Proposed Modification of Ballast Tank Vents, Fuel Oil TankVents and Sounding Tubes; 19 U.S.C.  1466

HQ 114109 October 21, 1997 VES-13-18-:RR:IT:EC 114109 GEV CATEGORY: Carriers Evelyn M. Suarez, Esq. Ross & Hardies 888 Sixteenth Street, N.W. Washington, D.C. 20006-4103 RE: Proposed Modification of Ballast Tank Vents, Fuel Oil Tank Vents and Sounding Tubes; 19 U.S.C.  1466 Dear Ms. Suarez: This is in response to your letter dated September 29, 1997, requesting, on behalf of your client, Sea-Land Service, Inc. ("Sea-Land"), a ruling as to whether certain proposed foreign work done to your client's vessels would be considered non-dutiable modifications under the vessel repair statute. Our ruling on this matter is set forth below. FACTS: Sea-Land's U.S.-flagged Atlantic Class Ships are currently fitted with carbon steel vents for the double bottom water ballast tanks ("DBWBT") which pass through the heavy fuel oil ("HFO") wing tanks. The vents run from the top of the double bottom tank, through the HFO wing tank, an upper wing ballast tank or void space, a passage space (box girder) and finally to the open deck. In regard to the vent and sounding tube piping for HFO wing tanks which pass through upper wing water ballast tanks ("UWWBT"), the Atlantic Class Ships are currently fitted with vent pipes of carbon steel running from the top of the HFO wing tank, through an UWWBT, and to the longitudinal passage way. In the passage way, the vents are connected through an inverted U-loop to an overflow and vent header which runs fore and aft. The vent piping and sounding tubes in the Atlantic Class Ships are currently functioning and not in need of repair. The proposed modifications, as described below, are being done to increase the efficiency in the operation of the vessels. - 2 - A review of the current design of the Atlantic Class Ship vent piping has led to the determination that a modification to the vent piping can increase the vessel's operating efficiency and lessen the chances of hazards to the environment. Suggested solutions include replacement of the existing piping with pipe of increased wall thickness or with a non-corroding composite material, or rerouting of the piping to less corrosive areas. For the proposed modifications there are two possible alternatives. The piping to be used in the work would be of different material (plastic) with the same or different configuration; or of the same material (steel) with a new configuration. Since the decision has not been finalized as to which of the options is the more efficient and cost-effective, specifications and/or drawings have also not been finalized. In support of your request that the proposed work be considered modifications, you have submitted the following: (1) a copy of a study conducted by naval architects and marine engineers regarding the existing system (Attachment A); and (2) a description of the proposed options for the modification work to be performed. ISSUE: Whether the proposed foreign work would constitute modifications to the hull and fittings of the Atlantic Class Ships under consideration so as to render the work non-dutiable under 19 U.S.C.  1466. LAW AND ANALYSIS: Title 19, United States Code,  1466, provides in pertinent part for payment of an ad valorem duty of 50 percent of the cost of foreign repairs to or equipment purchased for a vessel documented under the laws of the United States to engage in the foreign or coastwise trade, or a vessel intended to engage in such trade. In its application of the vessel repair statute, Customs has held that modifications 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 which 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., T.D. 44359 (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 be welded or otherwise "permanently attached" to the ship as a result of constant pitching and rolling. In addition, some items, the cost of which is clearly dutiable, interact with other vessel components resulting in the need, possibly for that purpose alone, for a - 3 - fixed and stable juxtaposition of vessel parts. It follows that a "permanent attachment" takes 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 Very often when considering whether an addition to the hull and fittings took place for the purpose of 19 U.S.C.  1466, we have considered the question from the standpoint of whether the work involved the purchase of "equipment" for the vessel. It is not possible to compile a complete list of items that might be aboard a ship that constitute its "equipment". An unavoidable problem in that regard stems from the fact that vessels differ as to their services. What is required equipment on a large passenger vessel might not be required on a fish processing vessel or offshore rig. "Dutiable equipment" has been defined to include: ...portable articles necessary or appropriate for the navigation, operation, or maintenance of a vessel, but not permanently incorporated in or permanently attached to its hull or propelling machinery, and not constituting consumable supplies. Admiral Oriental, supra., (quoting T.D. 34150, (1914)) By defining what articles are considered to be equipment, the Court attempted to formulate criteria to distinguish non-dutiable items which are part of the hull and fittings of a vessel from dutiable equipment, as defined above. These items might be considered to include: ...those appliances which are permanently attached to the vessel, and which would remain on board were the vessel to be laid up for a long period... Admiral Oriental, supra., (quoting 27 Op. Atty. Gen. 228). A more contemporary working definition might be that which is used under certain circumstances by the Coast Guard; it includes a system, accessory, component or appurtenance of a vessel. This would include navigational, radio, safety and, ordinarily, propulsion machinery. - 4 - Upon reviewing your letter of September 29, 1997, and the supporting documentation enclosed therein, it is apparent that the proposed work would meet the above-discussed criteria for non-dutiable modifications. In this regard we note the nature of the work to be done to the ballast tank vents, fuel oil tank vents and sounding tubes is such that it would be a permanent incorporation into the vessel. As such it would remain aboard the vessel during an extended lay up. Furthermore, the work is stated not to be done to replace a current part, fitting or structure which is not in good working order. Finally, the proposed work will improve the operation of the vessel by modifying the original design of the vessel that is deficient in its failure to take into consideration severe environmental conditions which could result in premature failure and possible environmental damage. Accordingly, the proposed work to the Atlantic Class Ships as described above and in the supporting documentation would meet the criteria for a modification and would therefore not be dutiable under 19 U.S.C.  1466. HOLDING: The proposed foreign shipyard work would constitute modifications to the hull and fittings of the Atlantic Class Ships under consideration so as to render the work 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  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, Jerry Laderberg Chief Entry Procedures and Carriers Branch