HQ 112451: Vessel Repair; Modifications; Inspection; Survey; Cleaning; United States Parts; 19 U.S.C. 1466; GLACIER BAY, v-9115; Entry No. C31-0005022-9.

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 112451

                            April 9, 1993

VES-13-18  CO:R:IT:C  112451  JBW

CATEGORY:  Carriers

Deputy Regional Director
Commercial Operations
Pacific Region
1 World Trade Center
Long Beach, CA 90831

RE:  Vessel Repair; Modifications; Inspection; Survey; Cleaning;
     United States Parts; 19 U.S.C.  1466; GLACIER BAY, v-9115;
     Entry No. C31-0005022-9.

Dear Sir:

     This letter is in response to your memorandum that 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 GLACIER BAY,
arrived at the port of Valdez, Alaska, on December 14, 1991.  Vessel
repair entry, number C31-0005022-9, was filed on December 16, 1991. 
The entry indicates that the vessel underwent foreign shipyard work
while in Singapore.  The applicant seeks relief for certain invoice
costs that it claims are not subject to duty as modifications.  Also
forwarded for our review are charges for inspections, cleaning, and
United States spare parts.

ISSUES:

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

     (2)   Whether inspections identified by the applicant are
subject to duty under 19 U.S.C.  1466.

     (3)   Whether cleanings identified by the applicant are subject
to duty 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 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.

I.   Modifications to the Vessel.

     In its application of the vessel repair statute, the Customs
Service has held that modifications 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 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, by 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.

     The Customs Service has held that the decision in each case as
to whether an installation constitutes a nondutiable 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.

     After reviewing the evidence regarding the specific items
submitted for our consideration, we find the following:

     Jurong Item 103(c) & (d): Sea Chest Blowing Valve and
     Limotorque Valve Modification:

     Item 103(c) involved the removal and blanking of the sea chest
     steam blowing valve, which had become obsolete.  The removal of
     these valves resulted in an improvement to the vessel that is
     not subject to duty.

     Item 103(d) involved the removal, remachining, and replacement
     of limotorque actuators from the valves.  As described in the
     application, "old motor driven 'remotorue' valve actuating
     mechanisms were replaced by better  reliable ones...."  The
     work appearing under this item appears to have resulted in the
     repair or replacement of current parts that are not in good
     working order.  The cost of this item is therefore subject to
     duty.
     
     Jurong Item 212c:  Johnson Package Boiler:

     The work performed under this item involved the replacement of
     supports to avoid stress concentration on the boiler drum.  The
     reason for the replacement was the discovery of cracks in the
     boiler drum of a sister ship.  The work description and the
     invoice in this case do not indicate that the boiler drum was
     in disrepair at the time of the dry docking.  We therefore
     determine that this work was required to address a problem
     resulting from the original design of the ship.  This work
     resulted in an improvement to the ship that was not repair
     related.  The costs appearing under this item are not subject
     to duty.

     Jurong Item 212d:  Stack Damper:

     This item involved the installation of a stack damper for the
     emergency boiler.  This work involved the installation of a new
     design feature that is not subject to duty.

     Jurong Item 402: New Pipe Installation and Removal:

     A jumper was provided between the scrubber cooling water pump
     and the vessel's sea water service system.  This item
     represents a new design feature that was installed to meet
     SOLAS requirements.  The cost of this installation is not
     subject to duty.

     Jurong Item 514: Spare 24" Angle Valve:

     The invoice indicates that a foundation was built to secure the
     vessel's spare 24" angle valve located in the pump room.  The
     invoice is ambiguous, however, as whether a new angle valve was
     purchased for the vessel or whether the foundation was merely
     constructed to hold an existing spare.  Absent clarification,
     we find this item to be dutiable.

     Jurong Item  605: Hand Railings:

     Under this item, new hand railings were installed around the
     steering gear (Item 605(b)).  This item represents a new design
     feature that is not subject to duty.  The other subheadings
     appearing under this item, 605(a) & (c), represent costs for
     repairs and are subject to duty.

     Jurong Item 805: L. BHD Modifications:

     Under sub-items (a) through (d)(1) of this item, work was
     performed to correct areas subject to potential cracking by
     stiffeners. The Customs Service has held that where the costs
     of welding cracks and of installing support brackets to address
     the structural cause of the cracks are segregated, the cost of
     the latter work is not subject to vessel repair duty. 
     Headquarters Ruling Letter 106199, dated August 12, 1983. The
     invoice indicates that crack repairs to the bulkhead were
     covered under a different item.  The work performed under this
     item constitutes an improvement to the vessel.  The cost of the 
     related repair work was properly segregated.  The cost for the
     work under sub-items (a) through (d)(1) is not subject to duty.

     The work performed under the following items is similar to that
     performed in Item 805, and the cost of the work is not subject
     to duty where modification and repair costs are properly
     segregated:

           Jurong Item 807: Bottom Side Girder Modification in Way
           of Ordinary Frames.

           Jurong Item 808: Bottom Center/Side Girder Connection to
           Swash and Trans-BHDs.

           Jurong Item 810:  #3 WBT - Modification of Bulkheads and
           Shell Longitudinals.

           Jurong Item 811:  #63, 69, 77, 85 T. BHD Intercostal
           Stiffener Ends.

     Jurong Item 814:  Breakwater Modification:

     The invoice indicates that riders and additional brackets were
     added to the breakwaters.  The purpose for these items was to
     strengthen the breakwaters.  However, no repairs were made. 
     The cost of this item is not subject to duty.

     Jurong Item 816.1 & .7:  Additional Steel Work:

     Under Item 816.1, strength compensation plates were installed
     to certain deck openings.  The drawing that accompanies this
     item states a crack was required to be gouged and welded.  This
     operation was a repair and is therefore subject to duty.

     Under Item 816.7, the invoice again indicates that a crack was
     repaired.  The cost of this operation is therefore subject to
     duty.

     Jurong Item 901:  Heating Coil System Retrofit in Engine Room:

     The work performed under this item involved the installation of
     a heating coil system in the engine room.  It is unclear from
     the invoice and the accompanying descriptions whether the
     installation of the heating coil system represents a new design
     feature or whether it replaces an existing system.  Absent
     further clarification, we find this item to be subject to duty.

     Jurong Item 902: Tank Heating Steam/Drain Mains:

     Expansion joints that caused freezing were removed and were
     replaced by sleeve joints with a different design.  There is no
     indication in the invoice that the original expansion joints
     were in disrepair.  The installation of the new sleeve joints
     represents an improvement to the vessel that is not subject to
     duty.

     Jurong Item 904:  Vapor Recovery Collecting Line:

     The work performed under this item involved the reconfiguration
     of the vapor recovery collecting line system as required by the
     United States Coast Guard.  The work resulted in an improvement
     to the ship that was not repair related.  The costs appearing
     under this item are not subject to duty.

II.  Inspection Charges.

     The applicant also seeks relief for items that it identifies as
non-dutiable inspections.  The Customs Service has held that where
periodic surveys are undertaken to meet the specific requirements of
a governmental entity, a classification society, or insurance
carrier, the cost of the surveys is not dutiable even when dutiable
repairs are effected as a result thereof.  Headquarters Ruling
Letter 110368, dated July 26, 1989.  In a recent case, we emphasized
that this interpretation exempts from duty only the cost of a
required scheduled inspection by a qualifying entity.  Headquarters
Ruling Letter 111328, dated August 7, 1991.  If, however, the survey
is to ascertain the extent of damage sustained or whether repairs
are deemed necessary, then the costs are dutiable as part of the
repairs that are accomplished.  C.I.E. 429/61; C.S.D. 79-2, 13 Cust.
B. & Dec. 993 (1979); C.S.D. 79-277, 13 Cust. B. & Dec. 1395, 1396
(1979).  In the liquidation process, Customs should look beyond the
mere labels of "continuous" or "ongoing" before deciding whether the
item is dutiable.  If an inspection or a survey is conducted as a
part of a maintenance and repair program labelled "continuous" or
"ongoing," the cost of such survey is dutiable if it is in fact
repair related.

     Item 106 of the Jurong Shipyard invoice reflects charges for
the inspection of the tailshaft.  Section (b) of this item indicates
that minor compression cracks were ground out to the satisfaction of
the American Bureau of Shipping and Coast Guard inspectors.  This
procedure qualifies as a dutiable repair and the related costs
appearing under item 106 are therefore subject to duty.  

     Item 201(c) list the cost of a hydrostatic test of the boiler. 
We find no repairs related to this test, and we consequently
conclude that the cost of this item is not subject to duty.
Likewise, items AAA, BBB, and CCC of the Suncrest Engineering PTE
Ltd Invoice are inspections that are not related to repairs.  The
costs of these items are not subject to duty.

III. Cleaning Charges.

     The applicant seeks relief for costs for the cleaning of the
bilges and boiler. 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 110841, dated May 29, 1990 (and cases
cited therein).  The costs appearing under item 012 for bilge
cleanings are unrelated to repairs and are therefore not subject to
duty.  The Customs Service has held that the cleaning of boilers is
not subject to duty provided that such cleaning is not in
preparation for repairs.  C.I.E. 51/61, dated November 25, 1960. We
find numerous references in the invoice to boiler repairs.  The
boiler cleaning therefore appears to be in preparation for repairs;
the costs appearing under items 201(a) and (b), relating to boiler
cleaning, are subject to duty.

IV.  Miscellaneous Items.

     The applicant seeks relief for Jurong Item 506.  This item
reflects the cost of removing and installing new pipes.  The
applicant claims relief for this work under 19 U.S.C.  1466(h),
which exempts from vessel repair duties foreign manufactured parts
that have previously entered the United States duty paid.  We find
that this invoice item reflects the cost for both parts and labor. 
Without proper segregation, we find the entire cost of this item to
be subject to duty.  Further, we do not find in the record evidence
that the parts used in this operation were either manufactured in
the United States or entered duty-paid in the United States.

     You have referred for our consideration Jurong Item 005.  This
item lists costs for maintaining a fire watch.  This office has
determined that a fire watch is a non-dutiable dry docking expense. 
Headquarters Ruling Letter 110743, dated July 25, 1990.  The cost
appearing under item 005 is therefore not subject to duty.

HOLDING:

      Following a thorough review of the evidence submitted as well
as an analysis of the applicable law and precedents, we have
determined that the Application for Review should be allowed in part
and denied in part as set forth in the Law and Analysis section of
this ruling.

                          Sincerely, 




                          Acting Chief