HQ 112176: Vessel Repair; 19 U.S.C. 1466; Application for Relief; Vessel Repair Entry No. C31-0009908-5; S/S CORNUCOPIA V-261

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 112176

                          July 22, 1992

VES-13-18 CO:R:IT:C 112176

CATEGORY:  Carriers

Deputy Regional Director
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California  90831

RE:  Vessel Repair; 19 U.S.C. 1466; Application for Relief;
     Vessel Repair Entry No. C31-0009908-5; S/S CORNUCOPIA V-261

Dear Sir:

     This letter is in response to your memorandum of March 24,
1992, which forwards for our consideration the above-referenced
Application for Relief from the assessment of vessel repair
duties submitted by Mr. George L. Stiehl III, of West Coast
Shipping Company.

FACTS:

     The record reflects that the subject vessel, the CORNUCOPIA,
arrived at Anchorage, Alaska, on November 22, 1991.  Vessel
repair entry, number C31-0009908-5, was filed on November 25,
1991, indicating work performed on the vessel at Yokohama, Japan.
The vessel owner was granted a 30 day extension to file an
application for relief which was subsequently filed on February
20, 1992.  We are asked to review the dutiability of the
following items:

Description                   Worksheet           Item No.
Main Deck Reinforcement       Page 2                   20

Inspection around Cargo Tank  Page 3                   26

Dry Nitrogen Supply Mod.      Page 3                   31

#3 Mooring Winch              Page 3                   34

ABS Survey                    CF 226                    2



ISSUE:

     Whether the foreign work performed on the subject vessel for
which the applicant seeks relief is dutiable 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.

Item 3 - Gas Free Certificate
Item 20 - Main Deck Reinforcement
Item 20a - Main Deck Reinforcement Coating
Item 21 - Acid Pipe Cleaning
Item 22 - Structural Repairs in the Interbarriers
Item 27 - Caustic Tank and Pipe Cleaning
ABS Survey Relative to Reinforcement of Main Deck at No. 2 Hold

     Applicant asserts that item 20 constitutes a main deck
structural modification whereby longitudinal and transverse
girders were installed.

     In its application of the vessel repair statute, Customs has
held that modifications/alterations/additions 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 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.

     We find that as to item 20, the foregoing elements have been
satisfied and the work constitutes a non-dutiable modification.
As noted in item 20, it appears that all costs associated with
any repairs are segregated in item 22 (structural repairs in the
interbarriers).  We find that item 20a (main deck reinforcement
coating) is dutiable because the painting of damaged coatings is
not segregated from the coating of the new modified structures.

     Applicant asserts that item 21 (acid pipe cleaning) was
required for the main deck reinforcement modification because the
sulfuric acid pipe had to be gas freed for hot work.  We agree
and hold this item non-dutiable.  Further, we find item 27
(caustic tank and deck piping cleaning) non-dutiable.  Item 27
involved the cleaning of the caustic lines on the main deck for
the installation of the new deck girders, and the cleaning of the
caustic tank for an ABS and USCG inspection.  We find that the
cleaning of the caustic tank for inspection purposes is not
required to be segregated from the cleaning of the caustic lines
for installation purposes because the latter is considered a
part of the non-dutiable modification.

     The ABS "Survey Relative to Reinforcement of Main Deck at
No.2 Hold" is also non-dutiable as part of a non-dutiable
modification.  Further, the gas freeing operations detailed in
item 3 should be prorated accordingly.


Item 26 - Void Space Inspection Around Cargo Tank No. 3
ABS Special Continuous Survey of Hull No. 7
ABS Special Continuous Survey of Machinery & Electrical Equipment
ABS Special Continuous Survey of Liquified Gas Cargo Features
ABS Damage Survey of Nos. 2 thru 4 Void Space
ABS Boiler Survey

     Certain vessel inspection operations are generally
considered non-dutiable.  Where periodic surveys are undertaken
to meet the specific requirements of, for example, a
classification society or insurance carrier, the cost of the
surveys is not dutiable even when dutiable repairs are effected
as a result thereof.  C.S.D. 79-277.  With increasing frequency,
this ruling has been utilized by vessel owners seeking relief not
only from charges appearing on an ABS or U.S. Coast Guard invoice
(the actual cost of the inspection), but also as a rationale for
granting non-dutiability to a host of inspection-related charges
appearing on a shipyard invoice.  In light of this continuing
trend, we offer the following clarification.

     C.S.D. 79-277 discussed the dutiability of certain charges
incurred while the vessel underwent biennial U.S. Coast Guard
and ABS surveys.  That case involved the following charges:

     ITEM 29
          (a) Crane open for inspection.
          (b) Crane removed and taken to shop.  Crane hob and
              hydraulic unit dismantled and cleaned.
          (c) Hydraulic unit checked for defects, OK.
              Sundry jointings of a vessel's spare
              renewed.
          (d) Parts for job repaired or renewed.
          (e) Parts reassembled, taken back aboard ship
              and installed and tested.

     In conjunction with the items listed above, we held that a
survey undertaken to meet the specific requirements of a
governmental entity, classification society, or insurance carrier
is not dutiable even when dutiable repairs are effected as a
result of the survey.  We also held that where an inspection or
survey is conducted merely to ascertain the extent of damages
sustained or whether repairs are deemed necessary, the costs are
dutiable as part of the repairs which are accomplished (emphasis
added).

     It is important to note that only the cost of opening the
crane was exempted from duty by reason of the specific
requirements of the U.S. Coast Guard and the ABS.  The
dismantling and cleaning of the crane hob and hydraulic unit was
held dutiable as a necessary prelude to repairs.  Moreover, the
testing of the hydraulic unit for defects was also found dutiable
as a survey conducted to ascertain whether repairs were
necessary.  Although the invoice indicated that the hydraulic
unit was "OK," certain related parts and jointings were either
repaired or renewed.  Therefore, the cost of the testing was
dutiable.

     We emphasize that the holding exempts from duty only the
cost of a required scheduled inspection by a qualifying entity
(such as the U.S. Coast Guard or the American Bureau of
Shipping).  In the liquidation process, Customs should go beyond
the mere labels of "continuous" or "ongoing" before deciding
whether a part of an ongoing maintenance and repair program
labelled "continuous" or "ongoing" is dutiable.

     Moreover, we note that C.S.D. 79-277 does not exempt repair
work done by a shipyard in preparation of a required survey from
duty.  Nor does it exempt from duty the cost of any testing by
the shipyard to check the effectiveness of repairs found to be
necessary by reason of the required survey.

     Turning to the case before us, upon careful review of the
ABS survey detailed as "Special Continuous Survey of Hull No. 7",
it appears that the survey is a period survey undertaken to meet
the specific requirements of the classification society.  The
shipyard work associated with this survey is detailed in item 26.
We find the work associated with item 26 solely involves opening
and removing perlite insulation from cargo tank no. 3 to enable
inspection; accordingly, item 26 is non-dutiable.

     After reviewing ABS "Special Continuous Survey of Machinery
and Electrical Equipment" and ABS "Special Continuous Survey of
Liquified Gas Cargo Features", it appears that these surveys do
not contain elements that check the effectiveness of any repairs
made; consequently, these surveys are non-dutiable surveys to
meet the specific requirements of the ABS.  However, the cost for
ABS "Damage Survey of Nos. 2 thru 4 Void Space" is dutiable as a
survey conducted to check the effectiveness of repairs.  We also
find the Boiler Survey to be dutiable because the ABS Report
indicates that welding work performed on the water-steam side
boiler, as detailed in item 47 of the Mitsubishi Heavy Industries
Invoice, was examined and found free from defects.  This segment
of the survey is akin to examining the effectiveness of repairs
and is not segregated from the required periodic inspection
segment; accordingly, the entire cost is dutiable.


Item 31 - Dry Nitrogen Supply System Modification
Item 34 - #3 Mooring Winch, New Inspection Plate

     Applicant asserts that items 31 and 34 are modifications
which enhance the operation of the ship.  Item 31 indicates that
a new gas check valve and a new ball valve on the high pressure
nitrogen supply to the bubblers and emergency deepwell pump
columns were installed.  The ball valve will secure the H.P.
nitrogen system without securing the nitrogen supply to the
inner barrier spaces.  The gas check valve will prevent the
possible reverse flow of inerting nitrogen back into the holds
via the hold pressure regulator.

     Item 34 indicates that an opening on the mooring winch cover
was cut and that a new inspection plate was installed.  After
reviewing items 31 and 34 we agree that they are non-dutiable
modifications and do not constitute a repair of a defect or
deficiency.



HOLDING:
     The application for relief is denied and granted in part as
detailed in the Law and Analysis portion of this ruling.

     All other items, not specifically discussed in this letter,
were reviewed and we agree with the determinations of dutiability
made.

                                   Sincerely,




                                   B. James Fritz
                                   Chief
                                   Carrier Rulings Branch