HQ 111527: Vessel Repair; Modification; M/V KATHLEEN PEARCY; 19 U.S.C. 1466; Entry No. C32-0006758-6.

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 111527

                          July 23, 1991

VES-13-18   CO:R:IT:C  111527  JBW

CATEGORY:   Carriers

Chief, Technical Branch
Commercial Operations
Pacific Region
1 World Trade Center
Long Beach, CA 90831

RE:  Vessel Repair; Modification; M/V KATHLEEN PEARCY; 19 U.S.C.
     1466; Entry No. C32-0006758-6.

Dear Sir:

     This letter is response to your memorandum of February 14,
1991, which forwards for our review the application for relief
filed on the above-referenced vessel repair entry.

FACTS:

     The record reflects that the subject vessel, the M/V
KATHLEEN PEARCY, arrived at the port of Honolulu, Hawaii, on
December 26, 1990.  Vessel repair entry, number C-0006758-6, was
filed on January 2, 1991, and indicated that work was performed
on the vessel in Bangkok, Thailand.  The description of the work,
the drawings, and the invoice show that a segregated fuel ballast
system was installed on the vessel.  This installation was
performed to maintain the ship's Certificate of Inspection
pursuant to a requirement by the United States Coast Guard.

ISSUE:

     Whether the work performed in a foreign shipyard is a
modification and therefore not subject to duty 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 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 engage in such trade.

     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.  Over the course of years, the identification of
work constituting modifications on the one hand and repairs on
the other has evolved from judicial and administrative precedent.
In considering whether an operation has resulted in a
modification that 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, 18 C.C.P.A. 137 (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.

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

     3.   Whether, if not a first time installation, an item
          under consideration replaces a current part, fitting,
          or structure that is not in good working order.

     4.   Whether an item under consideration provides an
          improvement or enhancement in operation or efficiency
          of the vessel.

     For purposes of section 1466, 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.

T.D. 34150, 26 Treas. Dec. 183, 184 (1914)(quoted with approval
in Admiral Oriental).

     In the present case, we find that the drawings and Manop
Engineering Limited Partnership invoice descriptions of the work
performed to install the segregated fuel ballast system
demonstrate that the work was performed to improve the operation
of the vessel.  The costs associated with this work is
consequently not dutiable.  However, item 11 of the Manop
Engineering Limited Partnership invoice reads:  "Blank deep tank
leaking heating coil in hold No.1, leaking pipe in deep tank,
hold No.2 port, and patch up leaking pipe."  This item indicates
that repairs were performed, and the cost thereof is subject to
duty.

HOLDING:

     The work performed to install the segregated fuel ballast
system is a modification and is not subject to duty.  Item 11 of
the Manop Engineering Limited Partnership invoice indicates that
repairs were made.  The cost of this item is dutiable.



                              Sincerely,



                              B. James Fritz
                              Chief
                              Carrier Rulings Branch