HQ 110564: Norfolk, Virginia, Vessel Repair Entry No. C14-0015731-4 dated June 19, 1989, M/V GUS W. DARNELL, Voyage 49

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 110564

                          June 1, 1990

VES-13-18-CO:R:P:C  110564 BEW

CATEGORY:  Carriers

Deputy Assistant Regional Commissioner
Commercial Operations Division
ATTN:  Regional Vessel Repair Liquidation Unit
New Orleans, Louisiana 70130

RE:  Norfolk, Virginia, Vessel Repair Entry No. C14-0015731-4
     dated June 19, 1989, M/V GUS W. DARNELL, Voyage 49

Dear Sir:

     This is in reference to an application for relief from
duties filed by Ocean Ships, Inc., in relation to the above
referenced vessel repair entry dated June 19, 1989.  The vessel
arrived at the port of Norfolk, Virginia, on June 17, 1989.

FACTS:

     The applicant's attorney claims that relief for the subject
items should be granted because the vessel departed the United
States at Charleston, South Carolina on October 30, 1985; that
the vessel was outside the United States for more than two
years, therefore, pursuant to Section 4.14(a)(2)(iii)(A) of the
Customs Regulations, only the purchases and repairs made during
the first six months after the vessel departure are subject to
duty.  She further claims that the subject items are
modifications, cleaning operations and inspections which are not
dutiable.

     The vessel's log shows that at 1:00 a.m. on October 25,
1985, the vessel was at sea enroute to the Virgin Islands.  A
review of the CF 226 and other documents reveals that in a very
short time thereafter, repairs began on the vessel and continued
in a steady manner throughout May 1986.  This raises a question
as to whether the vessel left the United States with the sole
intent of being repaired foreign.  Before making your final
decision on the application, please have the Liquidation Unit
obtain evidence concerning the specific use of the vessel while
she was foreign, as well as the dates of service.  Section
4.14(a)(2)(iii)(B) of the Customs Regulations states that the
provisions of section 4.14(a)(2)(iii)(A) do not apply to a vessel
designed and used primarily for transporting passengers or
property if such vessel departed the  U.S. for the sole purpose
of obtaining equipment, parts, materials, or repairs (see 19
U.S.C. 1466(e)(1) and 1466(e)(2)).

     The entire vessel repair entry involves a potential duty of
$82,058.55.

     You have referred a total of 4 items to us for our review
and comments.  The record shows that the shipyard work in
question was performed on the subject vessel at the Malta
Drydocks, shipyard in Valletta, Malta, during the period December
18 through December 23, 1985.  We will refer to the work using
the item numbers and invoice descriptions shown on the invoices
submitted with your memorandum.

ISSUE:

     Whether the evidence as presented is sufficient to show that
the items claimed are duty-free under the terms of the statute.

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.

     A leading case in the interpretation and application of
section 1466 is United States v. Admiral Oriental Line et al., 18
C.C.P.A. 137 (T.D. 44359 (1930)).  That case distinguished
between equipment and repairs on one hand and permanent additions
to the hull and fittings on the other, the former being subject
to duty under section 1466.

     In its application of the vessel repair statute (19 U.S.C.
1466), Customs has consistently held that modifications/altera-
tions/additions to the hull and fittings of a vessel which allow
the vessel to operate more efficiently are not subject to vessel
repair duties.  Alterations to the hull and fittings of vessels
are not within the purview of section 1466, and the cost of the
work is not subject to duty.  To be found non-dutiable as a
modification/alterations/additions, the work must involve no
element of repair due to damages, deterioration or wear and tear.

If those are present, the work will be considered a repair and
dutiable.  After reviewing the record, we consider the work done
under the following item to be in the nature of non-dutiable
modifications/alterations/additions to the hull and fittings
rather than dutiable repairs to the vessel due to damage or
deterioration:

     Item 102 - 3. Diesel oil service and storage tanks.

     Item No. 501 - 6. SULZER main engine - 5 RTA 76, and

     Our review of the invoice and the ABS report reveals that
there was a fracture in the fuel oil service tank, and that there
was a crack in the fourth bottom tank tube of the gas economizer.
Because the cost of the work relating to the non-dutiable
modifications is not segregated from the repairs, the following
items are dutiable repairs, except for the cost of staging:

     Item 101 - 2. Fuel oil service tanks, and

     Item 500 - 5.  Exhaust gas economizer.

     Customs has held that where periodic surveys are undertaken
to meet the specific requirements of a classification society,
insurance carrier, etc., the cost of the surveys is not dutiable
even when dutiable repairs are effected as a result thereof;
however, in the liquidation process Customs should go beyond the
mere labels of "continuous" or "ongoing" before deciding whether
the item is dutiable.  If an inspection or survey is conducted as
a part of an ongoing maintenance and repair program labelled
"continuous" or "ongoing" the cost is dutiable.  Also, if the
survey is to ascertain the extent of damage sustained, or to
ascertain if the work is adequately completed, the costs are
dutiable as part of the repairs which are accomplished pursuant
to holdings in C.I.E. 429/61, C.S.D. 79-2, and C.S.D. 79-277.

     With regard to the surveys listed on ABS invoice Nos.
800581, we find them to be nondutiable with the exception of the
following:

     Repairs & Modifications
     Repairs on Emergency Fire Pump Motor
     Repairs & Additional Stiffening to Exhaust Gas Economizer.

HOLDING:

     The foreign repair work for which the applicant seeks relief
is dutiable under 19 U.S.C. 1466 with the exception of those
items noted above.

                                     Sincerely,




                                     B. James Fritz
                                     Chief
                                     Carrier Rulings Branch