HQ 112786: Vessel repair; Modification; 19 U.S.C. 1466; SEA-LAND ENTERPRISE; Entry No. 110-0104410-3

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 112786

                          September 27, 1993

VES-13-18  CO:R:IT:C  112786 GOB

CATEGORY:   Carriers

Deputy Regional Director
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90831

RE:  Vessel repair; Modification; 19 U.S.C. 1466; SEA-LAND
     ENTERPRISE; Entry No. 110-0104410-3

Dear Sir:

     This is in response to your memorandum dated June 15, 1993,
which forwarded for our review the application for relief filed in
connection with the above-referenced vessel repair entry.

FACTS:

     The record reflects that the subject vessel, the SEA-LAND
ENTERPRISE ("vessel"), arrived at the port of Tacoma, Washington
on January 22, 1993.  Vessel Repair Entry No. 110-0104410-3 was
filed on January 27, 1993.  The entry indicates that the vessel
underwent foreign shipyard work while in Kaohsiung, Republic of
China.  Sea-Land Service, Inc. ("applicant") seeks relief for
certain invoice costs that it claims are not subject to duty
because those costs are for modifications.  The applicant also
seeks relief for certain other items which it contends are not
dutiable.

ISSUES:

     (1)  Whether certain work performed to the vessel resulted in
modifications to the vessel and is therefore not subject to duty
under 19 U.S.C. 1466.

     (2)  Whether certain other costs which were incident to
required inspections are subject to duty under 19 U.S.C. 1466.

     (3)  Whether certain administrative costs are subject to duty
under 19 U.S.C. 1466.

     (4)  Whether certain cleaning is subject to duty under 19
U.S.C. 1466.


                              - 2 -

LAW AND ANALYSIS:

     19 U.S.C. 1466 provides in pertinent part for the payment of
duty at a rate 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 be
employed in such trade.

Issue (1)

     In a non-binding, advisory letter to the applicant dated April
8, 1993, we stated as follows:

          We are writing in response to your letters of October 23
          and November 10, 1992, in which you relate plans on the
          part of Sea-Land Service, Inc., to have certain foreign
          shipyard operations conducted on four company vessels.
          ...
          We understand that it is proposed to take the Sea-Land
          vessels TRADER, NAVIGATOR, ENTERPRISE, and PACIFIC to
          foreign shipyards in order that their configurations may
          be changed so that they can be made to accomodate the
          carriage of greater numbers of cargo containers above
          decks.  This result will be achieved by raising the
          navigation bridge some fourteen (14) feet, and by
          modifying some of the hatches between numbers seven (7)
          and eleven (11) in order that they might accomodate
          containers of forty-five (45) feet.
          ...
          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.  The identification of
          work constituting modifications vis-a-vis work
          constituting repairs has evolved from judicial and
          administrative precedent.  In considering whether an
          operation has resulted in a nondutiable modification, the
          following factors have been 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 means of attachment so as to be
               indicative of the intent to be permanently
               incorporated.  

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

               

                              - 3 -

               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.

          With specific reference to the items presently under
          consideration, there would appear to be every likelihood
          that an examination of the invoices detailing the work
          outlined above would result in a finding that the vessels
          had undergone non-dutiable modifications in a foreign
          shipyard.  The operations anticipated to be completed
          abroad are of the type which we have previously found to
          be modifications rather than repairs.

     The applicant has broken certain of the work performed into
six modifications which it has numbered M1 through M6.  You have
asked us to review the following items on the applicant's
worksheet:  M1 - 1, 255, 275, 281, 282, 283; M2 - 2; M3 - 3, 284;
M4 - 145, 146, 147; M5 - 190, 191, 192; and M6 - 204, 205, 206. 

     The applicant states the following:

     M1.  These items relate to a structural modification of the
vessel which increased the height of the wheelhouse to allow the
vessel to carry more cargo while it still complied with visibility
requirements.  Additional structural changes were made as a result
of the bridge raising.  The foremast was modified to meet
visibility requirements.  The mounting of the navigation lights was
modified to conform with U.S. Coast Guard requirements.  The diesel
generator exhaust stack was raised to prevent exhaust gases from
being pulled into the wheelhouse.

     M2.  This item relates to the modification of hatch numbers
seven, nine, and 11 to carry 45 foot containers, which the vessel
has the capacity to carry as a result of the modification.

     M3.  These items relate to the modification of the cover to
hatch number one to permit the double-lashing of containers.

     M4.  These items relate to the modification of cell guide
gathers, which provide entry targets for the crane operator when
containers are stowed below deck.  A new structural fitting was
installed between the cell guide gather and the hatch coaming to
prevent future damage.

     



                              - 4 -

     M5.  These items relate to the modification of hatch cover
liners for hatch numbers four and 11.  The previous liners were
composed of mild steel and were subject to frequent damage due to
corrosion and wear.  The new liners are stainless steel.

     M6.  These items relate to the modification of hatch covers
at hatch numbers 13 and 4S.  The hatch covers were fitted with deck
sockets which provide a tie point for a container locking device. 
Prior to this modification, attempts to use these sockets
occasionally resulted in damage to the cover as it deflected
excessively if the locking device missed the socket.

     Based on the evidence of record in the case file, we find that
all of the above items are nondutiable modifications with the
exception of the following items: 145, 146, 147, and 283.  

     We find that items 145, 146, and 147 are dutiable repairs
based on the invoice for items 143-147 which indicates that the
work is both a modification and a repair.  That invoice describes
the modification, but also states "Labor - repair cell guides" with
respect to item 146.  Based on the apparent contradiction on the
face of the invoice, we are unable to conclude that items 145, 146,
and 147 are for work which constitutes nondutiable modification. 
We conclude that these three items are for work which constitutes
dutiable repairs.

     With respect to item 283, which is within the M1 group, we
find that the invoice does not reflect a sufficient nexus with the
M1 modification work.  The invoice states in part: "furnish
junction boxes...furnish 60' transducer cables...furnish MCFQ-
2518A-50 meter sat-com cables."  The invoice does not establish
that these expenses are related to a nondutiable modification. 
Accordingly, we find that this item is a dutiable repair.        

Issue (2)

     You have asked us to review the following items which the
applicant has termed on its worksheet "Intrinsic part of an
inspection required by USCG and ABS":  34, 36, 47, 48, 53, 54, 56,
61, 64, 67, 73, 79, 131, and 229.  

     The evidence of record indicates that the the work performed
with respect to these items was pursuant to inspections required
by the U.S. Coast Guard and ABS.  We have consistently held that
a survey undertaken to meet the requirements of a governmental
entity, classification society, or insurance carrier is not
dutiable.  Accordingly, all of these items are not dutiable.

Issue (3)

     You have asked us to review the following items which the
applicant has termed on its worksheet "Clerical and administrative 

                              - 5 -

costs, non-productive work, non-dutiable": 76, 85, 89, 95, 101,
105, 111, 116, 122, 126, 137, 152, 156, 160, 163, 171, 175, 179,
183, 186, 196, 199, 202, 208, 212, 216, 219, 222, 226, 232, 236,
240, 244, 248, and 253.

     The invoices reflect that these items constituted
administrative costs, administrative charges, or administrative
overhead.  We find that all of these items are dutiable because the
record indicates that these administrative costs were related to
dutiable repairs.

Issue (4)

     You have asked us to review item 258, which the applicant has
termed on its worksheet: "Cleaning, no repairs or painting, non-
dutiable."

     The invoice for this item indicates that the cleaning was not
related to a repair.  Accordingly, we find that this item is
nondutiable.

HOLDING:

     The application for relief is allowed in part and denied in
part.  The items within Issue (1) are nondutiable with the
exception of items 145, 146, 147, and 283.  The items within Issue
(2) are nondutiable.  The items within Issue (3) are dutiable.  The
item within Issue (4) is nondutiable.


          
                              Sincerely,



                              Arthur P. Schifflin
                              Chief
                              Carrier Rulings Branch