HQ 111711: Vessel Repair Entry No. C31-0007658-8; ALASKAN VENTURE; Conversion Work; 19 U.S.C. 1466

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 111711

                        December 17, 1991

VES-13-18-CO:R:IT:C 111711 GEV

CATEGORY:  Carriers

Chief, Technical Branch
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90731

RE:  Vessel Repair Entry No. C31-0007658-8; ALASKAN VENTURE;
     Conversion Work; 19 U.S.C. 1466

Dear Sir:

     This is in response to your memoranda dated May 14, 1991,
and June 20, 1991, forwarding an application for relief from
duties assessed pursuant to 19 U.S.C. 1466.  You ask that we
review the items listed under the right-hand column on the
worksheets provided by the San Francisco Vessel Repair
Liquidation Unit (VRLU).  Our findings are set forth below.

FACTS:

     The ALASKAN VENTURE is a U.S.-flag vessel (possessing both
fisheries and registry documentation) owned by K & H Fisheries,
Inc., of Seattle, Washington.  Under the vessel's former name
("BOLD VENTURE") and prior ownership, it was a super tuna seiner
based out of southern California.  The current owners elected to
have the vessel converted from a super tuna seiner to a long
line, head and gut, freezer processor fishing vessel.

     The conversion took place in two phases.  The first phase
took place at the shipyard of Dakota Creek Industries, Anacortes,
Washington.  The second phase took place at the shipyard of
Murakami Zosensho Shipbuilding Company, Ltd., Ishinomaki, Japan.
Various work items in the second phase of the conversion, handled
by Kouhoku Co. Ltd., of Fukishima, Japan, are specified for our
review.

     Subsequent to the completion of the work in Japan, the
vessel sailed for Alaskan fishing grounds.  While at the fishing
grounds an ill crewman necessitated that the vessel put into
Prince Rupert, British Columbia, Canada, where some minor
repairs were performed.  The vessel departed Prince Rupert on
                              - 2 -

November 6, 1990, and arrived in the United States at Dutch
Harbor, Alaska, on December 15, 1990.  A vessel repair entry was
filed on the date of arrival.  An application dated March 13,
1991, was timely filed.  A supplement billing from the Japanese
shipyard was also filed by a letter to the VRLU dated June 3,
1991.

     The applicant claims that the conversion work in question
constitutes nondutiable modifications and that various other
costs are otherwise nondutiable.  In support of these claims the
applicant submitted invoices, a recap of all invoices, a summary
statement of the owner, drawings/plans/photographs, and the
vessel's certificate of documentation.

ISSUE:

     Whether evidence is presented sufficient to prove that the
foreign work performed on the subject vessel for which the
applicant seeks relief constitutes modifications/alterations/
additions 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.
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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
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 Kouhoku Co. Ltd. invoice items marked
for our determination, we note that all of these items under
consideration are nondutiable costs of the conversion
                              - 4 -

with the exception of the following which are dutiable
installations of equipment and/or associated with dutiable
repairs.

          Invoice no. U-3(6) - Echo Sounder
                               Transducer Tank
                               Wiring Material
                               Wiring Work

          Invoice no. U-9 - Electronic Equipment & Works

          Invoice no. U-16 - Bilge Water Pump for Oil Separator

          Invoice no. M-15(L-2) - Cleaned Whole Inner Part of
                                   Ship

     In regard to the supplemental billing received by the
applicant from the shipyard after their initial application was
submitted, we note that the costs thereon are nondutiable with
the exception of Item 5 covering main engine air clutch repair
and replacement work.

HOLDING:

     The evidence presented is sufficient to prove that the
foreign work performed on the subject vessel for which the
applicant seeks relief constitutes modifications/alterations/
additions so as to render the work nondutiable under 19 U.S.C.
1466, with the exception of those items noted above.

                                   Sincerely,




                                   B. James Fritz
                                   Chief
                                   Carrier Rulings Branch