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HQ 113076

March 15, 1995

VES-13-18-CO:R:IT:C 113076 GEV


Deputy Assistant Regional Commissioner
Commercial Operations
ATTN: Regional Vessel Repair Liquidation Unit New York, New York 10048-0945

RE: Vessel Repair Entry No. C46-0016906-3; M/V NOSAC RANGER; V-094; Modification; 19 U.S.C. ? 1466

Dear Sir:

This is in response to a memorandum from the Chief, Residual Liquidation and Protest Branch, dated March 25, 1994, forwarding for our review an application for relief. Our findings on this matter are set forth below.


The M/V NOSAC RANGER is a U.S.-flag vessel operated by Pacific-Gulf Marine, Inc. The subject vessel had foreign shipyard work performed on her at Schiedam, The Netherlands, in July of 1993. Subsequent to the completion of the work, the vessel arrived in the United States at the port of Newark, New Jersey, on August 6, 1993. A vessel repair entry was filed on August 10, 1993.

Pursuant to an authorized extension of time, an application for relief with supporting documentation was filed on November 8, 1993. The applicant has requested relief for a myriad of work items. In particular, it is claimed that work involving a hydropneumatic tank and hot water heater described on Wilton-Fijenoord Invoice No. 7189/30562, Item 903 (p. 53) constitutes a non-dutiable modification. Related documentation regarding this particular item consists of the following: Pacific-Gulf Marine, Inc. letterhead, M/V NOSAC RANGER '93, Item 903 (pp. 86-88), Canal Boiler Works, Invoice no. 2478 and Duncan Technologies Group, Inc., Invoice no. 003138.

In addition to the above, our review of the following items is requested: Wilton Fijenoord Invoice no. 7189/30562, Item 104.5 (transportation costs); Wilton Fijenoord Invoice no. 7189/30477, Item 184 (paint remnants); and Kraerner Invoice No. 930347.


Whether the foreign costs for which the applicant seeks relief is dutiable pursuant to 19 U.S.C. ? 1466.


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 reviewing the record in its entirety with regard to Item 903 of Wilton-Fijenoord Invoice no. 7189/30562, it is readily apparent that the work described therein constitutes a non-dutiable modification. Accordingly, Item 903 as well as those costs on the related documentation discussed above are non-dutiable.

With respect to the other items for which our review is requested (Invoice no. 7189/ 30562, Item 104.5 - transportation costs; Invoice no. 7189/30477, Item 184 - paint remnants; and Kvaerner Invoice no. 930347 for Lloyd's certificate), Customs has held transportation costs to be non-dutiable. As for the paint remnants, the actual charge in question was for "disposing of paint remnants." This cost is akin to post-repair cleaning which was held dutiable by the U.S. Court of Appeals for the Federal Circuit in Texaco Marine Services, Inc. and Texaco Refining and Marketing, Inc. v. United States, Docket No. 93-1354, decided December 29, 1994 (affirming the decision of the U.S. Court of International Trade at 815 F.Supp. 1484 (1993)). In regard to Kvaerner Invoice no. 930347 for Lloyd's certificate, we are in accord with your opinion that it is dutiable.

Parenthetically, we note that the court in Texaco Marine also held protective covers dutiable (see Item 102.31 of Wilton-Fijenoord Invoice no. 7189/30562).


The foreign costs for which that applicant seeks relief are dutiable pursuant to 19 U.S.C. ? 1466 as discussed in the Law and Analysis portion of this ruling.


Arthur P. Schifflin

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