HQ 111268: Vessel Repair; Modification; Improvement; ARCO PRUDHOE BAY; Petition for Review; Vessel Repair Entry No. C31-0005014-6; 19 U.S.C. 1466; 19 C.F.R. 4.14.

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 111268

                        November 20, 1990


VES-13-18  CO:R:P:C  111268  JBW

CATEGORY:  Carriers

Chief, Technical Branch
Commercial Operations
Pacific Region
1 World Trade Center
Long Beach, CA 90831

RE:  Vessel Repair; Modification; Improvement; ARCO PRUDHOE BAY;
     Petition for Review; Vessel Repair Entry No. C31-0005014-6;
     19 U.S.C. 1466; 19 C.F.R. 4.14.

Dear Sir:

     This letter is in response to your memorandum of August 13,
1990, which forwards for our review and ruling the above
referenced petition for review from the assessment of vessel
repair duties.

FACTS:

     The record reflects that the subject vessel, the ARCO
PRUDHOE BAY, arrived in the port of Valdez, Alaska, on August 19,
1989.  Vessel repair entry, number C31-0005014-6, was filed on
the same day as arrival and indicated foreign shipyard work
performed on the vessel while in Korea and Singapore.

     The Customs Service first addressed the dutiablity of the
work in Headquarters Ruling Letter 110862, dated May 14, 1990.
In that ruling, we held to be dutiable the cost of the work
performed to install container sockets, invoice 8430, to remove
the eductor discharge pipe, invoice 8813, and to remove and
replace the inert gas system mast riser, invoice 8902.  The
vessel owner, by its agent, filed its petition for review on
July 21, 1990.  The vessel owner, in its petition, objects to the
assessment of duty against the cost of this work.

ISSUE:

     Whether the work performed in a foreign country on the
subject vessel is dutiable under 19 U.S.C. 1466 (1988).

LAW AND ANALYSIS:


     Title 19, United States Code, section 1466, provides 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.

     The Customs Service, in its interpretation of 19 U.S.C.
1466 and in accord with the logic established in United States
v. Admiral Oriental Line, 18 C.C.P.A. 137 (1930), distinguishes
between equipment and repairs on the one hand and permanent
additions to the hull and fittings on the other.  The court in
Admiral Oriental cited with approval an opinion of the Attorney
General (27 Op. Atty. Gen. 288) that defined the scope of the
term equipment in examining a statute that permitted drawback on
vessels built in the United States for foreign account, wholly or
in part of duty-paid materials.  The Attorney General found that
items that are not equipment are:

          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...[and] are material[s]
          used in the construction of the vessel....

Admiral Oriental, 18 C.C.P.A. at 140 (quoting the opinion of the
Attorney General).

     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.

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

     Customs has held that for an item to be characterized as a
nondutiable modification, it must encompass the installation of
an item as a new design feature, not as a replacement for, or
restoration of, parts now performing a similar function.
Further, we have held that the removal of an existing,
operational system for the purpose of improving the efficient
performance of the vessel is not dutiable provided that the work
was not performed in conjunction with dutiable repairs.
Headquarters Ruling Letter 109971, dated June 12, 1989.  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.

      In ruling on the application for relief, we determined that
the installation of the container sockets was made as a repair
to these items.  Our reason for reaching this conclusion was a
statement in the invoice:  "upon completion of repair all damaged
coating per Item #007."  The underlined word of suggested that
the installation was made as part of a repair.  In its petition,
the vessel owner submits its work order in which it demonstrates
that the word of should not have been included in the invoice.
In other words, the work invoice called for the installation of
new container sockets, and the areas damaged as part of this
alteration were to be coated or painted.  We have held that
painting new sections and other additions of the vessel is an
integral part of the cost of the alterations and is not subject
to the duty imposed by the vessel repair statute.  See C.I.E.
1043/60.  The installation of the container sockets is in the
nature of an addition of a new design feature and is consequently
a nondutiable alteration.  The painting of areas damaged as part
of the alteration are also not dutiable.

     The petitioner likewise claims that the removal of the
existing inert gas system mast riser to install an improved mast
riser is nondutiable as a modification.  In ruling on the
application, we stated that the invoice did not demonstrate that
the mast riser was a new design feature or improvement.  As part
of the petition, the vessel owner submits a letter from a naval
architect who explains that the purpose of the replacement was
to install a mist eliminator as a safety improvement.  Extensive
drawings are submitted to demonstrate the extent of the
alteration.  Upon examination of the new evidence submitted, we
conclude that the installation of the inert gas system mast riser
is a nondutiable modification.

     Finally, the petitioner challenges the assessment of duty
against the cost of removing and capping the eductor discharge
pipe.  We ruled that the cost of removing the pipe was dutiable,
for this operation was related to dutiable repairs performed in
the pump room (invoice 8808).  The petitioner counters by stating
that the removal of the eductor discharge pipe was simply the
removal of an obsolete item that is unrelated to the repairs in
the pump room.  While we acknowledge that the removal of the
eductor discharge pipe may be unrelated to the repairs in the
pump room, the petitioner fails to describe the reason for the
removal of the pipe.  That the eductor discharge pipe became
obsolete suggests that another item has assumed its function or
that a related item was changed to render its use obsolete.
Without further explanation, we cannot determine whether the
removal of the eductor discharge pipe was repair related.  We
conclude, therefore, that the cost of removing and capping the
eductor discharge pipe is dutiable.

HOLDING:

     The cost of installing the container sockets and removing
and installing an improved inert gas system mast riser is not
dutiable, for these operations are in the nature of a
modification or alteration to the hull or fittings of the ship.
However, the cost of removing the eductor discharge pipe is
dutiable, for the petitioner has not adequately explained the
reason for the operation.


                              Sincerely,



                              B. James Fritz
                              Chief
                              Carrier Rulings Branch