HQ 111483: Vessel Repair; Modification; Inspection; Cleaning; Staging; United States Parts; GLACIER BAY; Entry No. C31-0008312-1.

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 111483

                          July 25, 1991

VES-13-18   CO:R:IT:C  111483  JBW

CATEGORY:   Carriers

Chief, Technical Branch
Commercial Operations
Pacific Region
1 World Trade Center
Long Beach, CA 90831

RE:  Vessel Repair; Modification; Inspection; Cleaning; Staging;
     United States Parts; GLACIER BAY; Entry No. C31-0008312-1.

Dear Sir:

     This letter is in response to your memorandum of January 16,
1991, which 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 S/S GLACIER
BAY, arrived at the port of Valdez, Alaska, on June 3, 1990.
Vessel repair entry, number C31-0008312-1, was filed on June 4,
1990, and was marked incomplete.  A complete entry was filed on
August 29, 1990, pursuant to an extension of time authorized by
the Pacific Region Vessel Repair Liquidations Unit.  The complete
entry indicated extensive foreign shipyard work in the nature of
a complete drydocking, including both repairs and work claimed to
be non-dutiable as modifications, inspections, and cleaning.

ISSUE:

     (1)  Whether certain work performed to the vessel in the
Hyundai Shipyard resulted in modifications to the vessel and is
therefore not subject to duty under 19 U.S.C. 1466.

     (2)  Whether the load tests of the life boat davits, which
did not result in repairs, are not dutiable as inspections under
19 U.S.C. 1466.

     (3)  Whether a cleaning not performed in conjunction with
dutiable repairs is dutiable.

     (4)  Whether staging costs associated with ultrasonic
thickness gauging to ensure that steel renewals conform to
thickness requirements are dutiable.

     (5)  Whether parts used in the repairs of the vessel are
dutiable, if such parts are documented to be of United States
origin or to have been imported into the United States, duty-
paid.

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 work constituting modifications on the one hand
and repairs on the other 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.

     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 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 under consideration provides an
          improvement or enhancement in operation or efficiency
          of the vessel.

     For purposes of section 1466, 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.

T.D. 34150, 26 Treas. Dec. 183, 184 (1914)(quoted with approval
in Admiral Oriental).

     The applicant seeks relief for the following items.  Our
conclusions are as follows:

     Hyundai Item 63:  Segregated Ballast Valves:

          The work performed under this item resulted in the
          replacement of existing parts from the ship spares and
          does not constitute a new design feature.  The cost of
          the work is dutiable.

     Hyundai Item 70:  Aft Bunker Storage Tank Bellmouth:

          The work performed under this appears to have resulted
          in the replacement of existing parts and does not
          constitute a new design feature.  No Specifications
          appear for this item.  The cost of the work is
          dutiable.

     Hyundai Items 105(b) & (e): Miscellaneous Pipe Repairs and
Renewals:

          The work claimed to be non-dutiable in these items
          involved moving the fuel oil loading manifold (item
          105(b)) and installing expansion joints to the port and
          starboard stripping lines (item 105(e)).  The work
          performed to move the fuel oil loading manifold was
          required to address a problem resulting from the
          original design of the ship. Trinidad Statement on New
          Installations and Modifications at 2, August 10, 1990
          (hereinafter "Statement").  This work resulted in an
          improvement to the vessel that is not repair related;
          the costs appearing under Hyundai Invoice Item 105(b)
          are not dutiable.

          The work performed to install the expansion joints to
          the port and starboard stripping lines was required to
          correct "repeated damage to the pipe connection."
          Statement at 1.  This work is repair related, and we
          find the cost for Hyundai Item 105(e) to be dutiable.

     Hyundai Items 601 to 605: Structural Steel Modifications:

          The work performed under these items involved the
          installation of additional hull supports.  The work was
          required to address repeated cracking of the bulkhead
          stiffeners. Statement at 2-3; Hyundai Invoice items
          603 & 604.  The work is therefore repair related and is
          subject to duty.

     Hyundai Items 701 to 702: Structural Steel Renewals:

          Hyundai Invoice Items 701 and 702 involve the
          "renewals" of the plating of bulkhead 105 and of the
          after bulkheads of the port and starboard chain
          lockers.  The work performed under these items involve
          restoration of existing parts of the hull and do not
          represent new design features.  The cost for these
          items is dutiable.

     Hyundai Item 715: Oiltight Longitudinal Bulkhead:

          The work carried out under this item was required to
          address repeated cracking of longitudinal stiffeners.
          Statement at 3.  The work is therefore repair related
          and is subject to duty.

     Hyundai Item 800:  Heating Coil Retrofit:

          This item involved the installation of cargo heating
          coils in twelve cargo tanks along with associated
          supply and return risers and deck piping.  The work
          description and drawings demonstrate that this item
          involved the installation of a new design feature.
          The work constitutes a modification and is not subject
          to duty.

     The applicant claims that Hyundai Invoice Item 21, which
involved the load test of a life boat davit, was not dutiable as
an inspection to meet Coast Guard requirements.  Customs has held
that inspections not resulting in repairs are not dutiable.
Headquarters Ruling Letter 110395, dated September 7, 1989; see
American Viking Corp. v. United States, 37 Cust. Ct. 237, 247,
C.D. 1830 (1956).  The invoice description and the contract
specifications indicate that tests were performed, but that no
repairs to the life boats or life boat davits were required.  We
find this item not dutiable.

     The applicant also seeks relief for Hyundai Invoice Item 64,
port and starboard fuel oil settler temperature wells.  This
operation involved the installation of new design feature; the
work is considered a non-dutiable modification.  Associated with
this operation was the partial cleaning of the port and starboard
bunker tanks.   The Customs Service has consistently held that
cleaning is not dutiable unless it is performed as part of, in
preparation for, or in conjunction with dutiable repairs or is an
integral part of the overall maintenance of the vessel.  E.g.
Headquarters Ruling Letter 111204, dated December 7, 1990.  No
dutiable repairs were made for this item, and the cleaning costs
associated with the work are consequently not dutiable.

     Under Hyundai Invoice Item 722, the applicant claims that
staging costs associated with ultrasonic thickness gauging to
ensure that steel renewals conform to thickness requirements were
not dutiable.  The gauging was in the nature of an inspection to
ensure that repairs were adequately performed and is therefore
dutiable.  Under long-standing Customs interpretations, charges
relating to staging are not dutiable.  E.g., Headquarters Ruling
Letter 109510, dated June 15, 1988.  However, under this invoice
item, a single cost appears.  Where dutiable and non-dutiable
costs are not segregated within an invoice item, all of the
charges in that invoice item must be deemed dutiable.
Headquarters Ruling Letter 108567, dated September 10, 1986.
Absent a cost breakdown, we find the cost of the staging to be
dutiable.

     Finally, the applicant seeks relief for parts manufactured
in the United States or imported into the United States with duty
paid.  The vessel repair statute exempts from duty spare repair
parts or materials that have been manufactured in the United
States or entered the United States duty-paid and are used aboard
a cargo vessel engaged in foreign or coasting trade.  19 U.S.C.
1466(h).  For purposes of this section, where a part is
purchased from a party unrelated to the vessel owner, a United
States bill of sale constitutes sufficient evidence to
demonstrate that the part was either manufactured in the United
States or entered in the United States, duty-paid.  In cases in
which the vessel operator or a related party has acted as the
importer of foreign materials, or where materials were imported
at the request of the vessel operator for later use by the
operator, the vessel repair entry will identify the port of entry
and the consumption entry number for each part installed on the
ship which has not previously been entered on a Customs Form 226.

     We have reviewed the invoices included in the application
and have determined that the following invoices meet the above-
described evidentiary requirements for duty exemption:

     Harbor Ship Supply            Bailey & Associates
     Wilson Walton International   W & O Supply
     North American Refractories   James G. Wiley
     Trimodal Distribution         Unaflex
     Consolidated Freightways      Harbor Ship Electric Co.
     Saab Tank Control             Parmatic Pollution Control
     Port Electric Supply          Mathiasen's Tanker Industries
     Boiler Tube Company           Mar-Dustrial Sales, Inc.
     Schat-Marine Safety           Aqua-Chem Inc.
     EIM Controls                  Bell & Gossett
     Electocatalytic Inc.          Fuji Trading Co.
     Kvaerner Eureka               Peacock Inc.

     The Ameron Marine Coatings Division invoice indicates that
the goods listed on the invoice were shipped from the "Far East"
to the ship in Korea.  Notwithstanding the fact that a United
States bill of sale is presented, the invoice does not prove that
the goods were of United States origin or were imported into the
United States, duty-paid.  We therefore find these items to be
dutiable, provided that the work in which the goods were used is
also dutiable.  Likewise, the goods provided for in the Sanki
International and Victor Pyrate Ltd. invoices do not establish
the required nexus with the United States.

HOLDINGS:

     (1) We find that, consistent with our analysis above,
certain work performed to the vessel in the Hyundai Shipyard
resulted in modifications to the vessel and is therefore not
subject to duty under 19 U.S.C. 1466.

     (2)  Load tests of the life boat davits, which did not
result in repairs, are not dutiable under 19 U.S.C. 1466.

     (3)  Cleaning not performed in conjunction with dutiable
repairs is not dutiable.

     (4)  Staging costs associated with ultrasonic thickness
gauging to ensure that steel renewals conform to thickness
requirements, which are not segregated from the costs of the
dutiable steel renewals, are dutiable.

     (5)  Parts used in the repairs of the vessel are not
dutiable if such parts are documented to be of United States
origin or to have been imported into the United States, duty-
paid.


                              Sincerely,



                              B. James Fritz
                              Chief
                              Carrier Rulings Branch