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HQ 115344

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April 26, 2001

VES-13-18-RR:IT:EC 115344 GEV

CATEGORY: CARRIER

Sharon Steele Doyle, Esq.
Givens and Associates, PLLC
950 Echo Lane, Suite 360
Houston, Texas 77024-2788

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

Dear Ms. Doyle:

This is in response to your letter dated April 11, 2001, on behalf of your client, Gulfcoast Transit Company, the owners/operators of the subject barges, the DANA DUNN and the TECO 2. Pursuant to 19 CFR § 177.2(d), you request that we give immediate consideration as to whether the work proposed by your client to be done in a foreign shipyard on the subject vessels will constitute nondutiable modifications under the vessel repair statute. Our position in this matter is set forth below.

FACTS:

The vessels in question are sister ships, both U.S.-flagged, owned and operated. The vessels are currently in service as unmanned dry bulk cargo barges. As presently configured, the unloading system of each vessel includes a hoppered cargo hold, two (2) traveling rotary feeders, a twin longitudinal belt conveyor system, and a transverse (shuttle) shore discharge conveyor which will only handle wet phosphate rock (dense and free flowing). The system is designed to discharge cargo at 3000 tons per hour.

The proposed modifications would convert the cargo holds of the vessels into more conventional self-unloaders with new gates and hopper slopes capable of handling many dry bulk products. Gulfcoast Transit’s cargoes vary from very light semi-flowing products to
medium density products and many free-flowing types. The changes are being considered to improve the versatility of the barges by increasing the cargo capacity for high-stowage factor cargoes such as coal and grain. In order to broaden the cargo handling capabilities of the subject vessels, Gulfcoast proposes to modify each one by:
removing the existing traveling plow feeders and longitudinal sloping plates in the cargo holds; and
adding a new cargo hold tank top above the existing tank top, and, fitted into the tank top, will be hopper hogbacks with hold gates to control the flow of cargo going onto the belt. These will be positioned above the two existing hold conveyor belts mounted on the port and starboard sides. The hogbacks will serve as individual hoppers for each hold gate (total 60, with 30 per side). The remainder of the present unloading system will remain intact. New longitudinal hopper slopes will be tied into the existing cargo hold longitu- dinal wing tank bulkheads. This is necessary to direct the cargo flow into the hogbacks as the barge unloads.

A pair of 600 kilowatt generator sets will be mounted in the forepeak area to power the existing conveyor belts. The lighting generators currently existing will be left intact. The double-sided wing tanks and double-bottom tanks will not be changed.

The modifications include the installation of a raised cargo hold bottom to eliminate vertical cargo reclaiming. The existing ballast piping and bilge system can be retained in the centerline space below the cargo hold. An itemized list of the proposed changes is as follows:

Remove existing hopper slope plates.
Remove partial cargo hold bulkheads.
Install hoppers, hogbacks, gates, and outboard hopper slopes above the existing conveyors.
Raise conveyor trunk bulkheads inboard of the conveyors. Install a gate operating system.
Install a new raised cargo hold bottom on centerline. Modify the cargo hold bulkheads as required for the new hopper and gate arrangement.

In support of your claim, you submit the following: a description of the work from Richard Paris, Manager Major Maintenance, Gulf Coast Transit Company (Exhibit 1); drawings depicting the proposed modifications (Exhibits 2 and 3); and drawings depicting the existing configuration of the cargo holds (Exhibits 4 and 5).

ISSUE:

Whether the proposed work constitutes modifications to the subject vessels 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 in conjunction with the supporting documentation you submitted (see Exhibits 1-5, cited above), in light of the above-referenced authority and prior Customs rulings cited in your letter (Exhibits 6-11), it is readily apparent that the work constitutes nondutiable modifications to the subject vessels.

HOLDING:

The proposed work constitutes modifications to the subject vessels 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(d) and (e), Customs Regulations (19 CFR §§ 4.14(d) and (e)). Furthermore, any final ruling on this matter is contingent on Customs review of the evidence submitted pursuant to § 4.14(i), Customs Regulations (19 CFR § 4.14(i)).

Sincerely,

Larry L. Burton

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