HQ 111680: Vessel Repair; Modification; Equipment; Cleaning; 19 U.S.C. 1466; S/S ADMIRALTY BAY; Entry No. C31-0005020-3.

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 111680

                        November 19, 1991

VES-13-18   CO:R:IT:C  111680  JBW

CATEGORY:   Carriers

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

RE:  Vessel Repair; Modification; Equipment; Cleaning; 19 U.S.C.
     1466; S/S ADMIRALTY BAY; Entry No. C31-0005020-3.

Dear Sir:

     This letter is in response to your memorandum dated April
24, 1991, which 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 S/S
ADMIRALTY BAY, arrived at the port of Valdez, Alaska, on December
4, 1990.  Vessel repair entry, number C31-0005020-3, was filed on
the same day as entry and was marked incomplete.  A completed
entry and an application for relief were filed on March 6, 1991,
pursuant to an authorized extension of time.  The entry indicates
that repairs were made to the vessel in the Jurong Shipyard in
Singapore.  The applicant seeks relief for invoice costs that it
claims are not subject to duty as modifications or cleaning.

ISSUES:

     (1)  Whether certain work performed in the Jurong Shipyard
results in modifications to the vessel that is not subject to
duty under 19 U.S.C. 1466.

     (2)  Whether cleaning operations performed in conjunction
with claimed modifications to the vessel are subject to duty
under 19 U.S.C. 1466.

     (3) Whether the cost of purchasing and installing a copying
machine and of purchasing walkie-talkies is 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.

     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.  Over the course of years, the identification of
work constituting modifications on the one hand and repairs on
the other has evolved from judicial and administrative precedent.
In considering whether an operation has resulted in a
modification that 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, 18 C.C.P.A. 137 (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 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 under consideration provides an
          improvement or enhancement in operation or efficiency
          of the vessel.

     For purposes of section 1466, 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.

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

     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 seeks relief for the following items.  Our
conclusions are as follows:

     Jurong Item 213(c):  Deck non-return and isolation valves:

          The work performed under this item involved moving the
          non-return valve to increase the distance between the
          non-return valve and isolation valves.  The reason for
          moving the valve was to correct the interference in the
          operation of the valves caused by the proximity of the
          valves.  The work performed was required to address a
          problem resulting from the original design of the ship.
          This work resulted in an improvement to the vessel that
          was not repair related; the costs appearing under
          Jurong Item 213(c) are not dutiable.

     Jurong Item 311:    Stern Tube Oil Sump Tank:

          The work involved lowering the sump tank to steering
          gear flat level to reduce the head pressure on seals.
          This work was required to address a problem resulting
          from the original design of the ship; this work
          resulted in an improvement to the ship that was not
          repair related.  The costs appearing under this item
          are not subject to duty.

     Jurong Item 407:

          The work performed under this item involved the
          preparation of the ship for the later installation of
          a Grinnell valve.  The application does not indicate
          the purpose for this installation.  Absent such an
          explanation, we find the cost appearing under this item
          to be subject to duty.

     Jurong Item 408:

          The work performed under this item involved the
          reconfiguration of the existing steam piping alignment
          to relieve pressure on certain points of the piping.
          This pressure has resulted in pipe leaking, but the
          work description and the invoice do not indicate that
          the pipes were in disrepair at the time of the dry
          docking.  We therefore determine that this work was
          required to address a problem resulting from the
          original design of the ship; this work resulted in an
          improvement to the ship that was not repair related.
          The costs appearing under this item are not subject to
          duty.

     Jurong Item 502(c): Valve Hydraulic Control System:
Hydraulic Deck Penetration:

          As stated in the invoice, the problem that needed to be
          addressed under this item was that bronze tightening
          nuts would not last in the inert gas atmosphere.
          Further, the location of these nuts made access
          difficult.  Items 502(c)(2) & (3) delineate the cost of
          installing permanent ladders and work platforms to
          permit access to these tightening bolts.  This work
          involved the installation of a new design feature, and
          the cost of the work is not subject to duty.

          Item 502(c)(4) involved the installation of stainless
          steel tightening nuts in the place of the bronze nuts.
          The replacement of these nuts does not result in a new
          design feature, but merely results in the replacement
          of parts performing an identical function.  We
          therefore find the cost of installing the stainless
          steel tightening nuts to be subject to duty.

     Jurong Item 805:  Forward Upper Deck:

          The work performed under this item included the repair
          of cracked tie brackets and deck areas.  The work
          included the installation of additional brackets and
          rider plates, which the applicant claims is not subject
          to duty.  However, because these costs are not
          segregated from the crack repairs, we find all the
          costs appearing under Jurong Item 805 to be subject to
          duty.

     Jurong Items 806 to 812:

          Under Jurong Items 806 to 812, work was performed to
          install additional supports to strengthen specified
          bulkheads (Items 806 and 807), bottom and side
          longitudinals (Items 808 and 809), longitudinal
          bulkheads (Item 810), Guillotine Valve Openings (Item
          811), and Johnson Boiler Supports (Item 812).  The
          invoice indicates that costs for crack repairs of these
          sections were included under invoice items 802, 803,
          and 211.  The costs appearing under items 806 to 812
          thus do not include repair costs.

          The Customs Service has held that where the costs of
          welding cracks and of installing support brackets to
          address the structural cause of the cracks are
          segregated, the cost of the latter work is not subject
          to vessel repair duty.  Headquarters Ruling Letter
          106199, dated August 12, 1983.  In the present case,
          the cost of the crack repairs appears under separate
          invoice item numbers.  We find the installation of
          additional supports to the bulkheads, longitudinals,
          and other parts of the ship that appear under Jurong
          Invoice items 806 to 812 represents the installation of
          a new design feature; the costs appearing under these
          items are not subject to duty.

     Under Jurong Invoice Item 808(c)(3) there appears a charge
for cleaning performed to permit the structural modifications to
the bottom longitudinals.  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).  We have concluded that the structural
operations made in item 808 are not dutiable as modifications.
The cost of the cleaning associated with this operation is
consequently not dutiable.

     The applicant seeks relief for the purchase and installation
of a copying machine and the purchase of wireless walkie-talkies.
Jurong Invoice Item 320.  The statute provides for the assessment
of duty against the cost of equipment purchased for the vessel.
19 U.S.C. 1466.  As explained above, certain equipment purchases
may be free of duty if found to be modifications to the vessel.
The first criterion set out required that the item be permanently
incorporated to the vessel.  We find no attachment here to
suggest such permanent incorporation.  Further, these items are
not likely to remain aboard ship during an extensive lay-up.  We
therefore find the costs of purchasing and installing the copying
machine and of the walkie-talkies are subject to duty.

HOLDINGS:

     (1)  We find that certain work, as detailed in our analysis
above, constitutes modifications to the vessel and is not subject
to duty under 19 U.S.C. 1466.

     (2)  The cost of cleaning performed in conjunction with non-
dutiable modifications is not subject to duty.

     (3)  The costs of purchasing and installing the copying
machine and of the walkie-talkies are subject to duty.


                              Sincerely,



                              B. James Fritz
                              Chief
                              Carrier Rulings Branch