superstructure of a vessel (see United States v. Admiral Oriental Line et al., T.D. 44359 (1930)), either in a structural sense or as demonstrated by the means of attachment so as to be indicative of the intent to be permanently
incorporated. This element should not be given undue weight in view of the fact that vessel components must be welded or otherwise "permanently attached" to the ship as a result of constant pitching and rolling. In addition, some items, the cost of which is clearly dutiable, interact with other vessel components resulting in the need, possibly for that purpose alone, for a fixed and stable juxtaposition of vessel parts. It follows that a "permanent attachment" takes place that does not necessarily involve a modification to the hull and fittings.

2. Whether in all likelihood, an item under consideration would remain aboard a vessel during an extended lay up.

3. Whether, if not a first time installation, an item under consideration replaces a current part, fitting or structure which is not in good working order.

4. Whether an item under consideration provides an improvement or enhancement in operation or efficiency of the vessel

Very often when considering whether an addition to the hull and fittings took place for the purpose of 19 U.S.C. ? 1466, we have considered the question from the standpoint of whether the work involved the purchase of "equipment" for the vessel. It is not possible to compile a complete list of items that might be aboard a ship that constitute its "equipment". An unavoidable problem in that regard stems from the fact that vessels differ as to their services. What is required equipment on a large passenger vessel might not be required on a fish processing vessel or offshore rig.

"Dutiable equipment" has been defined to include:

...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 Court attempted to formulate criteria to distinguish non-dutiable items which are part of the hull and fittings of a vessel from dutiable equipment, as defined above. These items might be considered to include:

...those appliances 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).

A more contemporary working definition might be that which is used under certain circumstances by the Coast Guard; it includes a system, accessory, component or appurtenance of a vessel. This would include navigational, radio, safety and, ordinarily, propulsion machinery.

In regard to the alleged modifications in question, the record makes abundantly clear that the work in question was performed in order to correct existing defects on the vessel. Accordingly, notwithstanding the sufficiency of the remaining criteria discussed above, Items 109, 306 and 307 (and the related Cedervall invoice) are dutiable.

With respect to the applicant's claim that a credit be allowed on the Rentsch-Motoren invoice, the record does not support this claim. The only evidence submitted to that effect is a Crowley Maritime Corporation internal memorandum. Accordingly, absent additional evidence to the contrary, the full cost shown on the invoice is dutiable.

Finally, the applicant requests a waiver of all vessel repair duties because the MSC allegedly refused to grant a waiver which would have allowed the vessel to return to the U.S. for the drydocking. As you know, pursuant to an agreement between Customs and the MSC the vessel repair statute is applicable to those vessels which are owned by, or time, voyage or bareboat chartered to the MSC. The agreement contains no provision which would allow the relief sought by the applicant under these circumstances.


The foreign shipyard costs for which the applicant seeks relief are dutiable pursuant to 19 U.S.C. ? 1466 as discussed in the Law and Analysis portion of this ruling.


Arthur P. Schifflin

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