HQ 112036: Vessel Repair; Entry No. 335-0100603-6; SS PRESIDENT JOHNSON V-241; Modification;

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 112036

                        February 11, 1992

VES-13-18-CO:R:IT:C 112036 GEV

CATEGORY:  Carriers

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

RE:  Vessel Repair; Entry No. 335-0100603-6; SS PRESIDENT JOHNSON
     V-241; Modification;

Dear Sir:

     This is in response to your memorandum dated December 9,
1991, transmitting an application for relief from duties assessed
pursuant to 19 U.S.C. 1466.  You ask that we review two (2) items
listed in the application.  Our findings are set forth below.

FACTS:

     The SS PRESIDENT JOHNSON is a U.S.-flag vessel owned by
American President Lines, Ltd. of Oakland, California.  The
subject vessel underwent foreign shipyard work during the period
of June - July, 1991.  Subsequent to the completion of the work,
the vessel arrived in the United States at Seattle, Washington,
on August 10, 1991.  Formal entry was timely filed on August 15,
1991.  Pursuant to an authorized extension of time, an
application for relief with supporting documentation was timely
filed on November 7, 1991.

     The applicant contends that the two items in question (Item
3.3-2, Propeller Net Cutter Installation; and Item 3.3-3, Rudder
Side Plates Modification) constitute nondutiable modifications to
the subject vessel.

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.

                              - 2 -

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
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.

                              - 3 -


     "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, we note that both items appear on pp. 111-113 of Hongkong
United Dockyards Ltd. invoice no. 0011/09, dated July 11, 1991,
under the heading, "NON STANDARD HULL AND UNDERWATER REPAIR AND
MAINTENANCE."  The invoice descriptions for both items further
evidence repair work rather than modifications.  Accordingly,
Items 3.3-2 and 3.3-3 are dutiable.

HOLDING:

     Evidence is not 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