19 U.S.C. 1466; Vessel repair; Fuel oil transfer system

HQ 114116 October 8, 1997 VES-13-18-RR:IT:EC 114116 GOB CATEGORY: Carriers Evelyn M. Suarez, Esq. Ross & Hardies 888 Sixteenth Street, N.W. Washington, D.C. 20006-4103 RE: 19 U.S.C. 1466; Vessel repair; Fuel oil transfer system Dear Ms. Suarez: This is in response to your ruling request of September 19, 1997 on behalf of Sea-Land Service, Inc. ("Sea-Land"). FACTS: You request a ruling "confirming the nondutiable status as a modification of Fuel Oil Transfer System Modifications under 19 U.S.C.  1466." In your letter, you describe the work to be performed. You also submit preliminary specifications for the work. The work is described as follows in the "General Description" section of the preliminary specifications: The Atlantic Class Ships are presently fitted with two 250 mm diameter fuel oil transfer pipes (P/S) running from the Engine Room through the Duct Keel (pipe tunnel) forward to Fr. 175+370 mm. ... The existing eighteen (18) expansion joints shall be removed and replaced. Two (2) additional new expansion joints shall be installed at new locations and minor modifications to the piping arrangement shall be made to improve the anchoring and alignment of the piping sections. Prior to installation of the new and replacement joints, the place between sections of pipe where the joints are to be installed shall be adjusted to match the installation distance of the new joints. The distance between the pipe flanges shall be adjusted in the fore and aft direction to the specified mounting length of the new expansion joints. Possible methods of setting the correct flange spacing include moving of the pipe sections, cutting sections of pipe, or adding sections of pipe. The work to be performed is also described in the "Description of Work To Be Performed" section of the preliminary specifications. It includes such items as: removal of the 18 existing expansion joints; installation of expansion joints at 20 locations; checking of piping alignment; welding of pipe anchors; reconnecting and modification of steam tracing lines; the hydrostatic testing of the fuel piping and steam tracing piping; and associated insulation and cleaning. You state that the fuel transfer pipes in the Atlantic Class vessels are in good condition and not in need of repair. You further state that the new and replacement expansion joints will provide increased strength and flexibility by using a multi-ply bellows design, which reduces the mechanical stresses; these joints are expected to provide significantly increased component fatigue life and reliability. ISSUE: Whether the work to be performed is dutiable under 19 U.S.C. 1466. LAW AND ANALYSIS: 19 U.S.C. 1466 provides for the payment of duty at a rate of fifty percent ad valorem on the cost of foreign repairs to vessels documented under the laws of the United States to engage in foreign or coastwise trade, or vessels intended to be employed in such trade. In its application of the vessel repair statute, the Customs Service has held that modifications, alterations, or additions to the hull 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. In considering whether an operation has resulted in a nondutiable modification, the following factors have been considered. These factors 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: 1. Whether there is a permanent incorporation into the hull or superstructure of a vessel, either in a structural sense or as demonstrated by means of attachment so as to be indicative of a permanent incorporation. See United States v. Admiral Oriental Line, 18 C.C.P.A. 137 (1930). However, we note that a permanent incorporation or attachment does not necessarily involve a modification; it may involve a dutiable repair or dutiable equipment. 2. Whether in all likelihood an item would remain aboard a vessel during an extended lay-up. 3. Whether an item constitutes a new design feature and does not merely replace a part, fitting, or structure that is performing a similar function. 4. Whether an item provides an improvement or enhancement in operation or efficiency of the vessel. After a consideration of the documentation submitted, we find that the work to be performed on the vessels is a modification which is not dutiable under 19 U.S.C. 1466. The documentation does not evidence or indicate a state of disrepair, nor does it evidence or indicate that the work to be performed is work which would typically be described as repair work. The work to be performed is very similar to the type of work which we have previously determined to be nondutiable modifications. HOLDING: The work to be performed, as described in the documentation submitted, is a nondutiable modification to the vessels. Sincerely, Jerry Laderberg Chief, Entry Procedures and Carriers Branch