HQ 111733: Modification; Transportation, preparation for; Vessel Repair; 19 U.S.C. 1466; M.V. GALVESTON BAY; Entry No. 559- 1237219-4

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 111733


                          July 22, 1992


VES-13-18  CO:R:IT:C  111733 GFM

CATEGORY:  Carriers

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

RE:  Modification; Transportation, preparation for; Vessel
     Repair; 19 U.S.C. 1466; M.V. GALVESTON BAY; Entry No. 559-
     1237219-4

Dear Sir:

     This letter is in response to your memorandum of June 7,
1991, which forwards for our review the application for relief
filed pursuant to the above-referenced vessel repair entry.

FACTS:

     The record reflects that the subject vessel, the M.V.
GALVESTON BAY, arrived at the port of Boston, Massachusetts, on
January 23, 1991.  Vessel repair entry, number 559-1237219-4, was
filed on January 25, 1991.  The entry indicates that the vessel
underwent foreign shipyard work while in Rotterdam, Netherlands,
during January and February of 1991.  Specifically, the record
indicates that the vessel undertook modification of its port
gangway.  The vessel operator had previously sought a prospective
ruling in which this office concluded that the described work
would constitute a modification to the vessel (Headquarter Ruling
Letter 110703, January 23, 1990).

ISSUE:

     Whether the cost of foreign shipyard work completed aboard
the subject vessel is dutiable pursuant to 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.

     In its application of the vessel repair statute, the Customs
Service has held that modifications, alterations, or additions to
the hull and fittings of a vessel are not subject to vessel
repair duties.  Over the course of years, the identification of
work constituting modifications on the one hand and repairs on
the other has evolved from judicial and administrative precedent.
In considering whether an operation has resulted in a
modification that 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, 18 C.C.P.A. 137 [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 costs of which are 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 constitutes a new design feature
          and does not merely replace a part, fitting, or
          structure that is performing a similar function.

     4.   Whether an item under consideration provides an
          improvement or enhancement in operation or efficiency
          of the vessel.


     For purposes of section 1466, 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.

T.D. 34150, 26 Treas. Dec. 183, 184 (1914)(quoted with approval
in Admiral Oriental).

     The Customs Service has held that 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.

     In the present case, the application in question represents
charges incurred relative to the installation of a port-side
gangway.  The invoices state that a new extension with
accompanying hardware was fabricated, that certain ship features
were modified to accommodate the new modification, and that
testing of the new modification was performed.

     After thorough review, we are convinced that the operations
undertaken do indeed satisfy the above enumerated criteria and do
in fact constitute a modification.  Accordingly, we find that the
operation itself may be afforded non-dutiable status.

     However, we also find that this application contains two
objectionable charges which are not entitled to duty-free status.
These charges are discussed below:

Item 98/9006  MODIFICATION OF PORT-SIDE GANGWAY
     Sub-item 7.....................................$    6,353.57

     This item represents charges for repairs effected in
preparation for the modification.  With respect to this item, the
invoice clearly states that the work was completed "prior to





modification of P.S. accommodation ladder * * * same repaired as
follows:"  As previously stated, according to Title 19, United
States Code, section 1466, vessels documented under the laws of
the United States to engage in the foreign or coastwise trade, or
vessels intended to engage in such trade, which undergo foreign
repairs are subject to payment of duty in the amount of fifty
percent ad valorem on the cost of those repairs.  As the
operations undertaken in this particular sub-item clearly
constitute repairs, the cost of these charges ($6,353.57) is
fully dutiable.

Item 98/9006  MODIFICATION OF PORT-SIDE GANGWAY
     Sub-item 2.....................................$    3,690.47

     This item contains a charge for transportation of the old
gangway and installation of the new one.  According to the
invoice, a modified port accommodation ladder was "transported
from (the) yard's premises to vessel.  Existing port
accommodation ladder unrigged, disconnected, removed and
transported to our premises and unloaded.  Modified accommodation
ladder installed, rigged and operation test carried out."  The
invoice further indicates that the old gangway was then repaired
prior to being fitted with the modifications.  According to
C.I.E. 1325/58, in the context of vessel repair, charges for
transportation of parts and materials between a vessel and a
workshop are not dutiable if itemized separately.  Moreover, it
is the position of the Customs Service that "transportation" does
not include operations relative to preparing the item for
shipping (see, Customs Ruling Letter 112211, June 30, 1992).
Thus, labor for such services as removing a part from its housing
or mounting, or disconnecting an item, etc., does not constitute
transportation and is thus, dutiable.  With respect to this
portion of the item, charges representing costs for such
services may not be included in transportation costs.  Thus, the
charge of ($3,690.47) is dutiable.

Item 227/9006  MODIFICATION OF PORT-SIDE GANGWAY
     Sub-item 1.....................................$    6,353.57

     This item represents a charge for repairs effected in
preparation for a modification which were already submitted in
invoice 98/9006.  As this item has already been addressed, it
will be disregarded here.






HOLDING:

     After thorough review of the evidence presented, and as
detailed in the Law and Analysis portion of this ruling, the
application for relief is granted in part and denied in part.

                                        Sincerely,



                                        B. James Fritz
                                        Chief
                                        Carrier Rulings Branch