HQ 111698: Vessel repair; Modification; Fish processor; Vessel ALASKA Voyager; Entry No. H24-0010190-1, Port of arrival Dutch Harbor Alaska

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 111698

                        January 22, 1992



VES-13-18-CO:R:IT:C  111698 LLB

CATEGORY:  Carriers

Chief, Technical Branch
Commercial Operations Division
Pacific Region
One World Trade Center
Long Beach, California 90831

RE:  Vessel repair; Modification; Fish processor; Vessel ALASKA
     Voyager; Entry No. H24-0010190-1, Port of arrival Dutch
     Harbor Alaska

Dear Sir:

     Reference is made to your memorandum of May 14, 1991, which
forwards for our consideration the Application for Relief from
the assessment of vessel repair duties associated with the
above-captioned vessel repair entry.

FACTS:

     The vessel ALASKA VOYAGER underwent repairs and
modifications in a foreign shipyard.  The repairs were related to
a grounding incident remote in time from the shipyard operations
in question.  Relief is not sought in regard to the repair
expenses.  The vessel also underwent extensive modification work
which resulted in its being a trawler/processor vessel more
suitable for use in Alaskan fisheries operations.  The vessel was
attended to in a shipyard in Japan.

ISSUE:

     Whether foreign shipyard operations undergone by the vessel
ALASKA VOYAGER may be considered non-dutiable modifications 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 intended to be employed in such trade.

     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 layup.

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)).

     Pursuant to published Customs Service rulings (C.I.E.
1325/58 and C.I.E. 565/55), duties may not be remitted in
circumstances in which invoices fail to segregate dutiable from
non-dutiable expenditures.

     In the case of United States v. George Hall Coal Co., 134 F.
1003 (1905), it was held that any of various types of expenses
associated with foreign shipyard operations are classifiably free
from the assessment of duty, regardless of the character of the
overall shipyard work (repair vs. modification).  The case found
that the expense of drydocking a vessel is not a repair cost.
Drydocking is not an isolated expense, and is commonly associated
with numerous others.  These may include, but are not limited to,
sea water supply (for firefighting capability), fresh water
supply, hose hook-up and disconnection, fire watch services,
shore power hook-up, etc.

     We have thoroughly reviewed the entry documentation
submitted in this matter.  It is our conclusion that the entered
costs are clearly for non-dutiable modifications or classifiably
free items, with two exceptions, as noted from the foreign
shipyard invoice documents.  The noted exceptions are:

1.  Item 21, page 7; Crew Cabin Installation.  The invoice
details the removal of corroded flooring materials and provides
no segregation of this portion from the remainder of the
operation.  As such, the entire item is considered a dutiable
repair under authority of C.I.E. 1325/58 and C.I.E. 565/55.

2.  Subitem 1, page 23; Installation of Monitoring Camera.  The
invoice details the installation of cameras, monitors, lenses,
and remote control capability.  These delicate instruments are
considered equipment under authority of the decision of the court
in Admiral Oriental, supra., and are thus found to be dutiable.

HOLDING:

     Following a thorough review of the evidence as well as an
analysis of the law and applicable precedents, we have determined
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