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HQ 227073

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March 18, 1998

VES-13-18-RR:IT:EC 227073 CC

CATEGORY: CARRIER

Chief, Liquidation Branch
U.S. Customs
P.O. Box 2450
San Francisco, CA 94126

RE: Vessel Repair Entry No. 110-6461840-5; SEA-LAND TRADER; V-90; 19 U.S.C. ? 1466; Modifications; Application for Relief

Dear Sir:

This is in response to your memorandum dated June 18, 1996, which forwarded the application for relief submitted by Sea-Land Service, Inc. (applicant), with respect to the above-referenced vessel repair entry.

FACTS:

The SEA-LAND TRADER is a U.S.-flag vessel operated by Sea-Land Service, Inc. (Sea-Land). Subsequent to completion of foreign shipyard work, the vessel arrived at the port of Tacoma, Washington, on January 12, 1996. A vessel repair entry was filed on January 22, 1996.

Pursuant to an authorized extension of time, an application for relief with supporting documentation was timely filed. You have asked for our determination with respect to the following items:

Item No. Description

3.2-2 Rudder Pintle Bushing to Thordon
3.2-7 Stern Tube Seal
3.2-8 Main Reduction Gear Box End Covers
8.1-1 Centerline Transverse
Hatch Coaming Brackets
8.1-3 Transverse Coaming Stiffeners
8.1-5 Container Entry Guides Hatch #4
8.1-12 Hatch Cover Guides
8.1-13 Hatch Cover Bearing Pads
8.1-21 Drain Well
8.1-22 Manhole Cover Access
4001 Accommodation Ladder Turn table
4007 Main Circulating Suction Valve
4008 Chlorpac Dispersal Tube Bracketing
4018 Overboard Piping and Insert Plate in E/R Port Side
4047 Bow Thruster Tunnel's Plate Covers

ISSUE:

Whether evidence is presented sufficient to prove that the work covered by the subject items constitutes modifications to the hull and fittings of the vessel so as to render the work nondutiable under 19 U.S.C. ? 1466.

LAW AND ANALYSIS:

Title 19, United States Code, ? 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 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. 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 that 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, 18 C.C.P.A. 137 (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 often be welded or otherwise "permanently attached" to the ship because ships are subject to constant pitching and rolling. In addition, some items, the cost of which are clearly dutiable, operate with other vessel components, resulting in the need, possibly for that purpose alone, for a fixed and stable attachment to those vessel parts. It follows that a "permanent attachment" may take 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.

Our determinations on the subject items are as follows:

3.2-2. Rudder Pintle Bushing to Thordon. The applicant states that the ruddle pintle bushing was modified with a specially designed polymer, Thordon material. The ABS survey states that the housing for the rudder lower pintle bush was found wasted and was re-bored and fitted with a new bushing. Consequently, we find that this item was a repair, and, therefore, the costs are dutiable.

3.2-7. Stern Tube Seal. The applicant states that this work was done to "enhance the running time of the vessel without having problems of the stern tube seals leaking and causing environmental damage to the environment." The ABS survey states that the "complete aft seal assembly (outboard) was replaced using a KOBELCO type simplex seal under supervision of maker's representative." An invoice shows that before the stern tube seals were converted they were inspected and found to be in good condition. Thus, we find the work was done to convert the seals to make them more efficient and not to repair an item not in good working order. Therefore, this item is not dutiable.

3.2-8. Main Reduction Gear Box End Covers. The applicant states that the existing covers were removed and larger covers were installed in order that ABS requirement to inspect these areas at regular intervals could be met. The applicant has provided no evidence that this work was done incident to a nondutiable ABS survey; consequently, this item is dutiable.

8.1-1. Centerline Transverse Hatch Coaming Brackets. The applicant states that this work was done to prevent future cracking. Some of this work consists of renewing existing coaming brackets. Consequently, this item is a dutiable repair.

8.1-3. Transverse Coaming Stiffeners. The applicant states that this work was done to prevent future cracking. Some of this work relates to renewing existing coaming stiffeners; therefore, this item is a dutiable repair.

8.1-5. Container Entry Guides Hatch #4. The applicant states that this work was done to increase the productivity of the longshoremen in loading the vessel. This item is a modification and is nondutiable.

8.1-12. Hatch Cover Guides. The applicant states that 6 new hatch cover guides were installed on top of existing guides which were too short to help in lowering the hatch covers back into position. This work is a modification and is nondutiable.

8.1-13. Hatch Cover Bearing Pads. The applicant states that the existing bearing pads were not holding up. Thus, according to the applicant, certain coaming pads were completely renewed and new coaming pads were installed. Some of this work relates to the repair of existing articles. Therefore, this item is dutiable.

8.1-21. Drain Well. The applicant states that the cargo holds, originally designed as large refrigerated spaces and completely insulated with thick foam, have been converted to normal container cargo holds. The foam was removed to allow water to drain properly to the bilge well. This work is a modification and is nondutiable.

8.1-22. Manhole Cover Access. The applicant states that manhole covers were modified by removing sections of the coaming dam to allow water to drain correctly. This work is a modification and is nondutiable.

4001. Accommodation Ladder Turn Table. The applicant states that the accommodation ladder turn tables were modified from hydraulically actuated to manually operated by removing all hydraulics and electrical equipment. This was done to prevent oil spills and environmental damage. This work is a modification and is nondutiable.

4007. Main Circulating Suction Valve. The applicant states that the main circulator suction valve was required to be removed by the USCG for inspection and survey. We find no evidence that shows this work was done incident to a required survey, and, therefore, this item is dutiable.

4008. Chlorpac Dispersal Tube Bracketing. The applicant states that the piping bracket broke and was corrected with new modified bushing and material. This work constitutes a repair and is therefore dutiable.

4018. Overboard Piping and Insert Plate in E/R Port Side. The applicant states that the piping was removed as a result of the survey showing a possible safety hazard. This item consists of a repair the result of the survey. Consequently, this item is a repair that is dutiable.

4047. Bow Thruster Tunnel's Plate Covers. The applicant states that one of the plates was modified by installing a small 2-inch threaded plug to facilitate inspections. This item is a nondutiable modification.

HOLDING:

The subject items are dutiable in part and nondutiable in part as detailed in the Law and Analysis portion of this ruling.

Sincerely,

Jerry Laderberg
Chief
Entry Procedures and Carriers

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