HQ 110294: Request for opinion regarding the dutiability of certain foreign shipyard operations performed on the U.S.-flag vessel OMI MISSOURI

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 110294
                       September 11, 1989


VES-13-18-CO:R:P:C  110294 LLB

CATEGORY:   Carriers

Deputy Assistant Regional Commissioner
Classification and Value Division
ATTN:  Regional Vessel Repair Liquidation Unit
New York, New York  10048-0945

RE:  Request for opinion regarding the dutiability of certain
     foreign shipyard operations performed on the U.S.-flag
     vessel OMI MISSOURI

Dear Sir:

     Reference is made to your undated correspondence forwarding
for our consideration the July 27, 1988, application for relief
from vessel repair duties files by the OMI Corporation relative
to the  May 15, 1988 arrival of the vessel in the port of Albany,
New York.  Duty was assessed upon the cost of foreign shipyard
operations pursuant to section 466, Tariff Act of 1930, as
amended (19 U.S.C.1466), under vessel repair entry number 336-
0062171-9.

FACTS:

     The vessel underwent routine drydocking and repair
operations in Portugal from April 16 to April 26, 1988.  The
invoices presented are divided into five categories.  These are:

     1. Setenave shipyard invoice I/80/047 (general drydocking
     and repair services).

     2. Triton Marine Services invoice 87/88/047 (O ring, gasket,
     and seal ring sets).

     3. Catonave (cathodic protection) invoice 071/88 (supply of
     anodes to the vessel).

     4. Catonave (cathodic protection) invoice 075/88 (anode
     maintenance and protective applications).

     5. American Bureau of Shipping (ABS) survey report.


                              - 2 -


ISSUE:

     Whether evidence is presented sufficient to permit refund of
duties.

LAW AND ANALYSIS:

     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.

     A leading case in the interpretation and application of
section 1466 is United States v. Admiral Oriental Line et al., 18
C.C.P.A. 137 (T.D. 44359 (1930)).  That case distinguished
between equipment and repairs on one hand and permanent additions
to the hull and fittings on the other, the former being subject
to duty under section 1466.

     The Court in Admiral Oriental, supra., cited with approval
an opinion of the Attorney General (27 Op. Atty. Gen. 288).  That
opinion interpreted section 17 of the Act of June 26, 1884, (23
Stat. 57, which allowed drawback on the vessels built in the U.S.
for foreign account, wholly or in part of duty-paid materials.
In defining equipment of a vessel, the Attorney General found
that items which are not equipment are:

          ...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...
          [and] are material[s] used in the construction of
          the vessel...

While the opinion of the Attorney General interpreted a provision
of law other than section 1466 or a predecessor thereto, it is
considered instructive and has long been cited in Customs Service
rulings as defining permanent additions to the hull and fittings
of a vessel.

     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.  (T.D. 34150 (1914)).

     It should be noted that the fact that a change or addition
                              - 3 -

 of equipment is made to conform with a new design scheme, or for
the purpose of complying with the requirements of statute or
code, it is not a relevant consideration.  Therefore, any change
accomplished solely for these reasons, and which does not
constitute a permanent addition to the hull and fittings of the
vessel, would be dutiable under section 1466.

     One early case (United States. v. George Hall Coal Co., 134
F. 1003 (1905)), was the first to find any of various types of
expenses associated with repairs to be classifiably free from the
assessment of vessel repair duties.  The case established that
the expenses of drydocking a vessel (regardless of the underlying
need to drydock) is not an element of dutiable value in foreign
repair costs.  Drydocking is a major, but not isolated, expense
in general ship repair operations.  Many other associated
expenses and services are necessary adjuncts to drydocking and
are logically inseparable from the drydocking rule.  These
include such items as drydock block arrangement, sea water supply
(for fire-fighting equipment), hose hook-up and disconnection
charges, fire watch services, the services of a crane for
drydocking-related operations, the provision of compressed air,
cleaning of the drydock following repairs, and numerous others.

     Under the above-cited precedent, some of the items are
classifiably free, some are clearly dutiable repairs, and some
are insufficiently described to permit a determination.  The
items which we find to be dutiable repairs are:

     Invoice Page                    Item Description

     004                             seachest painting
     004                             replace anodes
     006                             replace outboard seal
     007                             new life raft falls/wires
     012                             main sea valves
     014                             washing/painting/blasting
     014                             cleaning/blasting/painting
     014                             propeller repairs
     015                             plate renewals
     017                             frame 2 crane grab reel
     017                             crane grab reels
     017                             crane grease line
     018                             fore mast stays
     018                             lifeboat falls
     018                             fish plate
     018                             aft draft gauge
     019                             echo sounder
     019                             doppler speed log
     020                             machinings
     024                             access work
     024                             hydraulic gauge

                              - 4 -


     BB                              Triton Marine Services
     CC                              Catonave (anodes)
     DD                              Catonave (protective coat)
     EE                              ABS survey (incomplete)


     The items for which insufficient information has been
submitted and which will therefore be considered dutiable are
shown as numbers 01,02, and 03 on page 015 of the main invoice.
The other items not specified in this ruling are considered free
of duty either as modifications or, in the case of items 1-15 on
the first 4 invoice pages, as classifiably free charges.

HOLDING:

     Following a thorough review of the evidence as submitted, we
recommend that the application be allowed in part and denied in
part, as specified in this ruling.

                                     Sincerely,




                                     B. James Fritz
                                     Chief
                                     Carrier Rulings Branch