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HQ 112893

March 14, 1995

VES-13-18 CO:R:IT:C 112893 GOB


Chief, Residual Liquidation and Protest Branch New York Region
Six World Trade Center
New York, New York 10048-0945

RE: Vessel Repair; 19 U.S.C. 1466; M.V. GALVESTON BAY, V-039; Entry No. 559- 1237244-2; Application; Modification; Repairs; Cleaning; Inspection and Testing

Dear Sir:

This is in response to your memorandum dated September 17, 1993, which forwarded the application for relief submitted by Sea-Land Service, Inc. ("applicant") with respect to the above-referenced entry.


The M.V. GALVESTON BAY (the "vessel") is a U.S.-flag vessel owned and operated by the applicant. On September 10, 1991, it arrived at the port of Boston, Massachusetts. A vessel repair entry was filed on September 12, 1991.

Your memorandum references WB Arnold Co. Inc. ("Arnold") invoice no. 21196 dated November 5, 1991 and the following items on Wilton Fijenoord ("WF") b.v. invoice no. 6956/10818 dated September 6, 1991: 20b, 20d, 34a, 34f, 35a, 35f, 36a, 36f, 37a, 37f, 38a, 38f, 39a, 39f, 49b, 85, 96a, and 96f.


Whether the items at issue are repairs which are subject to duty under 19 U.S.C. 1466.


19 U.S.C. 1466 provides for the payment of duty at a rate 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 be employed 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. The identification of work constituting modifications vis-a-vis work constituting repairs has evolved from judicial and administrative precedent. In considering whether an operation has resulted in a nondutiable modification, the following factors have been considered:

1. Whether there is a permanent incorporation into the hull or superstructure of a vessel, either in a structural sense or as demonstrated by means of attachment. See United States v. Admiral Oriental Line, 18 C.C.P.A. 137 (1930). However, we note that a permanent incorporation or attachment does not necessarily involve a modification; it may involve a dutiable repair.

2. Whether in all likelihood an item would remain aboard a vessel during an extended lay-up.

3. Whether an item 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 provides an improvement or enhancement in operation or efficiency of the vessel.

In Ruling 110993 dated May 2, 1990, which was merely advisory in nature, certain of the work at issue here was considered. That ruling pertained to twelve of the applicant's vessels, including the subject vessel. The shipyard work was described Ruling 110993 as follows:

Upgrade the existing 7 Bar service compressor to a 30 Bar topping-up air compressor...

Install an additional topping-up air compressor as a back-up to the upgraded service compressor.

Install an automated control system interfacing the main air compressor and the new topping-up air compressor.

Ruling 110993 stated:

The proposed shipyard work described herein would constitute modifications to the hull and fittings so as to render the work nondutiable under 19 U.S.C. 1466.

It is noted, however, that this ruling is merely advisory in nature and does not eliminate the requirement to declare work done abroad...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

After a consideration of the evidence of record in this case, we make the following findings.

The costs associated with Arnold invoice no. 21196, described in part as "Charges for Hamworthy Engineer to uprate 2TM6 Compressor" are nondutiable because they relate to a modification.

The costs of all other items referenced on page one of this ruling are dutiable.

The following items on WF invoice no. 6956/10818 are dutiable as inspection/testing items relating to repairs: 20b, 34f, 35f, 36f, 37f, 38f, 39f, 49b, and 96f.

The following items on WF invoice no. 6956/10818 are dutiable as cleaning items relating to repairs: 34a, 35a, 36a, 37a, 38a, 39a, and 96a. Item 34a involves post-repair cleaning. Such work was found to be dutiable in Texaco Marine Services, Inc. and Texaco Refining and Marketing, Inc. v. United States, 815 F. Supp. 1484 (U.S. Court of International Trade 1993), affirmed by the Court of Appeals for the Federal Circuit in Case No. 93-1354, decided December 29, 1994.

Item 20d on WF invoice no. 6956/10818, which is described as "rain and seal protection", is dutiable as an item incident to repair.

Item 85 on WF invoice no 6956/10818, which is described on the invoice as "Ship's Service air compressor modification (Make: Hamworthy)" is dutiable because the invoice includes certain repair items which are not itemized separately from modification work. Accordingly, the entire item is dutiable. In this regard, we cite Ruling 112731 dated July 8, 1993, which stated in pertinent part:

While the applicant contends that this item represents a modification, the Customs Service finds that this item contains, in part, repair operations as evidenced in the invoice description indicating that various items were being - 4 -
renewed or overhauled. Customs has consistently held that where the charges for dutiable and non-dutiable items are not segregated within an invoice item, all of the charges in that invoice item must be deemed dutiable.


As detailed supra, the application is granted in part and denied in part.


Arthur P. Schifflin

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