HQ 112419: Vessel Repair; Modifications; Inspection; Cleaning; 19 U.S.C. 1466; ALASKA RANGER; Entry No. H24-0009857-8.

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 112419

                        February 22,1993

VES-13-18  CO:R:IT:C  112419  JBW

CATEGORY:  Carriers

Deputy Regional Director
Commercial Operations
Pacific Region
1 World Trade Center
Long Beach, CA 90831

RE:  Vessel Repair; Modifications; Inspection; Cleaning; 19
     U.S.C.  1466; ALASKA RANGER; Entry No. H24-0009857-8.

Dear Sir:

     This letter is in response to your memorandum that forwards
for our review the application for relief filed in conjunction
with the above-referenced vessel repair entry.

FACTS:

     The record reflects that the subject vessel, the ALASKA
RANGER, arrived at the port of Anchorage, Alaska, on November 8,
1990.  Vessel repair entry, number H24-0009857-8, was filed on
the same day as arrival and indicated that work was performed on
the vessel in Ishinomaki City, Japan.  The applicant seeks relief
for certain costs that it claims are not subject to duty as
modifications.  The applicant also seeks relief for other items
it has identified as costs related to inspections and cleaning.

ISSUES:

     (1)  Whether certain work performed to the vessel resulted
in modifications to the vessel and is therefore not subject to
duty under 19 U.S.C.  1466.

     (2)  Whether the shipyard costs associated with inspections
carried out by qualifying inspection entities are subject to duty
under 19 U.S.C.  1466.

     (3)  Whether cleaning operations performed in conjunction
with both modifications and repairs are subject to duty under 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.


I.   Modification of the Vessel.

     In its application of the vessel repair statute, the Customs
Service 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.

     "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.

     The Customs Service has held that the decision in each case
as to whether an installation constitutes a nondutiable 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.

     The applicant has submitted the Yamanishi Shipbuilding and
Iron Works, Ltd., invoice to establish the modifications it
claims were performed to the vessel.  We find the descriptions
contained in the invoice to be problematic, for the items, for
the most part, fail to describe in detail the work actually
performed and are phrased as legal conclusions.  We have reviewed
the invoice and supporting documentation, where submitted, and
have concluded that the following items do not provide sufficient
descriptions to establish whether the work performed constitutes
a modification to the vessel:

          Yamanishi Invoice Item 5, page 2   
          Yamanishi Invoice Item 7, page 2
          Yamanishi Invoice Item 10, page 3
          Yamanishi Invoice Item 13, page 3
          Yamanishi Invoice Item 14, page 4
          Yamanishi Invoice Item 15, page 4
          Yamanishi Invoice Item 18, page 5
          Yamanishi Invoice Item 19, page 5
          Yamanishi Invoice Item 27, page 6
          Yamanishi Invoice Item 32, page 7
          Yamanishi Invoice Item 10, page 11
          Yamanishi Invoice Item 11, page 11
          Yamanishi Invoice Item 14, page 12
          Yamanishi Invoice Item 16, page 12
          Yamanishi Invoice Item 17, page 12
          Yamanishi Invoice Item 25, page 13
          Yamanishi Invoice Item 26, page 13
          Yamanishi Invoice Item 27, page 13
          Yamanishi Invoice Item 28, page 13


     We find the remainder of the items identified by the
applicant as modifications that are free of duty under 19 U.S.C.
 1466.

II.  Inspection.

     The Customs Service has held that where periodic surveys are
undertaken to meet the specific requirements of a governmental
entity, a classification society, or insurance carrier, the cost
of the surveys is not dutiable even when dutiable repairs are
effected as a result thereof.  Headquarters Ruling Letter 110368,
dated July 26, 1989.  In a recent case, we emphasized that this
interpretation exempts from duty only the cost of a required
scheduled inspection by a qualifying entity.  Headquarters Ruling
Letter 111328, dated August 7, 1991.  If, however, the survey is
to ascertain the extent of damage sustained or whether repairs
are deemed necessary, then the costs are dutiable as part of the
repairs that are accomplished.  C.I.E. 429/61; C.S.D. 79-2, 13
Cust. B. & Dec. 993 (1979); C.S.D. 79-277, 13 Cust. B. & Dec.
1395, 1396 (1979).  In the liquidation process, Customs should
look beyond the mere labels of "continuous" or "ongoing" before
deciding whether the item is dutiable.  If an inspection or a
survey is conducted as a part of a maintenance and repair program
labelled "continuous" or "ongoing," the cost of such survey is
dutiable if it is in fact repair related.

     Yamanishi Invoice Items 41 and 43 contain costs associated
with inspections carried out by the American Bureau of Shipping. 
Item 41 details work required to access certain parts of the
ship.  No repairs were carried out as part of the inspection. 
The costs appearing in Item 41 are therefore not dutiable.  Item
43 details work required for establishing load line marking,
measuring shell plate thickness, preparing the vessel for the
"inclining test," and repairing bulkheads.  We determine that the
first three of these tests were not associated with repairs and
are not subject to duty.  However, Item 43(d) relates to repairs
of the bulkheads and is subject to duty.

III. Cleaning.

     The applicant seeks relief for cleaning costs as identified
in Item 39.  The description under this item reads:  "Clean all
interior of vessel."  The Customs Service has consistently held
that cleaning is not dutiable unless it is performed as part of,
in preparation for, or in conjunction with dutiable repairs or is
an integral part of the overall maintenance of the vessel. E.g.,
Headquarters Ruling Letter 110841, dated May 29, 1990 (and cases
cited therein). Both modifications and repairs were made to the
interior of the vessel.  The cleaning, therefore, was in part in
preparation for dutiable repairs.  We cannot determine from the
invoice how those costs are apportioned.  We therefore find the
cleaning costs under Item 39 to be dutiable.

HOLDING:

      Following a thorough review of the evidence submitted as
well as an analysis of the applicable law and precedents, we have
determined that the Application for Review should be allowed in
part and denied in part as set forth in the Law and Analysis
section of this ruling.



                         Sincerely, 




                         Acting Chief