HQ 110590: Protest No. 1001-7-002964 Newark Vessel Repair Entry 85-702952-2 Vessel: SEA-LAND LEADER V-89

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 110590

                        February 21, 1990


VES-13-18-CO:R:P:C  110590 KVS

CATEGORY:  Carriers

Deputy Assistant Regional Commissioner
Classification and Value Division
ATTN:  Regional Vessel Repair Liquidation Unit
6 World Trade Center
New York, New York  10048-0945

Re:  Protest No.  1001-7-002964
     Newark Vessel Repair Entry 85-702952-2
     Vessel:  SEA-LAND LEADER V-89

Dear Sir:

     This is in response to a transmittal from your office of
protest no. 1001-7-002964, which concerns seven vessel repair
entries:  85-702874-3 (voyage 84), 85-702886-6 (voyage 85), 85-
702904-3 (voyage 86), 85-702923-4 (voyage 87), 85-702940-9
(voyage 88), 85-702852-2 (voyage 89), and 85-702985-2 (voyage
91).  Our findings are set forth below.

FACTS:

     On March 27, 1985, the SEA-LAND LEADER commenced certain
foreign shipyard operations to the engine room and bridge
systems to convert the vessel from ACC (Automatic Control
Console) to ACCU (Automatic Control Console Unattended) to permit
unmanned engine room operation. This conversion was to be
completed over a series of voyages encompassing the following
seven entries:  85-702874-3, 85-702886-6, 85-702904-3, 85-702923-
4, 85-702940-9, 85-702852-2, and 85-702985-2.  By prior
arrangement with the Chief, Residual Liquidation and Drawback
Branch, New York and Headquarters, Sea-Land was to declare a pro-
rata amount of the conversion cost on each voyage.  The invoices
for the conversion would be submitted at the completion of the
project.  Liquidation of the entries was to be suspended until
the conversion was completed.

     A pro forma invoice from Wilton-Fijenoord (invoice 5849,
account number 32-5247) for drydock repairs was submitted by Sea-
land for entry 85-702874-3 (voyage 84).  Sea-Land indicated in
its application for relief that an invoice from Wilton-
Fijenoord for the conversion would be submitted later.  Acting
under the inaccurate belief that the Wilton-Fijenoord invoice
(no. 5849, account 32-5247) represented the cost for the foreign
                               -2-

shipyard conversion work (instead of the drydock costs that it
actually represented), Customs ruled that since all of the
conversion work had been completed on the first voyage, Sea-Land
would not be permitted to prorate the cost of the conversion over
a series of voyages (see Customs Letter 108105 JM (dated July 24,
1986)).  When the commercial invoices were not received, entry
85-702874-3 (voyage 84) was liquidated using an estimated amount
for all the repairs in the amount of $2,156,000.00.

     Accordingly, Customs ruled that the prorated conversion
costs declared on subsequent voyages (with the exception of the
entry under protest) were duty-free as Customs had held the
entire amount dutiable on entry 85-702874-3 (voyage 84).

     When the invoices for the actual conversion costs were
submitted with the last voyage, entry 85-702985-2 (voyage 91)
(including Siemens-Allis invoice PE356838 dated July 31,1985, an
illegible Siemens-Allis invoice dated either October or November
22, 1985, and Ocean Transport invoice F.35391 dated March 13,
1985), Customs ruled that the charges were dutiable, but
liquidated the entry as duty-free, as the pro-rated estimated
conversion costs had already been held dutiable on the first
voyage, entry 85-702874-3 (voyage 84).

     In requesting relief, the protest asserts that the foreign
shipyard conversion work is a duty-free "modification" and
requests that the prorated conversion cost declared on entry 85-
702904-3 (voyage 86) be liquidated as duty-free.

ISSUE:

     Whether the prorated conversion cost declared on entry 85-
702904-3 (voyage 86), which has already been found dutiable on
entry 85-702874-3 (voyage 84), may be liquidated as duty-free.

LAW AND ANALYSIS:

     Section 466, Tariff Act of 1930, as amended (19 U.S.C. 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
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,
and additions to the hull and fittings of a vessel are not
subject to vessel repair duties.

       The protest, in asserting that the foreign shipyard
conversion work is a duty-free "modification" and requesting that
the prorated cost declared on entry 85-702904-3 (voyage 86) be
liquidated as duty-free, states that:


                               -3-

     ...partial declarations were made on Entries 7029043,
     7029234, 7029409, 7029522 ... and Customs liquidated
     these as duty-free.  The final declaration, Entry
     7029852 ... completed the project.  This was declared
     as duty free and Customs liquidated it as such. Entry
     85-7029043 should also be duty-free (emphasis added).

     In regard to the apparent confusion as to the status of the
entry 85-702904-3 (voyage 86), our records show that this entry
has previously NOT been liquidated as duty-free and we assume
that the inclusion of this entry on the list of those entries
whose partial declarations have been liquidated as duty-free is
in error.  Review of the files submitted with the protest
indicates that the sentence should read, "...partial declarations
were made on Entries 702886-6, 7029234, 7029409, 7029522... and
Customs liquidated these as duty-free".

     Parenthetically, we must also comment on the protest's
statements as to entry 85-702985-2 (voyage 91).  While it is
true that the partial declaration of the conversion cost declared
on this final entry was liquidated as duty-free, the conversion
cost was ruled as dutiable and the amount was attributed to a
prior entry, number 85-702874-3 (voyage 84)(see Customs Letter
108111 JM).  The liquidation of 85-702985-2 (voyage 91), then,
was a bookkeeping measure and not, as the protest implies, as a
determination that the conversion was a duty-free
"modification".

     As previously stated, we note that that the entry currently
under protest, 85-702904-3 (voyage 86), is the only entry in the
series of subsequent voyages which does not liquidate the
prorated conversion cost as duty free (see Customs Letters 108106
JM, 108107 JM, 108108 JM, 108109 JM 108110 JM, and 108111 JM (all
dated July 24, 1986)).  Review of related files leads us to
conclude that this was the result of a typographical error.
Because the total cost of the conversion has already been held
dutiable under the first entry, 85-702874-3 (voyage 84)(which is
the subject of protest 1001-5-011485), the denial of this
protest would result in the double payment of duty for the
prorated amount listed on entry 85-702904-3 (voyage 86).

     Accordingly, we hold that the prorated conversion cost
declared on entry 85-702904-3 (voyage 86) may be liquidated as
duty-free, subject to the caveat that the issue of the
classification of the conversion as a duty-free "modification"
will be determined in protest 1001-5-011485, filed in connection
with entry 85-702874-3 (voyage 84), which held the entire
conversion cost dutiable.



                               -4-

HOLDING:

     The prorated conversion cost declared on entry 85-702904-3
(voyage 86) which has already been found dutiable on the entry
for a previous voyage, may be liquidated as duty-free, subject to
the caveat that the issue of the classification of the conversion
as a "modification" will be determined in the protest filed in
connection with the entry for the previous voyage.

                                     Sincerely,




                                     B. James Fritz
                                     Chief
                                     Carrier Rulings Branch


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