HQ 110987: Vessel repair; modification; removal of new pipe for galvanization; replacement of disturbed painting Vessel: RICHARD G. MATTHIESEN V-46 Vessel Repair Entry No. C53-0012014-0

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 110987

                         August 7, 1990

VES-13-18-CO:R:P:C  110987 KVS

CATEGORY:  Carriers

Deputy Assistant Regional Commissioner
Commercial Operations Division
423 Canal Street
New Orleans, LA  90130-2341

RE:  Vessel repair; modification; removal of new pipe for
     galvanization; replacement of disturbed painting
     Vessel:  RICHARD G. MATTHIESEN V-46
     Vessel Repair Entry No. C53-0012014-0

Dear Sir:

     This is in response to your memorandum of April 12, 1990,
which forwards for our consideration a petition for review filed
in connection with the RICHARD G. MATTHIESEN V-46, vessel repair
enty no. C53-0012014-0.  Our findings are set forth below.

FACTS:

     The RICHARD G. MATTHIESEN, an American-flag vessel,
underwent foreign shipyard operations at Malta, in February and
March, 1989.  The vessel arrived in the United States on April
11, 1989, at Houston, Texas, and made entry on April 17, 1989.

     An application for relief was filed on on June 9, 1989.  On
January 18, 1990, we issued a decision on the application,
granting relief in part and denying relief in part.  The
petitioner was notified of our decision on the application in a
letter from the Vessel Repair Liquidation Unit, New Orleans,
dated February 1, 1990.

     The petition for review currently under consideration was
stamped as received on March 5, 1990.  We are informed by the
Vessel Repair Liquidation Unit that the Federal Express Air Bill
reads March 1, 1990, and that due to the presence of new
personnel, it is likely that the petition arrived on Friday,
March 2, 1990, but remained unstamped until Monday, March 5,
1990.  In order to avoid undue prejudice to the petitioner, we
will consider the petition timely filed as of March 2, 1990.

ISSUE:

     Whether the foreign shipyard operations carried out upon the
subject vessel are dutiable pursuant to 19 U.S.C. 1466.
                              - 2 -


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
engaged, intended to engage, or documented under the laws of the
United States to engage in the foreign or coastwise trade.

In its application of the vessel repair statute (19 U.S.C. 1466),
Customs has held that modifications/alterations/additions to the
hull and fittings of a vessel are not subject to vessel repair
duties.  A leading case in the interpretation and application of
section 1466 is United States v. Admiral Oriental Line et al.,
T.D. 44359 (1930) where the Court considered the issue of whether
steel swimming tanks installed on a U.S.-flag vessel in a foreign
port constituted equipment or repairs within the meaning of
section 1466.  In holding that the installation of these tanks
did not constitute either equipment or repairs and therefore was
not dutiable, the Court in Admiral Oriental cited earlier court
decisions which define equipment, promulgations by the Board of
Naval Construction, and regulations of the Treasury Department,
as well as opinions of the Attorney General.

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

     By defining what articles are considered to be equipment,
the authority cited above formulated criteria which distinguish
those items deemed to be modifications/alterations/additions to
the hull and fittings and therefore not dutiable under section
1466.  These items include:

          ...those applications 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).

Furthermore, the Court in Otte v. United States, T.D. 36489
(1916) stated that before an item can be regarded as part of a
vessel, it must be "essential to the successful operation" of the
vessel.

                              - 3 -


     In our decision on the application for relief, we held that
Item 3.1 (Overboard Line for Inert Gas Deck Seal) was not such a
non-dutiable modification.  The shipyard invoice description in
conjunction with this item, states "all pipes were removed, hot
dipped galvanised and replaced", thus generating the conclusion
that a dutiable repair had been performed.

     Thorough review of the evidence submitted, however, reveals
that this description refers to work undertaken on the newly
installed pipeline.  The piping was put into place to allow
inspection of position and then removed for galvanization before
replacement for final installation.  As such, we find the work
constitutes a modification.  Accordingly, the costs for labor
($5,725.00), material ($1,011.00) and cleaning ($535.00) in
connection with this item are non-dutiable.

     The petitioner also asserts that Item 3.3 (Mooring
Equipment) was also a modificaiton.  Our decision on the
application denied relief for this item on the basis that the
painting costs listed on the invoice were not related to the
modification performed to the main deck.

     Thorough examination of the evidence submitted, however,
reveals that the painting of the port and starboard wing ballast
tank was undertaken to replace the painting burned off by the
welding of the two 16" double bitts and the two closed chocks on
the main deck.  Therefore, we find that the painting was related
to the modification undertaken aboard the subject vessel.
Consequently, we find the costs for labor ($3,421.00), material
($486.00) and cleaning ($303.00) in connection with this item are
non-dutiable.

HOLDING:

     Upon thorough examination of the evidence submitted, and as
detailed in the Law and Analysis section of this ruling, we find
that each of the contested items constitutes a non-dutiable
modification.  Accordingly, the petition for review is granted in
full.

                                Sincerely,




                                B. James Fritz
                                Chief
                                Carrier Rulings Branch