VES-13-18-CO:R:IT:C 111653 GEV

Chief, Technical Branch
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90731

RE: Vessel Repair; Entry No. C31-0007659-6; S.S. CORNUCOPIA; Modifications; 19 U.S.C. 1466

Dear Sir:

This is in reference to your memorandum dated April 16, 1991, forwarding an application for relief from duties assessed pursuant to 19 U.S.C. 1466. You ask that we review ten (10) items listed in the application. Our findings are set forth below.


The S.S. CORNUCOPIA is a U.S.-flag vessel owned by Union Oil Company of Los Angeles, California. The subject vessel had shipyard work performed on her in Yokohama, Japan, during the period of November 11 - December 2, 1990. Subsequent to the completion of this work the vessel arrived in the United States at Kenai, Alaska, on December 13, 1990. A vessel repair entry was filed on the date of arrival.

Pursuant to an authorized extension of time, an application for relief, dated March 11, 1991, received by the San Francisco Vessel Repair Liquidation Unit on March 12, 1991, was timely filed. The applicant contends that the work items in question are non-dutiable modifications rather than dutiable repairs.


Whether evidence is presented sufficient to prove that the foreign work performed on the subject vessel for which the applicant seeks relief constitutes modifications or costs that are otherwise nondutiable under 19 U.S.C. 1466.

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Title 19, United States Code, section 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 trades.

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.

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"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 regard to the items specified for our review, we note that the following constitute non-dutiable modifications:

Item 16 - Fairleader Modification

Item 17 - New Safety Grab-Rail for Compressor House

Item 18 - New Safety Grab-Rail for Bridge Wings

Item 27 - Nitrogen Tank Service Platform extension

Item 44 - Fire Main Drain Modification

Item 54 - Lower Main L.O. Cooler New Temp. Regulating Valve Installation

Item 3 covers the cost of obtaining a gas free certificate. Pursuant to C.I.E.'s 1188/60 and 429/61, Customs has held the cost of obtaining a gas free certificate is an ordinary and necessary expense of obtaining repairs. Accordingly, such costs are apportioned with duty assessed on the portion attributable to repairs determined to be dutiable.

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We note that the applicant claims the gas free certificate in Item 3 discussed above was necessitated by the work done in Item 11 described on the invoice as a "Main Deck Reinforcement" and claimed to be a non-dutiable modification. Upon reviewing the shipyard invoices, however, including Item 11A on the invoice described as "Main Deck Repair" which references the same drawings as does Item 11, it is apparent that the work claimed to be a modification under Item 11 is done in conjunction with dutiable repairs and therefore is dutiable.

Item 39 covers the installation of a lifeboat access platform. The record is insufficient to enable Customs to render a determination that this item constitutes a modification. Accordingly, in the absence of evidence to the contrary Item 39 is dutiable.

Item 40 covers work entitled, "Port & Starboard Accommodation Ladder Radial Arm Modification." Upon reviewing the invoice, it is apparent that this work constitutes dutiable repairs/maintenance rather than a non-dutiable modification. Accordingly, the work done under Item is dutiable.


With the exception of those items noted above, the evidence presented is insufficient to prove that the foreign work performed on the subject vessel for which the applicant seeks relief constitutes modifications or costs that are otherwise non- dutiable under 19 U.S.C. 1466.


B. James Fritz
Carrier Rulings Branch