The boat can be fashioned in wood (7)
I believe the answer is:
pinnace
'the boat' is the definition.
(historical type of small boat)
'can be fashioned in wood' is the wordplay.
'be fashioned' indicates an anagram.
'in' is an insertion indicator.
'wood' becomes 'pine' (pine is a kind of wood).
'can' is an anagram of 'nac'.
'nac' put within 'pine' is 'PINNACE'.
(Other definitions for pinnace that I've seen before include "Small boat" , "Vessel" , "Ship's boat - nice nap (anag)" , "tender" .)