HQ 112834: Vessel Repair; Application for Relief; Modification; Survey; Overhead; Cleaning Vessel Repair Entry No.: C27-0082382-9 Date of Arrival: April 5, 1993 Date of Entry: April 6, 1993 Port of Arrival: Long Beach, California Vessel: SEA-LAND EXPRESS V-189

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 112834

                          November 12, 1993

VES-13-18-CO:R:IT:C  112834 DEC

CATEGORY:  Carriers

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

RE:  Vessel Repair; Application for Relief; Modification; Survey;
     Overhead; Cleaning
     Vessel Repair Entry No.:  C27-0082382-9
     Date of Arrival:  April 5, 1993
     Date of Entry:  April 6, 1993
     Port of Arrival:  Long Beach, California
     Vessel:  SEA-LAND EXPRESS V-189

Dear Sir:

     This is in response to your memorandum dated July 23, 1993,
which forwards the application for relief from vessel repair duties
filed in connection with the above-referenced vessel for our review.


FACTS:

     The SEA-LAND EXPRESS is operated by Sea-Land Service,
Incorporated.  It is an American-flag vessel.  While abroad, the
SEA-LAND EXPRESS stopped in Kobe, Hong Kong, and Kaohsiung
where it underwent various operations.  Subsequently, the vessel
arrived in the United States at Long Beach, California on April 5,
1993.  A vessel repair entry was filed on April 6, 1993.

     An application for relief from the assessment of vessel repair
duties was timely filed pursuant to an extension of time to file the
required documentation.  Headquarters Decision 112780 (July 1,
1993).  The following items have been submitted for our review.

             Item               Description

               4                dowels on hatch
              11                drydocking charge on ABS invoice
              12                automation survey on ABS invoice
           2-1-4                administrative charge (apportioned)
           4-1-1                deflection readings
             H-6                foremast
             H-8                faceplate
            H-16                rudder

                                 -2-


             M-6                crosshead bearings
            M-10                main bearing
            M-14                sea valve and overboard valve
            M-18                soil clapper valve
            M-22                flushing of oil passage
              22                hinged frame
              32                paint primer


ISSUE:

     Whether the cost of foreign shipyard work completed aboard the
subject vessel is dutiable pursuant to Title 19, United States Code,
section 1466.


LAW AND ANALYSIS:

     Title 19, United States Code, section 1466(a) provides, in
pertinent part, for payment of a fifty percent ad valorem duty on
the cost of foreign repairs to a vessel documented under United
States law to engage in the foreign or coastwise trade, or to a
vessel intended to be employed in such trade.


Dowels on Hatch (Item 4)

     The cost associated with the removal of the dowels on the hatch
covers is not subject to the assessment of vessel repair duties
because it is a duty-free modification.

     Over the course of years, the identification of modification
processes has evolved from judicial and administrative precedents. 
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.

           (2)  Whether the 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.

                                 -3-

           (4)  Whether an item under consideration provides an
                improvement or enhancement in operation or
                efficiency of the vessel.

Before an item is to be construed as a part of the vessel, it must
be (1) a permanent attachment and (2) essential to the successful
operation of the vessel.   Otte v. United States, 7 C.C.P.A. 166,
169 (1916).
     
     Customs finds that the removal of the dowels from the hatches
constitutes a non-dutiable modification.  Accordingly, no duty is
assessed with respect to these operations.


Drydocking Charge on ABS Invoice (Item 11)
Automation Survey on ABS Invoice (Item 12)

     The invoices at issue involve the cost associated with various
American Bureau of Shipping surveys.  Specifically, the applicant
contends that the drydocking survey (Item 11) and the annual survey
of automation (Item 12) should not be subject to duty because the
surveys did not involve any repairs.  

     In C.S.D. 79-277, the Customs Service addressed the dutiability
of surveys/inspections stating that "[i]f the survey was undertaken
to meet the specific requirements of a governmental entity,
classification society, insurance carrier, etc., the cost is not
dutiable even if dutiable repairs were effected as a result of the
survey."  Only the cost of a required scheduled survey by a
qualifying entity (such as the United States Coast Guard or the
American Bureau of Shipping) has been held to be exempt from duty.
Conversely, Customs has held that if an inspection or survey is
conducted merely to ascertain the extent of damages sustained or
whether repairs are necessary, the costs are dutiable as part of the
repairs which are accomplished.

     The cost of the surveys at issue meet the above-described
conditions and are, accordingly, not subject to duty.


Administrative Charge (apportioned) (Item 2-1-4)

     It is Customs position that overhead relating to repair work is
dutiable as part of the cost of repair.  Overhead is part of the
shipyard's cost of doing business and is a component of the
"expenses of repairs made in a foreign country. . .."  19 U.S.C.
 1466(a)(1993).  The total cost of each repair item is dutiable;
that total cost includes overhead (administrative charges).

     Customs does not wish to see overhead broken-out or segregated
as a separate item.  Customs believes that overhead should be
included within the cost of the work performed, whether that work be
a dutiable repair or a nondutiable modification.  Headquarters
Decision 112861 (Oct. 19, 1993).
                                 -4-


     In this invoice the applicant's claim for relief is granted
with respect to any overhead charges which are associated with
nondutiable charges and which are clearly reflected as such on the
pertinent invoices (chain inspection, rigging, and cleaning of chain
locker).  Duty on the administrative charge is to be assessed with
respect to the chain marking operation.  C.I.E. 233/60 and
Headquarter Decision 112691 (Oct. 19, 1993).


Deflection Reading (Item 4-1-1)

     This invoice represents the costs incurred for the taking of
the main engine deflection readings upon the vessel's arrival into
the shipyard and just prior to its departure.  No repairs were
performed.  Accordingly, no duty is assessed on this invoice.


Foremast (Item H-6)

     The invoice for the raising of the vessel's forward mast
platform represents an operation that enhances the safe operation of
the vessel and it is a permanent incorporation into the vessel. 
Customs is satisfied that this operation is a duty-free
modification.  Accordingly, no duty is assessed on the cost of the
operation and the related administrative charges.  Headquarters
Decision 112681 (Oct. 19, 1993).


Faceplate (Item H-8)

     The expenses associated with the removal of the faceplates are
not subject to duty because their removal does not constitute a
repair under 19 U.S.C.  1466.  See Headquarters Rulings 110743 and
109908.  Accordingly, no duty is assessed on the cost of the
operation and the related administrative charges.  Headquarters
Decision 112681 (Oct. 19, 1993).


Rudder (Item H-16)

     The operation on the rudder inspection hole was performed to
facilitate access for periodic inspections which will decrease the
time that the vessel will be required to be in dry-dock.  No repair
operation was undertaken in relation to this item.  Accordingly, no
duty is assessed on this item or its related administrative charges. 
Headquarters Decision 112681 (Oct. 19, 1993).


Crosshead Bearings (Item M-6)

     The labor element of this invoice is subject to the assessment
of vessel repair duty because it is a cleaning operation which 

                                 -5-


removes rust and/or deterioration which is necessary to effectively
maintain the vessel.  C.I.E. 429/61.  Absent evidence to the
contrary, this item is considered to be an integral aspect of the
overall maintenance of the vessel and is, therefore, dutiable.


Main Bearing  (Item M-10)

     Absent evidence to the contrary, the main engine bearings were
replaced due to anticipated deterioration.  Cleaning performed in
conjunction with dutiable repairs would be dutiable.  Consequently,
the cleaning cost itemized on the invoice is subject to duty.


Sea Valve and Overboard Valve (Item M-14)

     This invoice details the expense associated with the opening of
these valves for the United States Coast Guard and the American
Bureau of Shipping for inspection.  Since no identifiable repair
work was performed, the cost of this operation is not subject to
duty.


Soil Clapper Valve (Item M-18)

     The  cleaning of the soil clapper valve and lever is a
maintenance operation.  As such, it is a dutiable repair and subject
to the assessment of vessel repair duty.  The expense of a shipyard-
conducted inspection which relates to a dutiable repair is dutiable. 
In addition, the related administrative charges are subject to duty
as outlined in Headquarters Ruling 112681 (Oct. 19, 1993).


Flushing of Oil Passage (Item M-22)

     This invoice describes the flushing of the oil passage with
compressed air.  This described operation is analogous to a cleaning
operation designed to improve the efficiency of the vessel through
the proper maintenance of the oil passage.  Customs has consistently
held maintenance items dutiable.  Accordingly, this item together
with applicable administrative costs is subject to duty.  The
itemized staging costs are not subject to duty.


Hinged Frame (Item 22)

     The installation of the hinged frame twistlocks which upgrade
the vessel's current twistlocks breaking strength does not involve a
repair operation.  Rather, the installation is a permanent
incorporation into the vessel's superstructure which would remain
aboard the vessel during an extended layup and it improves the
operational efficiency of the vessel.  Accordingly, no vessel repair
duty is owed with respect to this invoice.
                                 -6-


Paint Primer (Item 32)

     The applicant admits to the dutiability of this invoice and
requests that the unused product which was returned to the vendor
for a credit not be assessed vessel repair duty.  Duty should be
assessed on the invoice with exception to the unused product
returned for credit.


HOLDING:

     After a thorough review of the submitted evidence, this
application for relief is granted in part and denied in part for the
reasons detailed in the Law and Analysis section of this ruling.

                                Sincerely,




                                Arthur P. Schifflin
                                Chief
                                Carrier Rulings Branch