HQ 111623: Vessel Repair; Modification; 19 U.S.C. 1466; PAUL BUCK; Entry No. 808-0514998-8.

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 111623

                        October 15, 1991

VES-13-18   CO:R:IT:C  111623  JBW

CATEGORY:   Carriers

Chief, Technical Branch
Commercial Operations
Pacific Region
1 World Trade Center
Long Beach, CA 90831

RE:  Vessel Repair; Modification; 19 U.S.C. 1466; PAUL BUCK;
     Entry No. 808-0514998-8.

Dear Sir:

     This letter is in response to your memorandum dated March
26, 1991, which forwards for our review the application for
relief filed in conjunction with the above-referenced vessel
repair entry.

FACTS:

     The record reflects that the subject vessel, the PAUL BUCK,
arrived at the port of San Francisco, California, on June 27,
1990.  Vessel repair entry, number 808-0514998-8, was filed on
the same day as arrival.  The entry indicates that foreign
shipyard work was performed in a large number of shipyards during
the course of the vessel's twenty-three month voyage.  The work
included operations claimed to be free from duty as
modifications.

ISSUE:

     Whether certain work performed in the Keppel Shipyard
results in modifications to the vessel that is not subject to
duty under 19 U.S.C. 1466.

LAW AND ANALYSIS:

     Title 19, United States Code, section 1466, provides in
pertinent part for payment of duty in the amount 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 engage in such trade.

     The applicant claims that certain work performed at the
Keppel Shipyard is not subject to duty, for the work constitutes
modifications to the vessel.  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.  Over the course of
years, the identification of work constituting modifications on
the one hand and repairs on the other has evolved from judicial
and administrative precedent.  In considering whether an
operation has resulted in a modification that 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, 18 C.C.P.A. 137 (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 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 under consideration provides an
          improvement or enhancement in operation or efficiency
          of the vessel.

     For purposes of section 1466, 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.

T.D. 34150, 26 Treas. Dec. 183, 184 (1914)(quoted with approval
in Admiral Oriental).

     The Customs Service has held that the decision in each case
as to whether an installation constitutes a nondutiable addition
to the hull and fittings of the vessel depends to a great extent
on the detail and accuracy of the drawings and invoice
descriptions of the actual work performed.  Even if an article is
considered to be part of the hull and fittings of a vessel, the
repair of that article, or the replacement of a worn part of the
hull and fittings, is subject to vessel repair duties.

     The applicant seeks relief from duty for claimed
modifications to install a fathometer transducer (Keppel
Shipyard Item 5413).  This work involved cutting a hole in the
hull, installing a watertight stand pipe, running new cable, and
testing the operation of the fathometer.   From the plans and
invoice description submitted, we find that this work resulted in
a new design feature that is not repair related.  The costs
appearing under Keppel Shipyard Item 5413 are not dutiable.

     Similarly, the applicant seeks relief for the installation
of an Elinca Antifouling System (Keppel Shipyard Item 2326/5506).
This work involved cutting holes in the port and starboard ER sea
chests, welding flange mountings, and installing anodes and
cables necessary for the system.  Again, we find that this work
resulted in a new design feature that is not repair related.  The
costs appearing under Keppel Shipyard Item 2326/5506 are not
dutiable.

     Finally, the applicant seeks relief for work performed to
the freezer meat room and vegetable room (Keppel Shipyard Item
8917).  Specifically, this work entailed resecuring or
reinforcing  existing racks in the cold rooms.  The work
performed under these items involves the restoration of existing
parts and does not represent improvements or new design features.
We find, therefore, that the costs appearing under Keppel
Shipyard Item 8917 are dutiable.

HOLDING:

     The costs for the installation of the fathometer transducer
and the Elinca Antifouling System are not dutiable, for the work
performed resulted in new design features that are not repair
related.  However, the costs for resecuring or reinforcing
existing racks in the cold rooms are dutiable, for the work
performed does not constitute a modification to the vessel.


                              Sincerely,



                              B. James Fritz
                              Chief
                              Carrier Rulings Branch