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HQ 110856

December 3, 1990

VES-13-18 CO:R:P:C 110856 BEW

CATEGORY: CARRIER

Chief, Technical Assistant
Pacific Region
U. S. Customs Service
Los Angeles, California 90831

RE: Los Angeles Vessel Repair Entry No. C27-0075223-4 dated June 2, 1989; M/V PRESIDENT EISENHOWER, Voyage No. 046. Application; modifications; 19 U.S.C. 1466; 19 CFR 4.14

Dear Sir:

This is in reference to a memorandum from your office which transmitted an application for relief from duties filed by American President Lines, relating to vessel repair entry No. C27-0075223-4 concerning foreign repairs performed on the M/V PRESIDENT EISENHOWER, voyage 046.

FACTS:

The record shows that the shipyard work in question was performed on the subject vessel in Yokohama, Japan, during the months of April and May 1989. The subject vessel arrived in the United States at the port of San Pedro, California, on May 29, 1989.

The entire vessel repair entry involves a potential duty of $152,313.50.

The applicant claims that relief for the subject items should be granted because the items should be classified as nondutiable items covered under title 19, United States Code, section 1466 and section 4.14 of the Customs Regulations.

You have requested our advice concerning the following repairs which relate to modifications/alterations/additions.

Item #552 - Sludge Tank Heating Coils,

Item #553 - Drain Line Re-routing,

Item #562 - Condensate Return Header, and

Item #567 - Gangway Modification.

The applicant claims that all of the above items are modifications/alterations/additions to the hull and fittings of the vessel.

ISSUES:

Whether certain work performed in a foreign country constitutes modifications/alterations/additions to the hull and fittings rather than equipment purchases or repairs within the meaning of 19 U.S.C. 1466?

LAW AND ANALYSIS:

Title 19, United States Code, section 1466, provides in part for payment of an ad valorem duty of 50 percent of the cost of foreign repairs to vessels documented under the laws of the United States to engage in the foreign or coastwise trade.

In its application of the vessel repair statute (19 U.S.C. 1466), Customs has consistently held that modifications/altera- tions/additions to the hull and fittings of a vessel which allow the vessel to operate more efficiently are not subject to vessel repair duties. Alterations to the hull and fittings of vessels are not within the purview of section 1466, and the cost of the work is not subject to duty. An article must be permanently attached to the vessel and it most be essential to the successful operation of the vessel (see Otte v. United States, 7 C.C.P.A. 166 (1916), and United States v. Richard & Co., 8 Ct. Cust. App. 231, T. D. 37496 (1917). To be found non-dutiable as a modification/alteration/addition, the work must involve no element of repair due to damages, deterioration or wear and tear. If those are present, the work will be considered a repair and dutiable. After reviewing the record and China Shipbuilding Corporation Kaohsiung Shipyard Invoice IK-78-032, dated June 14, 1989, we consider the work done under the following items to be in the nature of non-dutiable modifications/alterations/additions to the hull and fittings rather than dutiable repairs to the vessel due to damage or deterioration:

Item #552 - Sludge Tank Heating Coils,

Item #553 - Drain Line Re-routing,

Item #562 - Condensate Return Header, and

Item #567 - Gangway Modification.

HOLDINGS:

1. The installation of Items Nos. 552, 553 562 and 567 constitutes modifications/ alterations/additions to the hull and fittings rather than repairs. As such, the cost of this work in not dutiable under 19 U.S.C. 1466.

Sincerely,

B. James Fritz

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