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HQ 112377

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March 14, 1995

VES-13-18-CO:R:IT:C 112377 GOB

CATEGORY: CARRIER

Deputy Regional Director
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90831-0700

RE: Vessel Repair Entry No. C31-0005021-1; 19 U.S.C. 1466; EXXON NEW ORLEANS, V-9; Modification

Dear Sir:

This is in response to your memorandum dated June 30, 1992, which forwarded the application for relief submitted on behalf of Exxon Shipping Company ("applicant") with respect to the above-referenced vessel repair entry.

FACTS:

The record reflects that the EXXON NEW ORLEANS ("the vessel") arrived at the port of Valdez, Alaska on October 12, 1991 and filed the subject vessel repair entry on October 15, 1991.

You request our determination with respect to the following items:

Item No. Description
253 new gangway installation
317 accommodation modification
321 emergency towing package
A6 crew's expenses - Esso Singapore
B6 crew's expenses/ship provisions - Esso Singapore X5 ABS surveys, tank repairs

ISSUE:

Whether the subject items are dutiable pursuant to 19 U.S.C. 1466.

LAW AND ANALYSIS:

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.

Modification Issue

The applicant claims that the costs of item nos. 253, 317, and 321 are nondutiable because such items are modifications to the hull and fittings of the vessel.

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 so as to be indicative of a permanent incorporation. 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.

After a consideration of the record, we find that the costs of item nos. 253, 317, and 321 are nondutiable because those items are nondutiable modifications.

Other Items

With respect to item nos. A6 and B6, we find that the crew's expenses and the ship's provisions are nondutiable. The repair/spare parts and other charges are dutiable, as is indicated on the applicant's worksheet.

With respect to item X5, we find that the surveys, the loadline renewal, and the travel and living expenses are nondutiable. The tank repairs are dutiable; repairs are not within the scope of duty-free treatment accorded to certain surveys or inspections which are periodic and required by a government entity or a classification society.

HOLDING:

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

Sincerely,

Arthur P. Schifflin
Chief

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