HQ 111595: Vessel Repair Protest; Protest Number 5301-90-000537; Entry Number C53-0001999-5; Vessel PAUL BUCK

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 111595
                        November 13, 1991


VES-13-18-CO:R:IT:C  111595 LLB

CATEGORY:  Carriers

Deputy Assistant Regional Commissioner
Commercial Operations Division
South Central Region
New Orleans, Louisiana 70130

RE:  Vessel Repair Protest; Protest Number 5301-90-000537;
     Entry Number C53-0001999-5; Vessel PAUL BUCK

Dear Sir:

     Reference is made to your memorandum of March 18, 1991,
which forwarded for our consideration the protest from the
assessment of vessel repair duties filed by counsel on behalf of
Ocean Freedom Shipping, Inc., in regard to the above-captioned
vessel repair entry.

FACTS:

     Two invoice items are presented for determination as to
dutiability.  The first is identified as Falmouth Shiprepair
Limited invoice number 536/313, reflects charges of 206,470
British pounds sterling for, without elaboration, the following:

          Commenced 17/5/88
          Docked    17/5/88
          Undocked  28/5/88
          Completed 28/5/88

     The second item is identified as "Owners Item 3-5 Air
Conditioning to Wheelhouse", and describes the installation of an
air conditioning unit, including wiring and ducting
modifications, as well as the installation of louvres,
insulation, and welded seating for the compressor unit.  The unit
was fitted to the welded seating with nuts and bolts.

ISSUE:

     Whether the invoices as described adequately demonstrate
that the incurred costs at issue are the costs of duty-free
modifications as opposed to dutiable vessel repairs.

LAW AND ANALYSIS:

     Title 19, United States Code, section 1466(a), provides in
pertinent part for payment of duty in the amount of 50 percent ad
valorem on the cost of foreign repairs to vessels documented
under the laws of the United States to engage in the foreign or
coastwise trade, or vessels intended to be employed in such
trade.

     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 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.

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.  Admiral Oriental,
          supra., (quoting T.D. 34150, (1914)).




     Pursuant to published Customs Service rulings (C.I.E.
1325/58 and C.I.E. 565/55), duties may not be remitted in
circumstances in which invoices fail to segregate dutiable from
non-dutiable expenditures.  In the present matter, while the
attendant work is in the nature of a modification to the hull and
fittings of the vessel, the actual air conditioner is merely
bolted in place, as would be any other piece of equipment which
must be secured from potential shifting and movement aboard a
vessel.  The only invoiced segregation of relevance regarding the
item in question is for classifiably free expenses in the amount
of 1,649 pounds sterling.  The balance of the expense for the
item must be considered dutiable as equipment/repair costs.

     In regard to the Falmouth invoice, there is no information
provided upon which a determination as to the character of the
expenditures may be made.  As such, the entire invoice amount is
considered dutiable.

HOLDING:

     Following a thorough review of the evidence submitted, as
well as an analysis of the law and applicable judicial and
administrative precedents, we have determined that there is no
merit to the protest and that it should be denied, with the
exception of the segregated amount of 1,649 pounds sterling
appearing on invoice number 3-5 relating to the installation of
the air conditioner.

                                 Sincerely,




                                 B. James Fritz
                                 Chief
                                 Carrier Rulings Branch