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HQ H011364

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June 11, 2007

VES-13-18-OT:RR:BSTC:CCI H011364 LLB

Category: CARRIER

Sharon Steele Doyle, Esquire
Givens & Johnston, PLLC
950 Echo Lane, Suite 360
Houston, Texas 77024-2788

RE: 19 U.S.C. § 1466; Proposed vessel modification; M/V R.J. PFEIFFER

Dear Ms. Doyle:

This is in response to your May 15, 2007, letter, on behalf of your client Matson Navigation Company, Inc. In your letter, you request a ruling as to whether your client’s proposed work plan for the M/V R.J. PFEIFFER, set forth below, constitutes dutiable repairs or non-dutiable modifications under 19 U.S.C. § 1466. Our decision follows.

FACTS

The following facts are from your May 15, 2007, ruling request. The M/V R.J. PFEIFFER (the “vessel”), is a U.S.-flag container vessel built in 1992 and has been successfully operating since that time. The proposed work would allegedly modify the vessel’s main engine’s scavenge air cooling water and bearing lubricating oil systems.

I. Main Engine Scavenge Air Cooling Water System

The scavenge air coolers on the vessel are cooled directly by sea water and are fully operational and functioning. The main engine cylinder jacket fresh cooling water (high temperature) is not an independent system with dedicated coolers, but rather a mixing system with the existing low temperature fresh water system whereby a small amount of low temperature fresh water is introduced to cool the high temperature fresh water. This system inherently has limitations in the accurate control of the high temperature which can shorten the service life of the main engine cylinder liners.

Matson intends to install 2 new, additional dedicated fresh water pumps, jacket water coolers, and central coolers into the system for circulating fresh water, rather than sea water through the scavenge air coolers, and, the outlet water from the scavenge coolers will cool the main engine high temperature water in a dedicated and independent system. The fresh water cooling for the scavenge air coolers and the high temperature water for the jackets will be cooled in 2 coolers with sea water. The proposed modifications will improve the core life of the scavenge air cooler resulting in lower operating costs and improve the temperature control and stability of the main engine high temperature cooling water circuit.

To accommodate the modifications to the new systems, Matson proposes to perform the following work to the main engine cooling system:
i. Install 2 new (additional) main engine central coolers; ii. Install 2 new (additional) main engine HT (jacket water coolers); iii. Install 2 new (additional) scavenge air cooling fresh water pumps; iv. Make the new pipe connections for the intended service; v. Commission the system; and vi. ABS approval of the installation.

II. Lube Oil Sump Suction Piping System

The main engine cylinder frame and bed plate are mounted on a foundation that not only supports the total engine, but is part of an enclosed space that also makes up the lube oil sump. The two lube oil sump pumps for the main engine are located aft of the main engine, just off centerline, port and starboard and are fully operational and functioning.

The suction piping for the pumps is configured toward the center of the main engine, running fore and aft based on regulatory body requirements that existed at the time the vessel was constructed. Because the pipe design has long pipe runs and numerous bends, there is a lowering of pressure in the lines which causes air entrapment in the lube oil thereby causing the oil to foam affecting the hydrostatic load bearing capabilities of the oil film in the main engine cross head bearings.

Matson intends to shorten the pipe run, remove excessive pipe bends, and connect the suction pipe into the aft end of the lube oil sump. The proposed modification will improve the mechanical and operational systems by allowing the pump to operate at full capacity and thereby allowing the pump motors to be replaced with motors of increased operational capacity.

To accomplish the proposed modifications to the Lube Oil Sump Suction System, Matson will perform the following work:
i. Install new direct piping to the sump at the aft end of the engine; ii.Install blanks in existing line to decommission the existing line; and, iii. Install new (increased power) motors on the existing pumps.

ISSUE

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

LAW AND ANALYSIS

Pursuant to 19 U.S.C. § 1466, also known as the vessel repair statute, an ad valorem duty of 50 percent is payable for 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-a-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); Cust. Bull. and Dec., Vol. 31, No. 40 (Oct.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 non-dutiable under 19 U.S.C. § 1466.

In determining 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 et al., supra. 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 be welded or otherwise "permanently attached" to the ship as a result of constant pitching and rolling. In addition, some items, the costs of which are clearly dutiable, interact with other vessel components resulting in the need, possibly for that purpose alone, for a fixed and stable juxtaposition of vessel parts.

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 that is not in good working order.

4. Whether an item under consideration provides an improvement or enhancement in operation or efficiency of the vessel.

Upon reviewing the proposed work as described in your letter in conjunction with the supporting illustrations you submitted, and in light of the above-referenced authority, it is readily apparent that the proposed work will be permanent alterations of, and additions to, the hold and decks. These alterations are non-dutiable modifications to the subject vessel.

HOLDING

The proposed work, described above, constitutes a modification to the subject vessel and is therefore non-dutiable 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 19 C.F.R. § 4.14(e). Furthermore, any final ruling on this matter is contingent on CBP’s review of the evidence submitted pursuant to 19 C.F.R. § 4.14(f).

Sincerely,

Glen E. Vereb
Chief

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