HQ 111320: Vessel Repair; Modification; Cleaning; Petition for Review; Entry Nos. C27-0075267-1 and C27-0075290-3; JOVALAN; 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 111320

                        February 19, 1991

VES-13-18   CO:R:IT:C  111320  JBW

CATEGORY:   Carriers

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

RE:  Vessel Repair; Modification; Cleaning; Petition for Review;
     Entry Nos. C27-0075267-1 and C27-0075290-3; JOVALAN; 19
     U.S.C. 1466.

Dear Sir:

     This letter is in response to your memoranda of September
28, 1990, which forward for our review and ruling the above-
referenced petition for review of the assessment of vessel repair
duties.

FACTS:

     The record reflects that the subject unmanned barge, the
JOVALAN, arrived at the port of Long Beach, California, on August
10, 1989, and September 17, 1989.  Vessel repair entries C27-
0075267-1 and C27-0075290-3 were filed on August 10, 1989, and
September 22, 1989, respectively.  The vessel repair entries show
that the vessel called at Ensenada, Mexico, for repairs at
Astilleros Unidos de Ensenada, S.A. (Astilleros Unidos).

     The petitioner submits evidence--in the form of vessel logs,
letters from the towing company that towed the barge, and
relevant invoices--to demonstrate that the JOVALAN made two calls
for repairs at Astilleros Unidos.  The first call was between
July 23, 1989, and August 9, 1989.  During this call, the
invoices show operations to remove oily water and to clean the
cargo tanks of the barge.  The petitioner states that the purpose
of this cleaning was to enable the American Bureau of Shipping
(ABS) to undertake an annual survey of the hull, an annual load
line inspection, and the completion of a special periodical
survey of hull number 2.  Although the ABS report states that
these surveys began on June 23, 1989, the vessel log submitted
demonstrates that the vessel was in San Francisco at that time.
The log indicates, and the petitioner maintains, that these
surveys in fact began on July 23, 1989.

     During the course of the ABS inspection, interior damage to
the number 1 port side cargo tank was discovered.  The president
of the company that owns the vessel, by letter, affirms that his
company had no knowledge of this damage before its discovery
during the course of the routine survey.  The president further
affirms the cleaning of the vessel would have been performed
regardless of the damage.  This damage was subject to an ABS
conducted damage survey that began on July 27, 1989.

     The petitioner also submits evidence to show that the
Astilleros Unidos performed conversion operations to the vessel.
The purpose of the conversion was to permit the vessel to
withstand heavy weather experienced in the northern Pacific area,
thus increasing the range of the vessel.

     The vessel called again at Astilleros Unidos for further
inspection and conversion work on August 28, 1989.  During this
time, the vessel was again cleaned.

     Two applications for relief were filed.  Both applications
addressed the question of whether tank cleaning in preparation
for a routine survey by the ABS that revealed the need for
repairs is dutiable.  Because repairs were made to the number 1
port side cargo tank, we held that the cleaning costs were
dutiable, for they were in preparation for repairs.  Headquarters
Ruling Letter 110895, dated July 25, 1990, and Headquarters
Ruling Letter 111806, dated May 24, 1990.  The petitioner,
arguing that the damage was only discovered during the routine
inspection for which the cleaning was performed, disputes this
holding.  The petitioner also seeks relief for the conversion
work, which was not raised in the application and was not
addressed in the rulings on the application.

ISSUES:

     (1)  Whether the cost of cleaning in preparation for an
inspection are dutiable if that inspection reveals the need for
dutiable repairs.

     (2)  Whether conversion operations performed on the vessel
constitute non-dutiable modifications.

LAW AND ANALYSIS:

I.   Cleaning Costs in Preparation for Routine Inspection
     that Reveals Need for Dutiable Repairs

     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.

     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).  Stated differently, this rule provides that if
some demonstrable link exists between the cleaning and the
repair, then the cleaning is itself dutiable.

     The evidence submitted demonstrates that the need for
repairs was discovered during the routine inspection and that the
cleaning was required to carry out the inspection.  Thus, some
link between the cleaning and the repairs exists.  We therefore
conclude that the cleaning costs are dutiable.  We note, however,
that only those cleaning costs related to the number 1 port cargo
tank are dutiable.

II.  Alterations and Modifications to the Vessel

     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.  We have
also 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.

      In the present case, we find that the plans, statements
from the naval architects, and invoice descriptions of the work
performed to the hull of the vessel in conjunction with the
claims in the petition provide sufficient proof that no repairs
were made to the items claimed as modifications.  The cost for
this work is therefore not dutiable.  Moreover, item 6 on both
Astilleos Unidos invoices (numbers 6862 and 6842) relating to
tank cleaning for "hot work" is related to this modification and
is not dutiable.

HOLDINGS:

     (1)  Cleaning performed as part of, in preparation for, or
in conjunction with dutiable repairs is dutiable.  From the
invoices submitted, only those costs relating to the cleaning of
the number 1 port cargo tank are dutiable.

     (2)  The petitioner has submitted sufficient evidence that
the work performed to permit the vessel to withstand heavy
weather experienced in the northern Pacific is not dutiable.


                              Sincerely,



                              B. James Fritz
                              Chief
                              Carrier Rulings Branch