HQ 112249: Vessel Repair; Entry No. 335-0100603-6; SS PRESIDENT JOHNSON; V-241; Petition for Relief; Modification

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 112249

                        January 27, 1993

VES-13-18-CO:R:IT:C 112249 BEW

CATEGORY:  Carriers

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

RE:  Vessel Repair; Entry No. 335-0100603-6; SS PRESIDENT
     JOHNSON; V-241; Petition for Relief; Modification 

Dear Sir:

     This is in response to your memorandum dated April 15, 1992,
transmitting a petition for relief from duties assessed pursuant
to 19 U.S.C. 1466.  

FACTS:

     The SS PRESIDENT JOHNSON is a U.S.-flag vessel owned by
American President Lines, Ltd., of Oakland, California.  The
subject vessel underwent foreign shipyard work during the period
of June and July 1991.  After the completion of the work, the
vessel arrived in the United States at Seattle, Washington, on
August 10, 1991.  Formal entry was timely filed on August 15,
1991.  Pursuant to an authorized extension of time, an
application for relief with supporting documentation was timely
filed on November 7, 1991.

     The applicant alleged that the two items in question (Item
3.3-2, Propeller Net Cutter Installation; and Item 3.3-3, Rudder
Side Plates Modification) constituted nondutiable modifications
to the subject vessel.  Based on the evidence submitted, in
ruling No. 112036 GEV, dated February 11, 1992, it was held that:

     Upon reviewing the record with regard to this particular
     work, we note that both items appear on pp. 111-113 of
     Hongkong United Dockyards Ltd. invoice No. 0011/09, dated
     July 11, 1991, under the heading, "NON STANDARD HULL AND
     UNDERWATER REPAIR AND MAINTENANCE."  The invoice
     descriptions for both items further evidence repair work
     rather than modifications.  Accordingly, Items 3.3-2 and
     3.3-3 are dutiable.
     The petition for review centers primarily around Item 3.3-
2, Propeller Net Cutter Installation.  The petitioner alleges
that this item is a permanent modification to the hull and
fittings of the vessel.

ISSUE:

     Whether the foreign work performed in Item 3.3-2, for which
the petitioner seeks relief constitutes a modification so as to
render the work nondutiable 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 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, 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.
     The Customs Service has held that the decision in each case
as to whether an installation constitutes a nondutiable
modification/alteration/addition to the hull and fittings of a
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.

     A review of the documents submitted with the petition shows
that the propeller net cutter is a permanent addition to the hull
and fittings of the vessel.  We find that the propeller net
cutter was installed to prevent the vessel propeller from
becoming tangled with fish nets during it operations in Japanese
and Chinese waters.  Accordingly, we find that Item 3.3-2 is a
permanent modification installed to enhance the vessel's
operational efficiency.  The petition is granted as to Item 3.3.2
-Propeller Net Cutter.

HOLDING:

     Following a thorough review of the evidence as well as the
applicable law and analysis of the evidence, we have determined
that item 3.3.2- Propeller Net Cutter installation is a
nondutiable modification/alteration/addition to the hull and
fittings of the vessel that is remissible under the statute.

                                   Sincerely,




                                   Acting Chief
                                   Carrier Rulings Branch