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HQ 112911

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March 14, 1995

VES-13-18-CO:R:IT:C 112911 GOB

CATEGORY: CARRIER

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

RE: Vessel Repair Entry No. C31-0005027-8; ARCO TEXAS; 19 U.S.C. 1466; Modification;

Dear Sir:

This is in response to your memorandum dated September 27, 1993, which forwarded the application for relief submitted by Arco Marine Inc. ("applicant") with respect to the above-referenced vessel repair entry.

FACTS:

The record reflects that the ARCO TEXAS ("the vessel") arrived at the port of Valdez, Alaska on July 4, 1993 and filed the subject vessel repair entry.

You request our determination with respect to the following items:

Item No. Description

108B rudder nut
201 boilers firesides cleaning
202B preparation for ABS
302B main turbine
501 preparation for ABS
504 preparation for ABS
507 pump room light
808 c.o.w. drain
816 stripping line

Item No. Description

901 gyro compass installation
901A gyro compass stand
902 tank coating - access openings
902 environmental controls
903 pump room
904 pump room
904A bearing sensors
908 forward wing access
908 forward wing - env. controls
910 igs cooler connection
910A igs cooler piping
910B igs cooler foundation
913 towing system
913 towing system installation
913A towing system installation
915 bilge drain
916 deadweight survey misc. inv. 9 overhead charges

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.

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 evidence of record, we make the following determinations.

The costs of the following items are nondutiable because such items are modifications to the hull and fittings of the vessel: 108B, 507, 808, 816, 901, 901A, 903, 904, 904A, 910, 910A, 910B, 913 (both items listed supra), 913A, and 915.

The costs of the following items are nondutiable because the items are or they relate to nondutiable surveys or inspections: 201, 202B, 302B, and 916.

The costs of the following items are dutiable because the items are incident to dutiable repairs: 902 (both items listed supra), 908 (both items listed supra), and miscellaneous invoice no. nine.

With respect to item 501, the cost of the preparation for the ABS inspection is nondutiable.

The cost of item 504 is dutiable because that item is a maintenance item. Maintenance items are dutiable under 19 U.S.C. 1466.

HOLDING:

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

Sincerely,

Arthur P. Schifflin
Chief

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