HQ 111696: Vessel Repair; Modification; Conversion; Inspection; 19 U.S.C. 1466; SEA-LAND SPIRIT; Entry No. C27-189078-5.

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 111696

                         January 9, 1992

VES-13-18   CO:R:IT:C  111696  JBW

CATEGORY:   Carriers

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

RE:  Vessel Repair; Modification; Conversion; Inspection; 19
     U.S.C. 1466; SEA-LAND SPIRIT; Entry No. C27-189078-5.

Dear Sir:

     This letter is in response to your memorandum of May 3,
1991, which forwards for our review the application for relief
filed in conjunction with the above-referenced vessel repair
entry.

FACTS:

     The record reflects that the subject vessel, the SEA-LAND
SPIRIT (ex BENJAMIN HARRISON), arrived at the port of Los
Angeles, California, on December 17, 1990.  Vessel repair entry,
number C27-189078-5, was filed on the same day as arrival. The
entry indicates that the vessel underwent foreign shipyard work
while in Kobe, Japan.  Specifically, the record shows that the
vessel was converted from a combination barge and container
carrier to a full container vessel.  The vessel operator had
previously sought a prospective ruling in which this office
concluded that the described work would constitute a modification
to the vessel.  Headquarter Ruling Letter 111144, dated September
5, 1990.  In addition, other work was performed on the vessel
during the dry-docking.

ISSUES:

     (1)  Whether the submissions made in conjunction with this
entry constitute an application for relief.

     (2)  Whether certain work performed on the vessel while in
Kobe, Japan, results in modifications to the vessel, the cost of
which is not subject to duty.

     (3)  Whether inspections of the anchor windlasses because of
ongoing problems and the constant tension winches to ensure that
they are operating properly are non-dutiable inspections 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.

     The vessel operator has submitted a cover letter, invoices,
sketches, and a work sheet identifying the items for which it is
seeking relief.  However, the reasons for which relief is being
sought are not provided.  The Customs Regulations state that an
application for relief need not be in any particular form.  19
C.F.R. 4.14(d)(1)(i).  However, the regulations state and this
office has consistently held that an application must identify
the items for which relief from payment of duty is sought as well
as the legal bases for the Customs Service not to assess duty.
Id.; Headquarters Ruling Letter 110107, dated August 30, 1989.
With a deficiency, unless steps are taken to validate or complete
the application within the requisite time frame (i.e., within
sixty days from the date of first arrival or before the
expiration of time granted), the entry is subject to immediate
liquidation upon the expiration of the allotted time period.  By
failing to identify the legal grounds for relief, the submission
in this case does not constitute an application for relief.
Further, the time period during for filing an application has
expired.  The entry therefore is subject to immediate
liquidation in accordance with the determinations made in this
ruling.

     You have requested that this office review the following
items relating to the conversion of the vessel and other
installation operations.  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.  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 constitutes a new design feature
          and does not merely replace a part, fitting, or
          structure that is performing a similar function.

     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).

     The Customs Service has 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.

     Our conclusions on items specifically referred to this
office are as follows:

     Mitsubishi Heavy Industries Item 6.1-5:  Sigma Oily Water
     Separator:

          The vessel operator furnished an oily water separator
          to be installed in the engine room.  The invoice
          indicates that this separator replaces an item
          performing a similar function.  No evidence indicates
          that the new oily water separator constitutes a new
          design feature or an improvement.  The cost of this
          item is subject to duty.

     Mitsubishi Heavy Industries Item 6.1-7:  Emergency Diesel
     Boundary:

          Under this item, a boundary and self-closing door were
          installed to convert the emergency diesel platform to a
          sealed CO2 space.  This operation resulted in a new
          design feature being added to the ship.  The cost of
          the installation is not subject to duty.

     Mitsubishi Heavy Industries Item 6.1-9:  Chloropac System:

          Under this item, a Chloropac system was installed.  The
          purpose of this new installation was to protect the
          ship against marine growth.  This system represents a
          new design feature, the cost of which is not subject to
          duty.

     Mitsubishi Heavy Industries Item 6.1-13:  Uptake Expansion
     Joint:

          Four expansion joints in the uptakes for the port and
          starboard boilers were "renewed."  The invoice
          description suggests that this operation merely
          replaced existing parts that were worn.  Such operation
          is a repair and is subject to duty.

     Mitsubishi Heavy Industries Item 6.1-46:  Lube Oil Pumps:

          This item involved work on the suction line of the lube
          oil pump and air vent line.  The invoice includes the
          following descriptions:  "Deck penetration pipe cropped
          out and new T piece welded with flange"; "Existing air
          vent line cropped out and new flexible pipe installed
          new packing"; and "Pump discharge line in way of head
          tank cropped out, new flanges welded and sight glass
          installed with new gasket."  These description suggest
          that existing parts are being replaced with "new"
          parts.  The cost appearing under this item is subject
          to duty.

     Mitsubishi Heavy Industries: Final Price Agreement for
     Conversion of Vessel to Container Carrier

          The vessel operator has submitted extensive
          documentation on the contract and price agreement for
          the conversion of the vessel from a combination barge
          and container carrier to a full container vessel.
          Extensive descriptions of the work were included, as
          well as specific drawings of the changes.  The
          conversion included installation of or alterations to
          hatch covers, deck pedestals, refrigerated container
          outlets, and other items.  Repairs made to specific
          parts of the hull are separately itemized.  We find,
          therefore, that the cost of the conversion is not
          subject to duty.  Likewise, the cost of the Hull
          Modification Survey (No KO17739) by the American Bureau
          of Shipping, which relates entirely to the
          modification, is not subject to duty.


     The Mitsubishi Heavy Industries invoice indicates that tests
were performed to the anchor windlasses and the constant tension
winches.  The Customs Service has held that where a test is
performed to ascertain the extent of damage sustained or whether
repairs are deemed necessary, then the costs are dutiable as part
of the repairs that are accomplished.  C.I.E. 429/61; C.S.D. 79-
2, 13 Cust. B. & Dec. 993 (1979); C.S.D. 79-277, 13 Cust. B. &
Dec. 1395, 1396 (1979).  However, Customs has held that
inspections not resulting in repairs are not dutiable.
Headquarters Ruling Letter 110395, dated September 7, 1989; see
American Viking Corp. v. United States, 37 Cust. Ct. 237, 247,
C.D. 1830 (1956).  The invoice description relating to the anchor
windlasses (item 6.1-1) indicates that the inspections were
performed to evaluate ongoing problems with the windlasses;
notations indicate that problems in the hydraulic and electrical
system were checked and repaired.  The costs appearing under this
item are therefore subject to duty.  The inspection of the
constant tension winches (item 6.1-87) indicates that no repairs
were made.  The cost for this item is not subject to duty.

HOLDINGS:

     (1)  The submission of the vessel operator fails to meet the
regulatory requirements for an application for relief.  The time
period during which the vessel operator could cure the defect
has expired, and the entry is subject to immediate liquidation.

     (2)  We find that certain work, as detailed in our analysis
above, constitutes modifications to the vessel, the cost of which
is not subject to duty under 19 U.S.C. 1466.

     (3)  The invoice description relating to the anchor
windlasses (item 6.1-1) indicates that the inspections were
performed to evaluate ongoing problems with the windlasses and
that repairs were made.  The cost of this item is subject to
duty.  The inspection of the constant tension winches (item 6.1-
87) indicates that no repairs were made.  The cost for this item
is not subject to duty.


                              Sincerely,



                              B. James Fritz
                              Chief
                              Carrier Rulings Branch