HQ 112366: Vessel Repair; 19 U.S.C. 1466; Application for Relief; Vessel Repair Entry No. H24-0012499-4; F/V ALASKA RANGER

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 112366

                         October 8, 1992

VES-13-18-CO:R:IT:C 112366 MLR

CATEGORY:  Carriers

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

RE:  Vessel Repair; 19 U.S.C. 1466; Application for Relief;
     Vessel Repair Entry No. H24-0012499-4; F/V ALASKA RANGER

Dear Sir:

     This letter is in response to your memorandum of June 25,
1992, which forwards for our consideration the above-referenced
application for relief from the assessment of vessel repair
duties submitted by Jeffrey L. Turner, of Patton, Boggs & Blow,
on behalf of Fishing Company of Alaska, Inc.

FACTS:

     The record reflects that the subject vessel, the F/V ALASKA
RANGER, arrived at Dutch Harbor, Alaska, on January 7, 1992. 
Vessel repair entry number H24-0012490-4 was filed the same day,
indicating work performed on the vessel in Tokyo, Japan.  The
application for relief was filed on March 9, 1992. 

     The applicant states that the vessel was converted from a
tug offshore service boat into a fishing vessel in Seattle,
Washington, in 1989, and modifications were made in 1990.  The
applicant now seeks relief for further modifications made at NKK
Corporation Shimizu Works in 1991.  The applicant alleges that
the modifications to the hull and fittings should be considered
non-dutiable since "such work provides the serviced portion of
the vessel, or the vessel as a whole, with a new feature and does
not merely replace or restore parts that perform a similar
function", and improves or enhances the operation or efficiency
of the vessel.

     We are asked to review the dutiability of numerous items
(numbers correlate to the worksheet).  
 

ISSUE:

     Whether the foreign work performed on the subject vessel for
which the applicant seeks relief is dutiable under 19 U.S.C. 1466.

LAW AND ANALYSIS:

     Title 19, United States Code, section 1466, 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 foreign or
coastwise trade, or vessels intended to engage in such trade.

NKK CORPORATION SHIMIZU WORKS
     
I.   HULL PART
     4-1. Bottom Keel Ballast
          (material, labor, drawings, ABS survey)
     4-2. Water Thermometer
          (material, labor)
     4-3. Related Work for Keel Ballast
          (labor)
III. ELECTRIC PART
     10. Wiring 
          (material, labor)

     The applicant states that these items involve work done to
meet loadline requirements (i.e., adding an exterior keel
ballast), although a formal American Bureau of Shipping Survey
evidently was not performed.  Item 4-1 indicates that drawings
were prepared, yet they are not submitted with the application
for relief.  Further, the materials used are not specified.  

     In its application of the vessel repair statute, Customs has
held that modifications/alterations/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 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.

     We have held that the removal of an existing, operational
system for the purpose of improving the efficient performance of
the vessel is not dutiable provided that the work was not
performed in conjunction with dutiable repairs.  Customs Ruling
108871.  The decision in each case as to whether an installation
constitutes a non-dutiable addition to the hull and fittings of
the vessel depends to a great extent on the detail and accuracy
of the drawings and invoice descriptions of the actual work
performed.  Even if an article is considered to be part of the
hull and fittings of a vessel, the repair of that article, or the
replacement of a worn part of the hull and fittings, is subject
to vessel repair duties.

     It appears that the work done to increase the keel ballast
may constitute a modification; however, item 4-1 also indicates
that the keel ballast was "modified".  It is not specified what
this modification was.  Item 4-3 also refers to the execution of
restoration works, indicating possible repairs performed to the
keel ballast.  Since the installation of the water thermometer
and the speed log sensor is related to the bottom keel ballast
work (which in turn is related to the electric wiring work), we
are unable to determine the nature of these installations.  In
the absence of evidence to the contrary, relief with respect to
these items is denied.

I.   HULL PART
     5. Kolt Nozzle
          (material, labor, staging)
     6. Renewed Bilge Pipes
          (material, labor)

     The applicant states that these items represent preparatory
work for the installation of new kolt nozzles and for the
propeller.  Item 5 partially indicates that the inside of the
hull was reinforced, and that drawings were made which are not
included.  Absent these drawings, we are unable to determine if
the reinforcement work is not a dutiable repair.  Item 6
indicates restoration work, painting, and cleaning operations not
in the nature of non-dutiable modifications. 

I.   HULL PART
     7. Painting Hull Bottom
          (material labor)  

     Customs has held that painting performed on existing
portions of a vessel is in the nature of a dutiable maintenance
operation.  C.I.E. 1043/60, and Treasury Decisions 21670, 39507,
and 43322.  The process of chipping, scaling, cleaning, and wire
brushing to remove rust and corrosion that results in the
restoration of a deteriorated item in preparation for painting
has also been held to be dutiable maintenance.  States Steamship
Co. v. United States, 60 Treas. Dec. 30, T.D. 45001 (Cust. Ct.
1931).  This item is similar to the these precedents in that the
outside bottom hull was washed, polished with a disc sander, and
painted; it is therefore dutiable.

I.   HULL PART
     15. Hawse Pipes
          (material, labor)
         Works for Washing Chain Pipes
          (material, labor)
         Materials
         Labor 

     The applicant states that new hawse pipes were installed to
accommodate a larger anchor.  The invoice under item 15-1
indicates various operations were conducted to modify the hawse
pipes, and item 15-3 (e) indicates the side anchors were
refitted.  We agree that item 15-1 constitutes a modification;
however, we are unable to determine how items 15-2 and 15-3
relate to the hawse pipe modification.  For example, item 15-3
indicates that insulation in the refrigerator was renewed and
refitted.  Further, item 15-3 (e) states that the "shank" and
"palm" were reformed.  Absent further details, items 15-2 and 15-
3 are dutiable.

I.   HULL PART
     11. Pan Racks
          (material, labor) 

     This item indicates that pan racks at the forward end of the
factory were installed.  Items 11-a and 11-b appear to involve
modification work; however, we are unsure how items 11-c and 
11-d, pertaining to the modification of the fluish pump and the
switchboard, relate to the pan rack work.  Since items 11-b and
11-c are not segregated from the total amount, the entire item is
dutiable.

II.  MACHINERY PART 
     5. Propeller Blades 
          (material, labor)

     The applicant seeks relief for this item because the new
propellers which were supposed to improve fuel efficiency were
unsuitable for the vessel; accordingly, the old propellers were
reinstalled.  By issuance of C.I.E. 1128/60 on August 5, 1960
{reissued as Treasury Decision 55193(24)}, it was established
that ineffective repairs which prove to be of no value to vessels
are not dutiable under the vessel repair statute.  This is to be
distinguished from repairs which are made as a temporary
expedient, until permanent repairs can be obtained.  The cases in
which relief from duty has been granted due to ineffective
repairs, relate to the repair of some defect.  In this instance,
the old propeller blades were not defective, and if the new
propellers had been suitable, the applicant would have claimed
this item as a modification since the vessel's fuel efficiency
would have been improved.  In any event, the invoice indicates
that the blades were removed, polished, new O-rings were
installed, and the oil was drained and renewed.  This item
therefore consisted of routine dutiable maintenance which
benefitted the applicant.  Accordingly, relief with respect to
this item is denied.

II.  MACHINERY PART
     12. CPP Suction Unit 
          (material, labor)

     The applicant states that new full-flow valves were
installed for the CPP control pump, and that the use of the term
"renew" in the invoice is inappropriate since the valves are new
and more efficient than the old valves.  The invoice indicates
that four full-flow ball valves were installed on the CPP control
pump and at the suction strainer outlet.  The applicant fails to
prove that this item constitutes a modification because ball
valves were installed to the suction pipe of the CPP pump at
Yamanishi Shipbuilding & Iron Works in 1990 (see invoice R-1171,
dated October 30, 1990).  No evidence is submitted to show that
the ball valves replaced in 1991 are any different from the ones
used in 1990.  Accordingly, relief with respect to this item is
denied. 

III. ELECTRIC PART
     6. Fluorescent Lights Installed 
          (material, labor)

     The invoice indicates 8 "glove" lights were replaced with
fluorescent lights.  Further, the invoice shows that 50 white
florescent lights and 20 glow lights were supplied.  Light bulbs
are considered dutiable equipment, consequently only the labor
charge for extending the cables and mounting the lights in the
amount of Y43,500 is non-dutiable.

IV. Belt Conveyor 

     The applicant states that the following items constitute
modifications to the belt conveyors to improve their efficiency
and as a result of moving them due to other modifications (i.e.,
installing a new roe extraction machine and moving sump pumps):

          1. Adjustments to Conveyor 

     We deny relief as to this item since insufficient
information is provided in that it only indicates that "operation
adjustment works" were executed to the belt conveyor.

          2. Adjustments to Belt Conveyor

     This item is denied in that it does not entail any
description of the modification work done to the four sets of
belt conveyors.

          3. Net Conveyor

     Again, the invoice does not provide any details how the net
conveyor in the fish washing machine was modified.

          4. Adjustments for Side Conveyor 

     This item is denied in that it only states that operation
adjustment works were executed to the side conveyor.

          5. Materials

     Since relief for items 1-4 directly above are denied, the
materials used for these items must be denied as well.

V.   REFRIGERATING PART
     1-10. Refrigerating Coil 

     The applicant states that the refrigerating coil was
modified in the provision store as a result of piping
modifications made to vessel.  The invoice does not provide any
other details.  Absent further information concerning which
piping modifications required such work, we are unable to grant
relief.



VI.  NAVIGATION EQUIPMENT
     2. Loran-C Receiver 
          (material, labor) 
     3. Paravane Receiver
          (material, labor) 

     The applicant states that these articles were installed, and
that in all likelihood they would be left on board the vessel
during an extended layup.  For purposes of section 1466, dutiable
equipment has been defined as:

          ...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.  United States v.
          Admiral Oriental Line et al., T.D. 44359 (1930)
          {quoting T.D. 34150, (1914)}.

A more contemporary working definition of equipment 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 Customs Ruling 109936, we determined that a satellite
communications system was a non-dutiable permanent addition to
the fittings of the vessel.  However, in that case, three letters
from three different enterprises were presented to show that not
only was the system designed for permanent installation and was
left on board during layup, but specific examples of other
vessels were cited to show that the system did, in fact, remain
on board when they were in layup for an extended period of time. 
In light of the fact that we have consistently held that such
delicate electronic equipment is dutiable, the evidence submitted
is insufficient for us to grant relief.

III. ELECTRICAL PART 
     5. Pollack-roe-Machine 
          (material, labor)
        Above Pollack-Roe Machine
          (material, labor)
        Push Bottom Switch
          (material, labor)
        Cables Installed
          (material, labor)
        Testing Circuits
          (labor)

     The applicant states that these items were performed as a
part of the installation of the new roe extraction machine which
in turn is related to the belt conveyor work.  Since the
description for the belt conveyor work, discussed above in item
1-4, BELT CONVEYOR PART, was not detailed enough, we are unable
to determine the nature of these items.  Accordingly, they are
dutiable.

VI.  NAVIGATION EQUIPMENT
     4. Misc Expenses 

     The invoice indicates this item represents costs incurred
for transportation, "expenditures spent during the work at side",
and for entering and utilizing the dockyard.  Since it is not
indicated what the "expenditures" were for, and how much of the
total item cost was for such expenditures, the entire amount is
dutiable.


     We agree with the applicant that the following items are
non-dutiable modifications:

I.   HULL PART
     9.  Boat Davit
          (material, labor)
     10. Winch Units
          (material, labor)
     12. Wooden Box
     12. Factory Trash chutes 
          (material, labor)
     14. Factory Sumps
          (material, labor)
         Reinstalled Machines
          (material, labor) 
     16. Water Pump
     17. Permanent Deck Store
          (material, labor)
     19. Changing Mates Room
          (material)
     20. Escape Hatch
          (material, labor)
     23. Works for Permanent Galley
          (material, labor)

II.  MACHINERY PART
     7. Overboard Discharge Pipe
          (material, labor)
     18. Suction Pipe Changed 
          (material, labor)

III. ELECTRICAL PART
     2. Rack Above Oil Tank 
          (material, labor)
     3. Boat Davits - Electrical Wire
          (material, labor)
     7. 2 Emergency Lights
     9. Tested Cable Circuit 
          (material, labor) 


VII. MISCELLANEOUS INVOICES

A.   Fessler Equip
B.   Bird Johnson
C.   Devoe Coatings
D.   Dynamic *
E.   Puget Sound Pipe Supply
F.   Puget Sound Pipe Supply
G.   Waukesha Bearings

     The record indicates that many of the materials used were
shipped from the United States.  The invoices show most of the
items were purchased in the United States.

     Title 19, United States Code, section 1466(h) 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.  As discussed in Customs Ruling 111464, the Customs
Service interprets the use of the term cargo to limit the
exception contained in the statute to vessels whose sole service
is the transportation of cargo and which are actually engaged in
that service while documented for the foreign or coasting trade. 
The ALASKA RANGER, at the time of arrival, was a fishing vessel
and consequently does not qualify for the exceptions contained in
19 U.S.C. 1466(h).  

     Failing qualification for the exceptions accorded to cargo
vessels, we must evaluate duty treatment of parts under the
previously established statutory rules.  Customs administration
of duty assessment issues under section 1466 regarding United
States manufactured materials purchased in the United States has
been guided by the terms of Treasury Decision 75-257, 9 Cust. B.
& Dec. 576 (1975).  That decision provides that when materials of
United States manufacture are purchased by the vessel owner in
the United States for installation abroad by foreign labor, the
labor cost alone is subject to duty under 19 U.S.C. 1466.  The
owner or master must submit written documentation or other
physical evidence, such as an affidavit by the equipment
manufacturer, that the equipment was manufactured and purchased
in the United States.  Customs Ruling 110953.  Absent such
documentation, the material is deemed foreign and consequently is
dutiable.

     With the exception of Dynamic invoice #D3051 (worksheet item
"D") the applicant has satisfied the second element; however, the
first element (i.e., that the items were manufactured in the
United States) has not been satisfied.  Accordingly,
miscellaneous invoices A-C, and E-G are dutiable.

HOLDING:

     The application for relief is denied and granted in part as
detailed in the Law and Analysis portion of this ruling.

     All other items, not specifically discussed in this letter,
were reviewed and we agree with the determinations of duty made
by the San Francisco Vessel Repair Liquidation Unit.

                                   Sincerely,




                                   B. James Fritz
                                   Chief
                                   Carrier Rulings Branch