HQ 116657 - Proposed Vessel Modification; 19 U.S.C. § 1466 - United States International Trade Commision Rulings

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HQ 116657

May 31, 2006

VES-13-18-RR:BSTC:CCI 116657 IDL

CATEGORY: CARRIER

Sharon Steele Doyle
Givens & Johnston, 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 May 16, 2006, with enclosures, on behalf of your client, Matson Navigation Company, Inc. to determine whether certain proposed work on the hulls and fittings of certain vessels constitute non-dutiable “modifications,” rather than dutiable “repairs,” under the vessel repair statute. Our response on this matter is set forth below.

FACTS:

Matson Navigation Company, Inc. (“Matson”) intends to perform certain work on the MV MAHIMAHI, MV MANOA, and MV MOKIHANA (“the vessels”), all of which are described as U.S.-flagged “C9 Class Vessels.”

The mooring and docking arrangement on each vessel is comprised of three winches and two capstans on both the bow and the stern. All of the winches were designed to be equipped with wire ropes. In the mid-1980’s, due to the potential for the wire ropes to inflict severe injuries during docking and undocking operations, the vessels’ mooring lines were converted to synthetic poly-propylene mooring lines.

There are two significant drawbacks to the use of poly-propylene synthetic lines on these vessels. The first aspect involves the potential for injury from whiplash of the lines, due to the tremendous residual energy released when the inherently elastic lines break in tension. The second aspect involves compromising the safety of the vessel during the time the vessel is at the dock with the mooring winches on constant tension and the mooring system unattended, due to the tendency of the elastic poly-propylene mooring line to “bury” itself in the existing drum.

Matson intends to install new winches and “Amsteel Blue” lines (synthetic “Kevlar fiber” mooring ropes) capable of maintaining an automatic constant tension on the mooring lines, thereby improving the efficiency and safety of the docking and undocking operations, and the overall operations of each vessel. In order to accommodate the new systems, Matson proposes to perform the following work to the “Aft Second Deck” and “Forward Foc’sle Deck” mooring areas of each of the vessels:

Aft Second Deck

(i) Removal and scrapping of the existing three Lakeshore single drum mooring drum winches; (ii) Removal of the existing mooring winch foundations and smooth grounding of the Second Deck plating; (iii) Installation of three new Kocks winches (“The new foundations will be aligned with the existing underdeck structure and will be scribed to fit the deck to give the correct height and line leads. The new winches will be carefully positioned so that lines lead from the working portions of both the drum and the gypsy head align with the existing fixed mooring fittings for mooring operations. The new foundation will be welded to the Second Deck. Each new unit will be bolted to its respective foundation, and final alignment achieved with a pourable plastic shim, such as Philadelphia Resins chockfast”); (iv) Fitting of the drum anchor/stopper to the Second Deck, with reinforcement below deck; (v) Installation of two new control stations at the side of the ship in the vicinity of frame 203, P&S; (vi) Installation of three new winch motor control panels (“New power and control cable will be run from the panels to the control stations and the individual winches”); (vii) Commissioning and testing of each unit by the manufacturer’s representative.

Forward Foc’sle Deck
(i) Removal and scrapping of the existing centerline Lakeshore single drum mooring winches; removal and scrapping of the two mooring winch/anchor windlass drive units; (ii) Removal of the existing mooring winch foundations, and smooth grounding of the Foc’sle deck plating;
(iii) Installation of three new Kocks winches/windlass drive units (“The new foundations will be aligned with the existing underdeck structure and will be scribed to fit the deck to give the correct height and line leads. The new units will be carefully positioned so that lines lead from the working portions of both the drum and the gypsy head align with the existing fixed mooring fittings for safe mooring operations. The new foundation will be welded to the Foc’sle Deck. Each new unit will be bolted to its respective foundation and final alignment achieved with a pourable plastic shim, such as Philadelphia Resins chockfast”);
(iv) Installation and supporting of the mechanical clutch couplings that engage or disengage both the anchor windlass and the mooring winches; (v) Fitting of the drum anchor/stopper to the Foc’sle deck, with reinforcement below deck;
(vi) Installation of two new control stations at the side of the ship in the vicinity of Frame 19, P&S;
(vii) Installation of three new winch motor control panels (“New power and control cable will be run from the panels to the control stations and the individual winches);
(viii) Commissioning and testing of each unit by the manufacturer’s representative (“Both anchor windlasses will be proved operational by deploying and hoisting the port and starboard anchors”).

You have stated that the present system on each vessel is in good working order, that the proposed work is a new design feature, and that the proposed work would be permanently attached to the hull and fittings of each vessel. In addition, you have provided drawings depicting the proposed work.

ISSUE:

Whether the proposed work to the vessels, as described above, constitutes a non-dutiable modification under 19 U.S.C. § 1466?

LAW AND ANALYSIS:

Title 19, United States Code, § 1466(a) (19 U.S.C. 1466(a)), 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, U.S. Customs and Border Protection (CBP) 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 that 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 that is non-dutiable under section 1466.

A claim for duty-free modification must address four areas:
whether there was a permanent incorporation into the hull or fittings; whether the item would remain aboard during an extended lay-up; if not a first-time installation, whether an item that was not in good working order was replaced; and whether the item provided an improvement in operation or efficiency.

Upon our review of the information you submitted, it appears that the proposed work constitutes a modification to the subject vessels, and is, therefore, non-dutiable under 19 U.S.C. § 1466. We emphasize, however, that this ruling is merely advisory in nature and neither eliminates the requirement to declare all work done abroad at the subject vessel’s first United States port of arrival, nor the requirement of filing the declaration/entry showing this work (see §§ 4.14(d) and (e), CBP Regulations (19 CFR §§ 4.14(d) and (e)). Furthermore, any final decision on this matter is contingent on CBP’s review of the evidence submitted pursuant to section 4.14(i), CBP Regulations (19 CFR 4.14(i)).

HOLDING:

The proposed work to the vessels, as described above, constitutes a non-dutiable modification under 19 U.S.C. § 1466, pending further review of the evidence by CBP, as discussed above.

Sincerely,

Glen E. Vereb
Chief

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