HQ 111791: Vessel Repair; EXXON PHILADELPHIA; Modification; Generator Upgrade; 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 111791

                          July 25, 1991

VES-13-18-CO:R:IT:C 111791 GEV

CATEGORY:  Carriers

Russell W. MacKechnie, Jr., Esq.
Donohue and Donohue
26 Broadway
New York, New York 10004

RE:  Vessel Repair; EXXON PHILADELPHIA; Modification; Generator
     Upgrade; 19 U.S.C. 1466

Dear Mr. MacKechnie:

     This is in response to your memorandum dated July 3, 1991,
on behalf of your client, Exxon Shipping Company of Houston,
Texas, requesting a ruling on the dutiability of certain foreign
shipyard work performed on the EXXON PHILADELPHIA.  Our ruling on
this matter is set forth below.

FACTS:

     The EXXON PHILADELPHIA is a U.S.-flag vessel owned and
operated by Exxon Shipping Company ("Exxon") of Houston, Texas.
On May 21, 1991, the subject vessel departed from the United
States en route to Singapore where she was scheduled to undergo
biennial repairs at Keppel Shipyard.  The vessel arrived in
Singapore on June 9.  She was scheduled to depart from Singapore
on July 15 and arrive at Valdez, Alaska, on or about August 1,
1991.

     The focus of Exxon's ruling request is not the biennial
repair work to be performed in Singapore (which will be addressed
in a forthcoming application for relief filed pursuant to 19 CFR
4.14) but rather the "Generator Upgrade Project" which will
expand the power and capabilities of the vessel's auxiliary/
emergency generator system.  The project consists of removing the
existing 30 kw emergency diesel generator from the vessel,
relocating the existing 500 kw auxiliary diesel generator from
the engine room to a new Emergency Generator House to be located
on the Boat Deck and in which the 500 kw unit will now serve as
the new emergency generator, and installing a more powerful 850
kw auxiliary diesel generator in the engine room to replace the
500 kw unit.  This project includes the following:

                              - 2 -

     1.  Removal or relocation of interferences on the
         Boat Deck in the way of the new Emergency
         Generator House.

     2.  Removal of the 30 kw emergency diesel generator
         and associated ancillary equipment.

     3.  Fabrication and installation of a new Emergency
         Generator House with support systems on the
         Boat Deck.

     4.  Relocation of the 500 kw diesel generator to the
         new Emergency Generator House to serve as the
         emergency diesel generator.

     5.  Relocation of modified existing auxiliary switch-
         board to serve as the emergency switchboard.

     6.  Removal or relocation of interferences, structures,
         and equipment currently located in the auxiliary
         generator space in the engine room as required to
         provide for the 850 kw diesel generator and
         ancillary equipment.

     7.  Installation of an 850 kw diesel generator,
         foundation, and ancillary equipment and systems
         in the engine room to serve as the auxiliary
         diesel generator.

     8.  Installation of a new Sea Water Service to serve
         the 850 kw auxiliary diesel generator.

     9.  Relocation of existing alarm and monitoring devices
         from the old 500 kw generator to the 850 kw
         auxiliary diesel generator.

     10.  Reconnection of new alarm and monitoring system to
          serve the 500 kw emergency diesel generator.

     11.  Reconnection of the existing radiator and piping
          to serve the 500 kw emergency diesel generator in
          its new location.

     12.  Modification of the existing ventilation system
          serving the engine room to supply the auxiliary
          generator space to be occupied by the 850 kw unit.

     13.  Modification of the antenna installation in the
          way of the new Emergency Generator House.

                              - 3 -

     Counsel states that the components of this project are
permanently welded to the vessel by means of deck foundations and
supports.  They are not to be removed from the vessel should she
be laid up for a long period.  Furthermore, the current auxiliary
and emergency diesel generators are operational and are not in
need of repair.  Rather, the installation of the 850 kw diesel
generator serves to provide the subject vessel with new and
expanded capabilities and features.  The current 500 kw unit can
provide only 50% of the power and 75% of the sea speed that the
1000 kw main turbo-generator furnishes to the vessel.  The 850 kw
generator will provide 85% of the power and permit the vessel to
operate at full propulsion power (sea speed).  In addition, the
installation of the new, more powerful unit simplifies power
distribution in the vessel, because overload safeguards,
currently necessary on the 500 kw unit's switchboard, can be
eliminated.

     It is further stated that replacing the current 30 kw
emergency diesel generator with the 500 kw unit that formerly
served as the auxiliary generator will vastly increase the
capabilities of the emergency power generation system.  The 30 kw
unit can now provide only for navigation lights, interior
communications, the auxiliary generator starting compressor,
emergency lights, radios, and some navigation instruments.  By
replacing the 30 kw unit with the 500 kw generator, emergency
power can be provided for all the foregoing functions with the
following significant additions:  all navigation instruments,
engine room automation, emergency fire pump, steering gear,
emergency diesel fan, foam proportioning pump, lube oil pump,
elevator, starting air compressor, bilge pump, and radars.

     The above work items are detailed in technical
specifications provided by Exxon and appended to the ruling
request as Exhibit A.

ISSUE:

     Whether the foreign work performed on the subject vessel for
which relief is sought constitutes a modification/alteration/
addition so as to render the work nondutiable 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 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.

                              - 4 -

     In its application of the vessel repair statute, Customs has
held that modifications/alterations/additions 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.

2.  Whether in all likelihood, an item under consideration would
remain aboard a vessel during an extended layup.

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

     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.  Admiral Oriental,
          supra., (quoting T.D. 34150, (1914))

     In regard to the "Generator Upgrade Project" under
consideration, upon reviewing the documentation submitted it is
apparent that this work was not a repair but rather was done for
the purpose of permanently enhancing the vessel's auxiliary/
emergency generator system.  It appears to be akin to a "re-
engining" of a vessel with more fuel efficient engines, a
procedure we have previously found to be nondutiable (see ruling
104358 dated December 12, 1979).  Accordingly, the "Generator
Upgrade Project" constitutes a nondutiable modification/
alteration/addition to the EXXON PHILADELPHIA.

HOLDING:

     The foreign work for which relief is sought constitutes a
modification/alteration/addition so as to render it nondutiable
under 19 U.S.C. 1466.
                              - 5 -

     It is noted, however, that this ruling is merely advisory
and does not eliminate the requirement to declare work done
abroad at the subject vessel's first United States port of
arrival, nor does it eliminate the requirement of filing the
entry showing this work (see sections 4.14(b)(1)(2), Customs
Regulations (19 CFR 4.14(b)(1)(2)).  Furthermore, any final
ruling on this matter is contingent on Customs review of the
evidence submitted pursuant to section 4.14(d)(1), Customs
Regulations (19 CFR 4.14(d)(1))).

                              Sincerely,




                              B. James Fritz
                              Chief
                              Carrier Rulings Branch