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HQ 112782

March 15, 1995

VES-13-18-CO:R:IT:C 112782 GEV


Deputy Regional Commissioner
Commercial Operations
Pacific Region
1 World Trade Center
Long Beach, California 90831

RE: Vessel Repair Entry No. 110-0104408-7; SEA-LAND TRADER; V-55; 19 U.S.C. ? 1466; Modifications

Dear Sir:

This is in response to your memorandum of June 15, 1993, forwarding an application for relief from duties assessed pursuant to 19 U.S.C. ? 1466. You have requested our advice regarding several items contained within the above-cited vessel repair entry. Our opinion on these items is set forth below.


The SEA-LAND TRADER is a U.S.-flag vessel operated by Sea-Land Service, Inc. The subject vessel had foreign shipyard work performed during December of 1992 through January of 1993. Subsequent to the completion of the work the vessel arrived in the United States at the port of Tacoma, Washington on January 16, 1993. A vessel repair entry was filed on January 25, 1993.

Pursuant to an authorized extension of time, an application for relief with supporting documentation was timely filed. In support of its claims for relief, the applicant has submitted shipyard invoices, drawings and specifications.


Whether the foreign costs for which the applicant seeks relief are dutiable under 19 U.S.C.


Title 19, United States Code, ? 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.

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

Very often when considering whether an addition to the hull and fittings took place for the purpose of 19 U.S.C. ? 1466, we have considered the question from the standpoint of whether the work involved the purchase of "equipment" for the vessel. It is not possible to compile a complete list of items that might be aboard a ship that constitute its "equipment". An unavoidable problem in that regard stems from the fact that vessels differ as to their services. What is required equipment on a large passenger vessel might not be required on a fish processing vessel or offshore rig.

"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))

By defining what articles are considered to be equipment, the Court attempted to formulate criteria to distinguish non- dutiable items which are part of the hull and fittings of a vessel from dutiable equipment, as defined above. These items might be considered to include:

...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... Admiral Oriental, supra., (quoting 27 Op. Atty. Gen. 228).

A more contemporary working definition might be that which is used under certain circumstances by the Coast Guard; it includes a system, accessory, component or appurtenance of a vessel. This would include navigational, radio, safety and, ordinarily, propulsion machinery.

In regard to the items for which our review is requested, we find that the record supports the applicant's claim that the work referenced on the worksheets and detailed under Items 3.1-14 (China Shipbuilding Corporation - Rudder Modification) and 3,6 and 3,7 (ABS - Structural Modification for Raised Bridge), as well as those costs for "modifying lashing" done by China Shipbuilding Corporation and referenced on p. 6 of the worksheets constitute non-dutiable modifications and/or costs associated therewith. Although the record contains a Ta Kao Jung Electrical & Co., Ltd. inspection report that appears to be related to the aforementioned raised bridge modification, the record contains no invoice covering this work. Accordingly, this item is dutiable.

Item 3.1-27 (Double-Bottom Tank Cleaning) covers costs incurred pursuant to a required U.S. Coast Guard inspection. In view of the fact that these costs do not appear to have been incurred pursuant to dutiable repairs, they are non-dutiable.

Item 3.2-9 (Obsolete Reefer Hold Insulation Removal) covers costs associated with work that does not constitute dutiable repairs. Accordingly, these costs are non-dutiable.


The foreign costs for which the applicant seeks relief are dutiable in part and non-dutiable in part as discussed in the Law and Analysis portion of this ruling.


Arthur P. Schifflin

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