HQ 113064: Dutiable Status under 19 U.S.C. 1466 of Foreign Work on U.S.- flag Vessels

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 113064

                            April 12, 1994

VES-13-18-CO:R:IT:C   113064 GOB

CATEGORY: Carriers

John P. McConville, Esq.
Sea-Land Service, Inc.
Law Department
P.O. Box 2555
Elizabeth, New Jersey 07207

RE:  Dutiable Status under 19 U.S.C. 1466 of Foreign Work on U.S.-
     flag Vessels 

Dear Mr. McConville:

     This is in response to your letter of March 29, 1994 in which
you request a ruling as to whether certain foreign shipyard work
performed on three U.S.-flag vessels will be dutiable under 19
U.S.C. 1466.

FACTS:

     Sea-Land Service, Inc. ("Sea-Land") is the owner of the three
container vessels at issue - GALVESTON BAY, SEA-LAND VALUE, and
RALEIGH BAY ("vessels").  It proposes to modify the vessels in a
foreign shipyard in order to increase the vessel speed.  Sea-Land
describes the proposed modifications as follows:

     ...installation of a package designed to augment propulsion
     power by completion of the following additions or deletions
to   the three specified existing vessels of the Atlantic class: 

     (a) elimination of hatch groups 9, 10, and 11 (approx. 40M
     midbody section removal);

     (b) reconnecting the vessel in way of existing frames 105 and
     132;

     (c) cropping and removing the existing lower bow structure
     from forward of frame/bulkhead 202 approximately to the
     forward end at frame 217, from the baseline to approx. 9.5 M
     above baseline at frame 202 to a point just below the second
     deck at the stem;

     


                              - 2 -

     (d) construction of a diaphragm supported hull fairing from
     approximately frame number 179 to frame 202 to a point just
     below the second deck at the stem;

     (e) pre-fabrication and installation of a new bow structure
     incorporating a new bow thruster installation and a bulbous
     bow as well as other structural modifications which will
     result in the lengthening of the bow by approximately 17
     frames spaces of 810 mm each, in order to improve vessel lines
     and contribute to the increase of speed;

     (f) installation of diesel driven shaft booster motor, having
     an output of approximately 4,000 kW to the vessel's new
     propeller shafting to increase speed;

     (g) replacement of existing propeller with a controllable
     pitch propeller of a new design to enhance vessel speed;

     (h) modification or conversion to existing piping, electrical,
     and mechanical systems affected by the above modifications
     including, but not limited to, monitoring, control, and alarm
     systems.

     Sea-Land states that the proposed modifications will result
in a more efficient and effective use of the vessels.  It asserts
that the work will not cure any defect or repair any damage.  Sea-
Land states that it does not intend to make any repairs to the
vessels during the modification process.

ISSUE:

     Whether the foreign shipyard work described herein would
constitute modifications to the hull and fittings of the vessels
so as to render the work non-dutiable under 19 U.S.C. 1466.

LAW AND ANALYSIS:

     19 U.S.C. 1466 provides for the payment of duty at a rate 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 be employed 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.  The identification of work constituting modifications vis-
a-vis work constituting repairs has evolved from judicial and
administrative precedent.  In considering whether an operation has
resulted in a nondutiable modification, the following factors have
been considered:

                              - 3 -

     1.   Whether there is a permanent incorporation into the hull
or superstructure of a vessel, either in a structural sense or as
demonstrated by means of attachment so as to be indicative of a
permanent incorporation.  See United States v. Admiral Oriental
Line, 18 C.C.P.A. 137 (1930).  However, we note that a permanent
incorporation or attachment does not necessarily involve a
modification; it may involve a dutiable repair.

     2.   Whether in all likelihood an item would remain aboard a
vessel during an extended lay-up.

     3.   Whether an item 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 provides an improvement or enhancement
in operation or efficiency of the vessel.

HOLDING:

     After a review of the documentation submitted, we conclude
that the work described constitutes modifications to the vessels
which are nondutiable under 19 U.S.C. 1466.

     We emphasize, however, that this ruling is based on the
information submitted and counsel's assertion that Sea-Land does
not intend to make any repairs during the modification process and
if any such repairs are determined to be required they will be
undertaken under a separate Repair Agreement and will be invoiced
separately by the non-U.S. shipyard or the party performing the
repairs.  This ruling does not eliminate the requirement of 19 CFR
4.14(b) to declare and enter work performed abroad at the vessels'
first port of arrival.  Any final determination as to whether
repairs are involved will be made after Customs review of the
evidence required to be submitted pursuant to 19 CFR 4.14(d).



                              Sincerely,



                              Arthur P. Schifflin
                              Chief
                              Carrier Rulings Branch