HQ 113128: Vessel Repair Entry No. 410-0019946-7; Modification; SEA-LAND PRODUCER; V-247; 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 113128

                          June 20, 1994

VES-13-18-CO:R:IT:C 113128 GEV

CATEGORY:  Carriers

Deputy Regional Commissioner
Commercial Operations
Pacific Region
1 World Trade Center
Long Beach, California 98031

RE:  Vessel Repair Entry No. 410-0019946-7; Modification;
     SEA-LAND PRODUCER; V-247; 19 U.S.C.   1466

Dear Sir:

     This is in response to your memorandum dated May 27, 1994,
forwarding an application for relief from duties assessed pursuant
to 19 U.S.C.   1466.  You request our review of four items
contained within this entry.  Our findings are set forth below.

FACTS:

     The SEA-LAND PRODUCER is a U.S.-flag vessel owned and operated
by Sea-Land Service, Inc.  The subject vessel had work performed
in Yokohama, Japan during January of 1994.  Subsequent to the
completion of this work the vessel arrived in the United States at
Oakland, California on February 9, 1994.  A vessel repair entry was
filed on the date of arrival.  

     Pursuant to an authorized extension of time, an application
for relief with supporting documentation was filed on May 10, 1994. 
Among the work for which the applicant seeks relief are Items 7.5
(Slop Tank Conversion) and 7.6 (Chloropac System Installation)
which are claimed to be modifications.  In support of these claims
the applicant has submitted shipyard invoices and drawings from
Mitsubishi Heavy Industries, Ltd.

ISSUE:

     Whether evidence is presented sufficient to prove that the
foreign work performed on the subject vessel as detailed in Items
7.5 and 7.6 constitute modifications so as to render the work non-
dutiable under 19 U.S.C.   1466.


                              - 2 -
      
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

     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.


                              - 3 -

     "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 regard to the work described in Items 7.5 and 7.6, upon
reviewing the record in its entirety, we are of the opinion that
both items meet the requisite criteria to be considered non-
dutiable modifications.

     Parenthetically, we note that we were also requested to review
the following two items:  Item 2.1-5 (Sea valves and overboard
valves); and the American Bureau of Shipping (ABS) survey of
certain work performed as part of Item 7.5, discussed above.  In
regard to the former, it is apparent that such charges were
incurred pursuant to a non-dutiable USCG and ABS survey unrelated
to any repairs.  In regard to the latter, such costs were
associated with the non-dutiable modification work detailed in Item
7.5.  Accordingly, these costs are non-dutiable.
                              - 4 -

HOLDING:

     Evidence is presented sufficient to prove that the foreign
work performed on the subject vessel as described in Items 7.5 and
7.6 constitutes modifications so as to render the work non-
dutiable under 19 U.S.C.   1466.

                              Sincerely,




                              Arthur P. Schifflin
                              Chief
                              Carrier Rulings Branch