United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 2000 HQ Rulings > HQ 115073 - HQ 228254 > HQ 115116

Previous Ruling Next Ruling
HQ 115116




August 14, 2000

VES-13-18-RR:IT:EC 115116 GEV

CATEGORY: CARRIER

Kevin C. O’Rourke
Senior Vice President and General Counsel Matson Navigation Company
Post Office Box 7452
San Francisco, CA 94120-7452

RE: Proposed Vessel Modification; 19 U.S.C. § 1466

Dear Mr. O’Rourke:

This is in response to your letter dated July 14, 2000, requesting a ruling as to whether certain foreign shipyard work your company proposes to have done on the containership MANULANI in order to accommodate the stowage of additional 40 foot containers in the hold and on deck will constitute nondutiable modifications under the vessel repair statute. Our position in this matter is set forth below.

FACTS:

The MANULANI was built as a containership in 1970 at the Bethlehem Steel Shipyard in Sparrows Point, Maryland, and has been continuously operated in the Hawaii or West Coast trade ever since. As originally configured, most of the cell guides and other stowage locations were suitable for Matson’s standard 24 foot containers. Over the years, the demand for 24 foot containers has declined, and the 40 foot container has become the size of choice of Matson’s customers. Matson has found it necessary to convert several of its ships to meet this changing demand.

The conversion work to container Hold No. 3 on the MANULANI will involve removing and scrapping ten existing 24 foot hatch covers, building and installing six new 40 foot hatch covers, removing and scrapping two internal cell guide structures, relocating and altering
three transverse box girders and associated cell guide structures, and altering the hatch coamings. It will also require the fabrication and installation of new on-deck container pedestals, access platforms and associated fittings for the reconfigured cargo stowage pattern to provide additional 40 foot positions. In addition, there will be a limited number of alterations to the ship’s existing internal structure, primarily within the double bottom tanks and along the transverse bulkheads, to provide proper foundation for and attachment of the new structure. The hold will also be fitted with ventilation fans to make it suitable for certain classes of hazardous cargoes. The work in question will not require any changes to either the watertight subdivision or the longitudinal hull girder.

In addition to Hold No. 3, Hold Nos. 1 and 2 will be altered to carry additional 40 foot containers as well. Hold No. 1 is presently a small general cargo hold. The changes to it will involve opening up the below deck hatch openings and installing cell guides and support structure for 40 foot containers. The changes to Hold No. 2 will be limited to the on deck stowage positions, where one hatch cover will be modified and pedestals added to provide 40 foot locations as an alternate to the existing 24 foot spaces.

ISSUE:

Whether the proposed work constitutes modifications to the subject vessel and is therefore nondutiable under 19 U.S.C. § 1466.

LAW AND ANALYSIS:

Title 19, United States Code, § 1466 (19 U.S.C. § 1466), provides in pertinent part for the payment of an ad valorem duty of 50 percent of the cost of “equipments, or any part thereof, including boats, purchased for, or the repair parts or materials to be used, or the expenses of repairs made in a foreign country upon a vessel documented under the laws of the United States”

In its application of the vessel repair statute, Customs 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-à-vis work constituting repairs has evolved from judicial and administrative precedent. (See Otte v. United States, 7 Ct. Cust. Appls. 166, T.D. 36489 (1916); United States v. Admiral Oriental Line et al., 18 C.C.P.A. 137, T.D. 44359

(1930); and Customs Bulletin and Decisions, Vol. 31, Number 40, published October 1, 1997.) The factors discussed within the aforementioned authority 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.

Upon reviewing the proposed work as described in your letter, it is readily apparent that the work constitutes nondutiable modifications to the subject vessel. The conversion or reconfiguration of a vessel to enable it to accommodate different sized containers, in the absence of repairs or a state of disrepair, is typically held to be a nondutiable modification. As cited in your letter, Customs has previously ruled similar work done to Matson vessels to be nondutiable modifications (see Customs ruling letters114380, dated June 18, 1999, and 114735, dated July 23, 1999).

HOLDING:

The proposed work constitutes modifications to the subject vessel and is therefore nondutiable under 19 U.S.C. § 1466.

It is noted, however, that this ruling is merely advisory in nature and does not eliminate the requirement to declare work done abroad at the subject vessel’s first United States port of arrival, nor does it eliminate the requirement of filing the entry showing this work (see §§ 4.14(b)(1)(2), Customs Regulations (19 CFR §§ 4.14(b)(1)(2)). Furthermore, any final ruling on this matter is contingent on Customs review of the evidence submitted pursuant to § 4.14(d)(1), Customs Regulations (19 CFR § 4.14(d)(1)).

Sincerely,

Larry L. Burton

Previous Ruling Next Ruling