HQ 111693: Vessel Repair; Entry No. C18-0013084-6; SS VALLEY FORGE V-555; Modification; Oily Water Ballast Monitor

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 111693

                        December 24, 1991

VES-13-18-CO:R:IT:C 111693 GEV

CATEGORY:  Carriers

Deputy Assistant Regional Commissioner
Commercial Operations Division
423 Canal Street
New Orleans, Louisiana 70130-2341

RE:  Vessel Repair; Entry No. C18-0013084-6; SS VALLEY FORGE
     V-555; Modification; Oily Water Ballast Monitor

Dear Sir:

     This is in response to your memorandum dated May 8, 1991,
transmitting an application for relief from duties assessed
pursuant to 19 U.S.C. 1466.  Our findings are set forth below.

FACTS:

     The SS VALLEY FORGE is a U.S.-flag vessel owned by Keystone
Shipping Co., of Philadelphia, Pennsylvania.  The subject vessel
underwent the installation of an oily water ballast monitor while
in Adabiya, Egypt, on November 9, 1990.  Subsequent to the
completion of the work, the vessel arrived in the United States
at Jacksonville, Florida, on December 21, 1990.  Formal entry was
timely filed on December 28, 1990.  An application for relief was
timely filed on February 11, 1991.

     The applicant states that the installation referenced above
was a requirement of the U.S. Coast Guard (USCG) for all tank
vessels carrying oil cargoes, unless an exemption is granted by
the USCG (see sections 157.12 and 157.306, USCG Regulations (33
CFR 157.12, 157.306)).  It is stated that the subject vessel was
operating under such an exemption which was subsequently revoked
thereby necessitating the installation in question.  The
applicant contends that this work constituted a nondutiable
modification.  In support of this position, the applicant has
submitted documentation from Mackay Communications and GMG
Systems, Inc., a U.S. Coast Guard Certificate of Inspection, and
two of its own internal memoranda.


                              - 2 -

ISSUE:

     Whether evidence is presented sufficient to prove that the
foreign work performed on the subject vessel for which the
applicant seeks relief constitutes a modification so as to render
the work nondutiable 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 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.

     In its application of the vessel repair statute, Customs has
held that modifications 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

     Very often when considering whether an addition to the hull
and fittings took place for the purpose of 19 U.S.C. 1466, we
have considered the question from the standpoint of whether the
work involved the purchase of "equipment" for the vessel.  It is
                              - 3 -

not possible to compile a complete list of items that might be
aboard a ship that constitute its "equipment".  An unavoidable
problem in that regard stems from the fact that vessels differ as
to their services.  What is required equipment on a large
passenger vessel might not be required on a fish processing
vessel or offshore rig.

     "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))

     By defining what articles are considered to be equipment,
the Court attempted to formulate criteria to distinguish non-
dutiable items which are part of the hull and fittings of a
vessel from dutiable equipment, as defined above.  These items
might be considered to include:

          ...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...  Admiral Oriental,
          supra., (quoting 27 Op. Atty. Gen. 228).

     A more contemporary working definition might be that which
is used under certain circumstances by the Coast Guard; it
includes a system, accessory, component or appurtenance of a
vessel.  This would include navigational, radio, safety and,
ordinarily, propulsion machinery.

     Upon reviewing the record with regard to this particular
work it is apparent that the installation of the oily water
ballast monitor constitutes a nondutiable modification.  In
regard to the supporting documentation, however, we note that
the only description contained on the photocopy of the Mackay
Communications invoice no. 26502375 submitted reads, "SMR TERIAL
LLEY FORGE 5234 [sic]."  Although this would appear to indicate
that some type of material was purchased for the VALLEY FORGE,
there is not a sufficient nexus between the invoice and the
installation under consideration to support a finding that it
was included as part of this modification.  The charges on this
invoice are therefore dutiable with the exception of the freight
charges listed thereon.

HOLDING:

     With the exception of the Mackay Communications invoice no.
26502375, evidence is presented sufficient to prove that the
foreign work performed on the subject vessel for which the
applicant seeks relief constitutes a modification so as to
render the work nondutiable under 19 U.S.C. 1466.

                                   Sincerely,




                                   B. James Fritz
                                   Chief
                                   Carrier Rulings Branch