HQ 112945: Protest 0401-92-100616; Vessel Repair Entry No. 559-1237207- 9; NEDLLOYD HUDSON, voyage 029; Modification; Air Compressor; 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 112945

                          May 31, 1994


VES-13-18   CO:R:IT:C  112945 BEW

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:  Protest 0401-92-100616; Vessel Repair Entry No. 559-1237207-
     9; NEDLLOYD HUDSON, voyage 029;   Modification; Air
     Compressor; 19 U.S.C.  1466;

Dear Sir:

     This letter is in response to your memorandum of October 26,
1993, which forwarded 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 NEDLLOYD
HUDSON, arrived at the port of Boston, Massachusetts, on 
November 6, 1990.  Vessel repair entry, number 559-1237207-9, was
filed on the same day as arrival.  The entry indicates that the
vessel, among other items, had a complete compressed air system
installed while the vessel was in Felixstowe, England.  An
application for relief was filed on January 23, 1991.  This
application was denied in part by your office, for no
documentation was included with the application to establish the
claim that the installation of the air compressor is not subject
to duty as a modification.

     A petition was filed on March 21, 1991.  In support of its
claim, the petitioner submitted an invoice from Hamworthy Marine
that provided a cost for the installation of the air compression
system.  The invoice, however, did not describe the work
performed.  The petition did not provide an explanation or
description of what work was done.  The petitioner merely made  reference to an advisory ruling in which this office stated
thatgiven the information submitted, the prospective work would
be considered a modification that is not subject to duty (HQ
110993 GEV, dated May 2, 1990).

     By decision dated January 9, 1992, the petition was denied
on the basis that:

     Notwithstanding the advisory ruling stating that the
     installation of an air compression system would constitute a
     modification to the subject vessel, without further
     description of the actual installation process, we are
     unable to conclude that the installation of the air
     compressor constitutes a modification to the vessel. 

     The entry was liquidated on July 6, 1992. The protest was
timely filed on October 2, 1992.  The protestant claims that the
installation of the air compressor is a modification to the
vessel's hull and fittings. In addition to the previous invoices,
the protestant has submitted technical drawings and data of the
new compressor unit, a schedule and outline from Hamworthy of the
work done during the installation of the new compressor and
upgrading the existing compressor, a progress report, and revised
costs covering the work done on the vessel.  The file also
contains reports from the Coast Guard and ABS approving the
compressor units and technical sketches showing the proposed
changes.

ISSUE:

     Whether the evidence submitted as part of the protest is
sufficient to establish that the installation of the air
compressor is a modification/alteration/addition to the vessel's
hull and fittings.

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, alterations, or 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 that 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, 18 C.C.P.A. 137 (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
     often be welded or otherwise "permanently attached" to the
     ship because ships are subject to constant pitching and
     rolling.  In addition, some items, the cost of which is
     clearly dutiable, operate with other vessel components,
     resulting in the need, possibly for that purposes alone, for
     a fixed and stable attachment to those vessel parts.  It
     follows that a "permanent attachment" may take 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, 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.

     In Headquarters Ruling Letter 110993, this office held that,
based on the work order description and accompanying drawing, the
proposed installation of the air compressor would be a
modification to the vessel that is not subject to duty.  However,
this advisory ruling stressed that any final determination would
be contingent on review of the evidence submitted as part of the
entry and procedure for review.  

     The evidence submitted as part of the protest substantiates 
that the installation of the air compressor constitutes a
modification/alteration/addition to the vessel's hull and
fittings.  Accordingly, the protest is granted.

HOLDING:

     The protest is granted.

     In accordance with  3A(11)(b) of Customs Directive 099 3550-
065, dated August 4, 1993, Subject:  Revised Protest Directive,
this decision should be mailed by your office to the protestant
no later than 60 days from the date of this letter.  Any new
billing (the equivalent of the reliquidation of an entry) in
accordance with the decision must be accomplished prior to
mailing of the decision.  Sixty days from the date of the  decision the Office of Regulations and Rulings will take steps to
make the decision available to Customs personnel via the Customs
Rulings Module in ACS and the public via the Diskette
Subscription Service, Lexis, Freedom of Information Act and other
public Access channels.
 
                              Sincerely,



                              Arthur P. Schifflin
                              Chief
                              Carrier Rulings Branch