HQ 227043: 19 U.S.C. 1466; LIHUE, V-163; Vessel Repair Entry No. H24-0021756-6; Hatch cover alterations; Change of name markings

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 227043

                                August 12, 1996

VES-13-18-RR:IT:EC    227043 GOB

CATEGORY:   Carriers

Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 416
P.O. Box 2450
San Francisco, CA 94126

RE:  19 U.S.C. 1466; LIHUE, V-163; Vessel Repair Entry No. H24-0021756-6; 
     Hatch cover alterations; Change of name markings

Dear Sir:

     This ruling is in response to your memorandum dated June 11,
1996, which forwarded the application for relief submitted by
Matson Navigation Company ("applicant") with respect to the
above-referenced vessel repair entry.  The subject vessel, LIHUE
("vessel"), was previously known as the PRESIDENT HOOVER.

FACTS:

     You have requested our determination with respect to item
five on the CF 226, which states in pertinent part as follows:

     5.  Hyundai Mipo Dockyard Conversion work to cargo slots to
     permit loading of 24 ft. boxes.  Paint two stacks with
     Matson colors, change name on the bows, stern, & both bridge
     wings to "Lihue."  Alter hatch covers & hatch coamings on
     some holds...

     In a letter dated May 23, 1996, the applicant states, in
pertinent part;

     SS LIHUE is one of six vessels Matson purchased from
     American President Lines, Ltd. ("APL").  Under our agreement
     APL contracted for and was responsible for the work
     performed on this vessel with respect to this entry and was
     responsible for submitting the appropriate documentation to
     Customs.  The work was performed and this entry took place
     while the vessel was bareboat 

     chartered to APL.  Matson adopts the enclosed APL letter
     dated May 15, 1996 as its application for remission of duty.

     In its letter of May 15, 1996, APL states as follows, in
pertinent part:

     Matson and APL announced their intent to enter into a
     strategic alliance to share cargo carrying capacity on a
     route serving the U.S. Pacific Coast, Hawaii, Guam, Korea
     and Japan.

     It was necessary to make certain improvements to the vessels
     to increase their efficiency and to make the vessels
     suitable for this new deployment.  These improvements are
     described in Enclosure (A) and (B).

     A careful review of enclosures A and B will show that "but
     for" the new deployment of these vessels in the intended
     service involving the ability to carry not only the
     traditional 20/40 foot containers but the necessity to
     accommodate the Matson standard 24 foot containers, these
     modifications and improvements would not have been
     undertaken.

     Mr. Bud Stewart of American President Lines, Ltd. advised
telephonically that Enclosure A consists of the drawings
submitted and that Enclosure B consists of Invoice No. 960023-A
dated March 6, 1996.

ISSUE:

     Whether the work described supra (item five on the CF 226)
is dutiable pursuant to 19 U.S.C. 1466.

LAW AND ANALYSIS:

     19 U.S.C. 1466 provides for the payment of duty at a rate 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 be employed
in such trade.

Hatchcover Work

     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.  The identification of work constituting
modifications vis-a-vis work constituting repairs has evolved
from judicial and administrative precedent.  In considering
whether an operation has resulted in a nondutiable modification,
the following factors have been considered:

     1.  Whether there is a permanent incorporation into the hull
or superstructure of a vessel, either in a structural sense or as
demonstrated by means of attachment so as to be indicative of a
permanent incorporation.  See United States v. Admiral Oriental
Line, 18 C.C.P.A. 137 (1930).  However, we note that a permanent
incorporation or attachment does not necessarily involve a
modification; it may involve a dutiable repair.

     2.  Whether in all likelihood an item would remain aboard a
vessel during an extended lay-up. 

     3.  Whether an item constitutes a new design feature and
does not merely replace a part, fitting, or structure that is
performing a similar function.

     4.  Whether an item provides an improvement or enhancement
in operation or efficiency of the vessel.

     The pertinent invoice, which covers the hatch cover work and
the change of name markings, is Invoice No. 960023-A dated March
6, 1996.  It states, in pertinent part:

     24" Container Stowage Modifications

     Accomplish the hatch cover conversion/modifications to carry
     six rows of 24-foot containers in combination with the
     existing 40-foot container stowage to permit the vessels to
     meet the requirements of the new owners (Matson Navigation
     Company) and the new combined Matson/APL deployment.
     
     After a consideration of the record, we find that this item
is a nondutiable modification.  The work described supra, the
conversion of stowage to carry six rows of 24 foot containers in
combination with the existing 40 foot container stowage, is the
type of work which is a nondutiable modification, as opposed to a
repair dutiable under 19 U.S.C. 1466.  This item appears to fall
squarely within the description of a nondutiable modification,
supra.  There is no indication of any repairs on the pertinent
invoice.

Change of Name and Related Markings

     In Ruling 112513 dated March 30, 1993, we stated with
respect to the painting of the ship's name (item 16 in that
ruling):

     Pursuant to C.D. 1430 (41 CCPA 57, C.A.D. 529), painting
     that is strictly ornamental and in no sense performed for
     the preservation of the vessel, cannot be considered
     "maintenance painting."  With respect to the above items, as
     the 

     painting performed pursuant to item 16 was ornamental in
     nature, it is entitled to remission.

     In H.C. Gibbs v. United States, 28 Cust. Ct. 318, C.D. 1430
(1952), aff'd 41 C.C.P.A. 57, C.A.D. 529 (1953), the court
stated:

     Relative to painting the hull of the vessel black between
     the decks and repainting the ship's name thereon, as well as
     the expenses of cartage of materials and labor, this court
     is of the opinion that the cost thereof is properly dutiable
     under the provisions of section 466 as "repairs."  Although
     it is contended that the painting in question is strictly
     ornamental and in no sense performed for the preservation of
     the vessel and, therefore, cannot be considered "maintenance
     painting," it remains a fact that, irrespective of the
     intention behind the act, the painting of the ship black in
     order to present a better appearance to the public had the
     effect of restoring the old and rusted surfaces, and since
     the repainting of the hull covered the ship's name, it
     became necessary thereafter to paint the name Gretna Victory
     over the new black paint.

     The painting of the words "Christmas Ship Pacific Northwest
     U.S.A." does not appear to be in the nature of a restoration
     of the vessel or a necessary act after the performance of
     painting, such as the repainting of the name of the ship. 
     The words were painted upon the sides of the ship purely for
     advertisement purposes to show the nature of the voyage. 
     The words were neither applied to the sides of the vessel as
     an ornamentation, as a preservation of the vessel, nor as a
     restoration...we do not believe that the cost of lettering
     the words "Christmas Ship Pacific Northwest U.S.A." on the
     port and starboard sides of the hull in 4-foot white
     letters, is a dutiable item...or is included within the
     provisions of section 466, supra, as the expenses of repairs
     made in a foreign country. 

     Pursuant to H.C. Gibbs and Ruling 112513, we determine that
the change of name and related markings are not dutiable pursuant
to 19 U.S.C. 1466.  The work here is similar to the painting of
the words "Christmas Ship Pacific Northwest U.S.A." in H.C. Gibbs
in that there is no indication that such work was in the nature
of a restoration of the vessel or a necessary act after painting
of the vessel.  The painting of the name of the vessel, Gretna
Victory, described supra in the first excerpted paragraph of H.C.
Gibbs, is distinguishable from the work here in that the work
here was not accomplished incident to maintenance or restorative
painting.  Accordingly, as stated supra, the costs for the change
of name and related markings are not dutiable.






HOLDING:

     The work described supra (item five on the CF 226) is not
dutiable pursuant to 19 U.S.C. 1466.


                              Sincerely,



                              William G. Rosoff
                              Chief,
                              Entry and Carrier Rulings Branch