HQ 111936: Vessel repair; Repairs; Modifications; Vessel ARCO TEXAS; Vessel repair entry number C31-005019-5; Port of arrival Valdez, Alaska

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 111936

                        February 5, 1992


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

CATEGORY:  Carriers

Chief, Technical Branch
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90731

RE:  Vessel repair; Repairs; Modifications; Vessel ARCO TEXAS;
     Vessel repair entry number C31-005019-5; Port of arrival
     Valdez, Alaska

Dear Sir:

     Reference is made to your memorandum of October 2, 1991,
which forwards for our consideration and recommendation the
Application for Relief from the assessment of vessel repair
duties filed on behalf of Arco Marine, Inc., in regard to the
above-captioned vessel repair entry.

FACTS:

     The vessel ARCO TEXAS arrived in the United States after
having  had extensive work performed on the ship while abroad.
Customs and the vessel operator are in substantial agreement on
the issue of dutiability, and only seventeen (17) items are
offered for our review.  These items, listed below by shipyard
invoice item number, are as follows:

324  Work on the fire line cargo pumps.

409  Work on the cargo manifold gallows.

414  Work on the main deck rope scuttle.

419  Work on the IGS center tank piping system.

420  Work on the IGS center tank (No. 5) piping system.

431  Work on piping on the scrubber tower line.

433  Installation of container sockets on deck.

434  Installation of a vertical ladder to top of pump room.

508  Preparation for future installation of pump bearing monitor.

509  Testing main and emergency switch board breakers.

511  Staging for conduit pipe installation.

708  Installation of Butterworth holes on main deck.

901  Installation of auxilliary lube oil pump.

906  Cabling for installation of satellite communication system.

907  Cabling and installation costs for 3 cm and 10 cm radars.

910  Installation of an emergency towing system.

911  Installation of cargo heating coils.

ISSUE:

     Whether the evidence reveals that the operations specified
in the Facts portion of this ruling are subject to vessel repair
duty, or whether they might qualify for remission or refund under
a statutory, judicial, or administrative exception.

LAW AND ANALYSIS:

     Title 19, United States Code, section 1466(a), 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 be employed in such
trade.

     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 layup.

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.

    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.  Admiral Oriental,
          supra., (quoting T.D. 34150, (1914)).

     Pursuant to published Customs Service rulings (C.I.E.
1325/58 and C.I.E. 565/55), duties may not be remitted in
circumstances in which invoices fail to segregate dutiable from
non-dutiable expenditures.

     In the case of United States v. George Hall Coal Co., 134 F.
1003 (1905), it was held that any of various types of expenses
associated with foreign shipyard operations are classifiably free
from the assessment of duty, regardless of the character of the
overall shipyard work (repair vs. modification).  The case found
that the expense of drydocking a vessel is not a repair cost.
Drydocking is not an isolated expense, and is commonly associated
with numerous others.  These may include, but are not limited to,
sea water supply (for firefighting capability), fresh water
supply, hose hook-up and disconnection, fire watch services,
shore power hook-up, etc.

     In the case under consideration, we find that all costs have
been adequately segregated.  Further, we find that, with the
exception of items 509 and 511, all listed costs were for non-
dutiable modifications to the hull and fittings of the vessel.
Item 509 details testing performed on the main and emergency
switchboards during which no repairs performed.  This item is
considered duty-free.  Item 511 lists staging costs for pipe
installation which are considered free under authority of the
court decision in George Hall Coal Co., supra.

HOLDING:

     Following a thorough review of the evidence as well as
analysis of the applicable law and precedents, we have determined
that the items under review are considered duty-free for the
reasons set forth in the Law and Analysis portion of this ruling.

                              Sincerely,




                              B. James Fritz
                              Chief
                              Carrier Rulings Branch