HQ 113076: Vessel Repair Entry No. C46-0016906-3; M/V NOSAC RANGER; V-094; Modification; 19 U.S.C. 1466

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 113076

                          March 15, 1995

VES-13-18-CO:R:IT:C 113076 GEV

CATEGORY:  Carriers

Deputy Assistant Regional Commissioner
Commercial Operations
ATTN:  Regional Vessel Repair Liquidation Unit
New York, New York 10048-0945

RE:     Vessel Repair Entry No. C46-0016906-3; M/V NOSAC RANGER; V-094;
     Modification; 19 U.S.C.  1466

Dear Sir:

     This is in response to a memorandum from the Chief, Residual Liquidation and Protest
Branch, dated March 25, 1994, forwarding for our review an application for relief.  Our findings
on this matter are set forth below.

FACTS:

     The M/V NOSAC RANGER is a U.S.-flag vessel operated by Pacific-Gulf Marine, Inc. 
The subject vessel had foreign shipyard work performed on her at Schiedam, The Netherlands, in
July of 1993.  Subsequent to the completion of the work, the vessel arrived in the United States at
the port of Newark, New Jersey, on August 6, 1993.  A vessel repair entry was filed on August
10, 1993.  

     Pursuant to an authorized extension of time, an application for relief with supporting
documentation was filed on November 8, 1993.  The applicant has requested relief for a myriad of
work items.  In particular, it is claimed that work involving a hydropneumatic tank and hot water
heater described on Wilton-Fijenoord Invoice No. 7189/30562, Item 903 (p. 53) constitutes a
non-dutiable modification.  Related documentation regarding this particular item consists of the
following:  Pacific-Gulf Marine, Inc. letterhead, M/V NOSAC RANGER '93, Item 903 (pp. 86-88),  Canal Boiler Works, Invoice no. 2478 and Duncan Technologies Group, Inc., Invoice no.
003138.  
                              - 2 -

     In addition to the above, our review of the following items is requested:  Wilton Fijenoord
Invoice no. 7189/30562, Item 104.5 (transportation costs); Wilton Fijenoord Invoice no.
7189/30477, Item 184 (paint remnants); and Kraerner Invoice No. 930347.

ISSUE:

     Whether the foreign costs for which the applicant seeks relief is dutiable pursuant to 19
U.S.C.  1466.

LAW AND ANALYSIS:

     Title 19, United States Code,  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.  

     In its application of the vessel repair statute, Customs 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
                              - 3 -

     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, 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))

     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.

     In reviewing the record in its entirety with regard to Item 903 of Wilton-Fijenoord Invoice
no. 7189/30562, it is readily apparent that the work described therein constitutes a non-dutiable
modification.  Accordingly, Item 903 as well as those costs on the related documentation
discussed above are non-dutiable.
                              - 4 -

     With respect to the other items for which our review is requested (Invoice no. 7189/
30562, Item 104.5 - transportation costs;  Invoice no. 7189/30477, Item 184 - paint remnants;
and Kvaerner Invoice no. 930347 for Lloyd's certificate), Customs has held transportation costs
to be non-dutiable.  As for the paint remnants, the actual charge in question was for "disposing of
paint remnants."  This cost is akin to post-repair cleaning which was held dutiable by the U.S.
Court of Appeals for the Federal Circuit in Texaco Marine Services, Inc. and Texaco Refining and
Marketing, Inc. v. United States, Docket No. 93-1354, decided December 29, 1994 (affirming the
decision of the U.S. Court of International Trade at 815 F.Supp. 1484 (1993)).  In regard to
Kvaerner Invoice no. 930347 for Lloyd's certificate, we are in accord with your opinion that it is
dutiable.  

     Parenthetically, we note that the court in Texaco Marine also held protective covers
dutiable (see Item 102.31 of Wilton-Fijenoord Invoice no. 7189/30562).  

HOLDING:

       
     The foreign costs for which that applicant seeks relief are dutiable pursuant to 19 U.S.C.
  1466 as discussed in the Law and Analysis portion of this ruling.

                              Sincerely,




                              Arthur P. Schifflin
                              Chief
                              Carrier Rulings Branch