HQ 110863: Vessel Repair; Cleaning; Survey; Modification; Repair; Vessel PRINCE WILLIAM SOUND, V-180; Entry Number 718- 0000358-5

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 110863
                          July 24, 1990

VES-13-18-CO:R:P:C 110863 LLB

CATEGORY:  Carriers

Chief, Technical Branch
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90831


RE:  Vessel Repair; Cleaning; Survey; Modification; Repair;
     Vessel PRINCE WILLIAM SOUND, V-180; Entry Number 718-
     0000358-5


Dear Sir:

     Reference is made to your memorandum of February 6, 1990,
which forwards for our consideration the application for relief
from vessel repair duties filed by Sun Transport, Incorporated,
seeking relief from the assessment of vessel repair duties in
connection with the November 28, 1988, arrival of the vessel
PRINCE WILLIAM SOUND in the port of Portland, Oregon.

FACTS:

     The vessel, upon arrival, filed a declaration and entry of
vessel repairs as required under section 4.14, Customs
Regulations (19 CFR 4.14), reporting extensive work which had
been performed in foreign shipyards.  The application for relief
from duties seeks relief on numerous items for the claimed
reason that they involved non-repair-related expenses
(modification, cleaning, survey, etc.).  Customs Headquarters
advice is sought on fifty-six such items.

ISSUE:

     Whether the items claimed as free and forwarded for review
and advice are considered duty-free under either court or
administrative interpretations of 19 U.S.C. 1466(a).

LAW AND ANALYSIS:

     Section 466, Tariff Act of 1930, as amended (19 U.S.C. 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.

     The Court in Admiral Oriental, supra., cited with approval
an opinion of the Attorney General (27 Op. Atty. Gen. 288).  That
opinion interpreted section 17 of the Act of June 26, 1884, (23
Stat. 57), which allowed drawback on vessels built in the U.S.
for foreign account, wholly or in part of duty-paid materials.
In defining equipment of a vessel, the Attorney General found
that items which are not equipment are:

     ...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...[and] are
     material[s] used in the construction of the vessel...

While the opinion of the Attorney General interpreted a provision
of law other than section 1466 or a predecessor thereto, it is
considered instructive and has long been cited in Customs Service
rulings as defining permanent additions to the hull and fittings
of a vessel.

     Customs has held that for an item to be characterized as a
nondutiable modification, it must encompass the installation of
an item as a new design feature, not as a replacement for, or
restoration of, parts now performing a similar function.  We have
also 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.

     Customs also holds that the costs for certain surveys and
inspections are not dutiable, even though dutiable repair may be
performed in connection with their execution.  Such operations
are generally limited to surveys required to keep a vessel in
class.  Other surveys or inspections, such as those performed to
ascertain whether repairs are either necessary or adequately
accomplished, are dutiable.


     One early case (United States v. George Hall Coal Co., 134
F. 1003 (1905)), was the first to find any of various types of
expenses associated with the foreign shipyard operations to be
classifiably free from the assessment of vessel repair duties.

     We have reviewed the evidence regarding the items for which
relief is sought and find that the operations constitute
permanent duty-free modifications to the hull and fittings of the
vessel, with the exception of item A-19E. (Sembawang Shipyard
Invoice #5049C).  This item relates to the installation of
computer equipment for the tank gauging system.  This segregated
cost is for sensitive electronic equipment which would be removed
were the vessel to be laid up for any extended period of time and
is, therefore, considered dutiable.

HOLDING:

     In light of the foregoing facts and analysis of the law, we
are of the opinion that the items for which relief is sought are
not subject to duty under section 1466(a) except as specified
above.

                                Sincerely,




                                B. James Fritz
                                Chief
                                Carrier Rulings Branch