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HQ 114183





December 18, 1997

VES-13-18-RR:IT:EC 114183 GOB

CATEGORY: CARRIER

Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 415 P.O. Box 2450
San Francisco, CA 94126

RE: Vessel Repair Entry No. C31-0005034-4; ARCO ALASKA, V-344; 19 U.S.C. 1466; Application

Dear Madam:

This is in response to your memorandum of November 13, 1997, which forwarded the application for relief submitted on behalf of ARCO Marine, Inc. ("applicant") with respect to the above-referenced vessel repair entry.

FACTS:

The evidence of record indicates the following. The ARCO ALASKA (the "vessel"), a U.S.-flag vessel owned and operated by the applicant, arrived at the port of Valdez, Alaska on June 25, 1997. The subject vessel repair entry was subsequently filed. The vessel underwent certain foreign shipyard work in Ulsan, Korea.

ISSUE:

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

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 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. These factors are not by themselves necessarily determinative, nor are they the only factors which may be relevant in a given case. However, in a given case, these factors may be illustrative, illuminating, or relevant with respect to the issue of whether certain work may be a modification of a vessel which is nondutiable under 19 U.S.C. 1466:

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 or dutiable equipment.

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.

You request our review with respect to numerous items. The item numbers listed below are taken from the lefthand column (marked "CF 226 No.") on the spreadsheets.

Item 57. The invoice terms this item "Butterworth Steam Return System Modification." We find that this item is dutiable vessel equipment because it is more akin to equipment of the vessel than to the hull of the vessel.

Item 58. The applicant states that this item is a "USCG Required Test." However, that is not reflected on the invoice, which merely states "foam content testing." We find that this item is dutiable.

Item 66. The applicant refers to this item as "Assistance to accomplish ABS Survey of Hull." However, the invoice, which indicates ultrasonic gauging, does not reflect an ABS survey. We find that this item is dutiable.

Item 67. The applicant states that the subject "agency fees" were "incurred in order for the vessel to drydock for required ABS and USCG surveys and inspections." The invoice does not reflect that these fees were incurred for ABS and USCG surveys and inspections. It reflects typical general services and/or drydock costs. These costs are to be prorated between dutiable and nondutiable costs.

Item 67a. The invoice reflects that this cost was incurred for slop and sludge disposal. This cost is to be prorated, as we ruled in Ruling 113798 dated January 9, 1997.

Item 100-20 105. We find that the staging, lighting, and ventilation for the ABS Special Survey are nondutiable as items incident to a nondutiable survey.

Item 100-21. We find that the removal of pipes and valves for an ABS Special Survey are nondutiable as items incident to a nondutiable survey.

Item 100-24. We find that the inspection preparation cost is dutiable because it includes grit blasting and spotting of "repaired areas..."

Item 100-38. We find that the full tailshaft inspection is dutiable because it appears to include a repair, i.e., the removal of "any surface cracks in tailshaft taper with pencil grinding."

Item 100-40. We find that the spurs line cutter installation is a nondutiable modification.

Item 100-45. We find that the valves modification (all three itemized costs) is a nondutiable modification.

Item 100-54. We find that the IGS sealing water pump suction modification is a nondutiable modification.

Item 200-1. We find that the port and starboard boiler fire side cleaning and refractory work is nondutiable as incident to an ABS boiler survey and a U.S. Coast Guard biennial boiler inspection.

Item 200-5. We find that the regasketing cost is nondutiable as incident to an ABS boiler survey and a U.S. Coast Guard biennial boiler inspection.

Item 200-16 206.3. We find that the extension of the existing foundations is a nondutiable modification.

Item 200-25 211.B. We find that the uptake modification with respect to the boiler uptake expansion joints is a nondutiable modification.

Item 300-28 314. We find that the installation of a new, permanent catwalk is a nondutiable modification.

Item 300-29 314.1. We find that the relocation of drain lines in the way of the new catwalk is a nondutiable modification.

Item 300-68 337. We find that the installation of two isolation valves and one bypass line is a nondutiable modification.

Item 500-15 507. We find that the installation of "cable chaffing cover around the signal cables at cable tray penetrations..." is dutiable equipment pursuant to 19 U.S.C. 1466.

Item 600-8 605. We find that the toilet and shower decks modification is a nondutiable modification.

Item 700-17 (709). The invoice reflects a modification of pump room casing. We find that this is a nondutiable modification.

Item 700-18 (710). The invoice reflects a "Fwd storeroom CVK modification" including the installation of pipe columns, replacement of CVK web plate and replacement of under deck stiffeners. We find that this item is a dutiable repair based on the "replacement" of certain items.

Item 700-19 (710-1). The invoice provides: "Fwd store room CVK modification ... Installed two (2) triangle brackets... We find that this is a nondutiable modification.

Item 700-20 (710-2). The invoice provides, in pertinent part: "Fwd store room CVK modification ... Replace one (1) designated under deck long.'s located from frame 16-19 port side approx. 5/8" x 24" x 12 ft with 2" flange (bend 90 degree)." We find that this is a dutiable repair based on the replacement of the under deck longitudinal.

Item 700-22 (710.3). The invoice provides, in pertinent part: "Fwd store room CVK modification ... replace the CVK web flange..." We find that this is a dutiable repair based on the replacement of the CVK web flange.

Item 700-24 (712). The invoice provides, in pertinent part: "Double bottom trunks modification (5) ... Installed and welded to each port double bottom trunk..." We find that this item is a nondutiable modification.

Item 800-15 804 (cleaning). The job description provides: "Cargo Pump Relief Valves, Check Valves, Piping Repairs." We find that this item is a dutiable repair.

Item 800-18 806. The invoice provides: "Eductor discharge ... Clean, Crop out, renew and weld..." We find that this item is a dutiable repair.

Item 800-32 809. The invoice provides, in part: "#2 Cargo Pump Suction Strainer Modification." The applicant states: "The work involved the installation of a large heavy beam and supports to increase the strength of the supports that secure the strainer." We find that this item is a nondutiable modification.

HOLDING:

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

Sincerely,

Jerry Laderberg
Chief,
Entry Procedures and Carriers

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