HQ 112263: Vessel Repair; Modification; 19 U.S.C. 1466; NOSAC RANGER, v-61; Entry No. C46-0013785-4.

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 112263

                        February 4, 1993

VES-13-18  CO:R:IT:C  112263  JBW

CATEGORY:  Carriers

Deputy Assistant Regional Commissioner
Classification and Value Division
ATTN:  Regional Vessel Repair Liquidation Unit
6 World Trade Center
New York, New York 10048-002980

RE:  Vessel Repair; Modification; 19 U.S.C.  1466; NOSAC RANGER,
     v-61; Entry No. C46-0013785-4.

Dear Sir:

     This letter is in response to your memorandum that 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 NOSAC
RANGER, arrived at the port of New York on December 20, 1991. 
Vessel repair entry, number C46-0013785-4, was filed on the same
day as arrival and indicates that stern and side ramp motors were
installed on the vessel while in foreign shipyards.

ISSUE:

     Whether the installation of limit valves on hydraulic motors
is a modification to the vessel, the cost of which would not be
subject to duty 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.

     In its application of the vessel repair statute, the Customs
Service 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.

     "Dutiable equipment" has been defined to include:

          ...portable articles necessary or appropriate
          for the navigation, operation, or maintenance
          of a vessel, by 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.

     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.

     Kvaerner Invoice Number 90697 indicates the cost for the
replacement of hydraulic motors that raise and lower the stern
and side ramps.  The applicant acknowledges that the replacement
of these motors was due to wear.  The cost of the motors is
therefore subject to duty.  

     The applicant seeks relief for the installation of limit
valves and housing on each motor.  The applicant has included a
general description and drawing of the work performed.  The costs
of the materials used in this procedure are listed in Kvaerner
Invoice Number 90698.  The costs for the labor used to install
both the motors and the limit valves and housing are listed in
Kvaerner Invoice Number 90794; the invoice indicates that the
cost for installation of the limit valves is 33,700 SEK.  We find
that the installation of the limit valves and the housings
represent new design features.  The costs of the materials used
are therefore not subject to duty.  The labor costs contained in
Invoice Number 90794 would be subject to duty, with the exception
of the 33,700 SEK that is attributable to the non-dutiable
modification.

HOLDING:

     The installation of the limit valves and the housing
represents new design features.  The costs of the materials
contained in Invoice Number 90698 are therefore not subject to
duty.  The labor costs contained in Invoice Number 90794 would be
subject to duty, with the exception of the 33,700 SEK that is
attributable to the non-dutiable modifications.
     

                              Sincerely,




                              Acting Chief