HQ 111616: Vessel repair; Repairs; Modifications; Vessel TYSON LYKES, ex. DELAWARE BAY, V-1, Vessel repair entry No. C14- 0021244-0

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 111616

                        January 13, 1992

VES-13-18-CO:R:IT:C  111616 BEW

CATEGORY:  Carriers

Deputy Assistant Regional Commissioner
Commercial Operations Division
South Central Region
New Orleans, Louisiana 70130

RE:  Vessel repair; Repairs; Modifications; Vessel TYSON LYKES,
     ex. DELAWARE BAY, V-1, Vessel repair entry No. C14-
     0021244-0

Dear Sir:

     This is in reference to your memoranda of March 21 and
April 12, 1991, which forwarded for our consideration an
Application for Relief from assessment of vessel repair duties
submitted by counsel in regard to the above-captioned vessel
repair entry.

FACTS:

     The subject vessel underwent foreign shipyard work in
Germany.  During the period of foreign work, various repairs and
modifications were undertaken.  Specific items of work have been
forwarded for our review as to dutiable status.  These include
the following:

1.  Lloyd Werft invoice page 6, item 011; work on the anchor
windless.

2.  Lloyd Werft invoice page 43, item 068; work on catwalks.

3.  WL invoice 90-03-0066-We, exhibit C, page 3; refilling fire
extinguishers with CO.

4.  WL invoices 90-06-0324-We and 90-04-0138-We, exhibit C, pages
5 and 50; purchase of working leather gloves.

ISSUE:

     Whether certain vessel survey expenses, materials purchases,
and labor operations are considered subject to duty under the
vessel repair statute.

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

     A question exists as to whether certain of the items under
consideration might be considered non-dutiable modifications.  In
its application of the vessel repair statute, Customs has held
that modifications/alterations/additions to the hull and fittings
of a vessel are not subject to vessel repair duties.   Over the
course of years, the identification of modification processes has
evolved from judicial and administrative precedent.  In
considering whether an operation has resulted in a modification
which 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 et al., T.D. 44359 (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.  This element should not be given
     undue weight in view of the fact that vessel components must
     be welded or otherwise "permanently attached" to the ship as
     a result of constant pitching and rolling.  In addition,
     some items, the cost of which is clearly dutiable, interact
     with other vessel components resulting in the need,
     possibly for that purpose alone, for a fixed and stable
     juxtaposition of vessel parts.  It follows that a "permanent
     attachment" takes place that does not necessarily involve a
     modification to the hull and fittings.

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

     3.  Whether, if not a first time installation, an item under
     consideration replaces a current part, fitting or structure
     which 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.  Admiral Oriental,
          supra., (quoting T.D. 34150, (1914)).

     Relating the foregoing to the items under consideration, we
find as follows:

     1.  The work on the anchor windless is largely a
     modification, but does include an unsegregated repair
     element (renewal of stainless steel fittings).  Accordingly,
     the entire cost of this item is dutiable.

     2.  The work on the catwalks is largely a modification, but
     does include an unsegregated repair cost for the "numerous
     minor local damages in scattered location" (See ABS report
     90-224-BR page 3), a repair of damage which is not shown to
     have been necessitated by casualty.

     3.  The recharging of the fire extinguishers is equatable to
     the purchase of freon for refrigeration which has been held
     to be nondutiable (C.I.E. 887/64).

     4.  Articles which are purchased to be used as a part of
     repair work are dutiable.  The leather work gloves are
     considered dutiable under subsection (a) of the statute.

     5.  The cost of obtaining a gas-free certificate
     constitutes and ordinary and necessary expense incident to
     repair operations and is pro-rated between dutiable and non-
     dutiable work.

HOLDING:

     Following a thorough review of the facts as well as full
analysis of the law and applicable precedents, we are of the
opinion that the Application for Relief should be allowed in part
and denied in part, as specified in the Law and Analysis portion
of this ruling.

                               Sincerely,



                               B. James Fritz
                               Chief
                               Carrier Rulings Branch