HQ 111381: Vessel Repair; 19 USC 1466; Lash Barge; Modification; Drydocking; Inspection

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 111381

                        February 19, 1991



VES-13-18-CO:I:T:C 111381 RAH

CATEGORY:  Carriers

Chief, Technical Branch
Commercial Operations Division
Pacific Region
300 North Los Angeles Street
Los Angeles, CA  90053-3371

RE:  Vessel Repair; 19 USC 1466; Lash Barge; Modification;
     Drydocking; Inspection

Dear Sir:

This is in response to your memorandum of October 31, 1990,
regarding vessel repair entry number 331-3918079-9

FACTS:

     The record reflects that BARGE 450-7 arrived in the United
States at Bellingham, Washington, on March 29, 1990, and an entry
was filed on April 9, 1990.  No information was received from the
operators of the barge, and the entry was liquidated on July 20,
1990, using estimated amounts for the drydocking and repairs.


     The subject of this ruling is protest number 30040-000273
filed October 16, 1990.  The protestant claims that
modifications on invoice 4-3A, drydocking on invoice 4-3B and
inspections on invoice 4-3D are non-dutiable under 19 U.S.C.
1466.

ISSUE:

     Whether work performed on the subject vessel constitutes
non-dutiable modifications, drydocking and inspections.

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
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under the laws of the United States to engage in the foreign or
coastwise trade, or vessels intended to be employed in such
trade.

     On August 20, 1990, the President signed into law the
Customs and Trade Act of 1990 (Pub. L. 101-382), section 484E of
which amends the vessel repair statute by adding a new subsection
(h), which provides in part:

     (h) The duty imposed by subsection (a) of this section shall
not apply to--

          (1) the cost of any equipment, or any part of
          equipment, purchased for, or the repair
          parts or materials to be used, or the
          expense of repairs made in a foreign country
          with respect to, LASH (Lighter Aboard Ship)
          barges documented under the laws of the
          United States and utilized as cargo
          containers.

     It is clear that the statutory exemption does not apply to
all LASH barges, but rather only to those which are documented
under U.S. laws and are utilized as cargo containers.  Further,
the benefits of the statute are not made applicable to LASH
barges which are undocumented.  Neither should benefits extend to
LASH barges which were not in continual cargo container service
(e.g., such service may have been suspended or terminated)
between the time of the last pre-repair departure from the U.S.,
and first subsequent U.S. arrival.

     The effective date of the amendment is stated as follows:

          Effective Date.--The amendment made by this
          section shall apply to--

          (1) any entry made before the date of
          enactment of this Act that is not liquidated
          on the date of enactment of this Act, and
          (2) any entry made--
               (A) on or after the date of enactment of
                   this Act, and
               (B) on or before December 31, 1992.

     In the instant case, the entry was filed on March 29, 1990,
before the date of enactment of the Customs and Trade Act of
1990, but the entry was liquidated on July 29, 1990, before its
enactment and is thus not subject to treatment thereunder.

     With regard to the protestant's claim that the items on
invoice 4-3A constitute non-dutiable modifications, Customs has
held that for an item to be characterized as a nondutiable
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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.  Customs Memorandum
108871 (4-16-87).  Customs has 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.  Customs
Memorandum 108871 (4-16-87), citing C.S.D. 83-35.  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.  See, C.I.E. 233/60.  We have reviewed invoice 4-3A and
find the items listed thereon to be non-dutiable modifications.

     Next, we will address the drydocking services listed on
invoice 4-3B.  Expenses of docking a vessel while undergoing
repairs in a foreign port is not subject to the payment of a
duty.  United States v. Geo. Hall Coal Co., 134 F. 1003 (Circuit
Court, New York 1905).  See also, American Viking Corp. v. United
States, C.D. 1830 (1830).  A review of that invoice reflects that
the items listed thereon constitute non-dutiable drydocking
expenses.

     Finally, the protestant claims that  the inspection of the
barge on invoice 4-3D is non-dutiable.  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 a part of an
ongoing maintenance and repair program labelled "continuous" or
"ongoing" is dutiable.  Although, 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 the holdings in C.I.E.
429/61, C.S.D. 79-2, and C.S.D. 79-277.  In the instant case,
the items on invoice 4-3C, inspection account, correspond with
the shell repairs made on the repair account, invoice 4-3C.
Accordingly, since the inspections in question were performed in
conjunction with dutiable repairs, the inspections are also
dutiable.

HOLDING:

     Following a thorough review of the evidence provided, and as
detailed in the law and analysis section of this ruling, the
petition for review is denied with regard to the inspections and
granted with regard to the modifications and drydocking.

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     If you have any further questions regarding this matter,
please do not hesitate to contact our office.

                                   Sincerely,



                                   B. James Fritz
                                   Chief
                                   Carrier Rulings Branch