Vessel repair; 19 U.S.C. 1466; Conversion of vessel fromsingle-hull to double- hull; Modification

HQ 114490 October 6, 1998 VES-13-18-RR:IT:EC 114490 GOB CATEGORY: Carriers Sharon Steel Doyle, Esq. Givens and Associates, PLLC 950 Echo Lane Suite 360 Houston, Texas 77024-2788 RE: Vessel repair; 19 U.S.C. 1466; Conversion of vessel from single-hull to double- hull; Modification Dear Ms. Doyle: This is in response to your ruling request of October 1, 1998 on behalf of Coscol Marine Corporation. FACTS: You describe the pertinent facts as follows: The purpose of this request is to determine if certain proposed work will be classified as modifications of the hull and fittings of the U.S.-flag vessel, the COASTAL MANATEE. The proposed work would convert the vessel from a single hull vessel to a double hull vessel as required by OPA 90. The proposed modification consists of the installation of an internal hull throughout the cargo spaces and the cargo piping along with the modification of any other affected auxiliary system. Also, a complete ballast system is to be installed to service the double bottom and win[g] tank areas created by the internal hull. In addition, a complete Hot Oil Heating System is to be installed including (2) 12 million BTU heaters and approximately 75,000 lineal feet of 2-1/2" pipe coals. The new internal hull will consist of a new inner bottom located a minimum of 5'-5" above the molded baseline and wing longitudinal bulkheads located a maximum of 35'-7" off centerline port and starboard all running fore and aft for the length of the cargo block (approximately 490'). In order to install the internal hull it is proposed to cut the existing main deck, centerline and traverse bulkheads and webs and any piping, electrical, hydraulics, etc. along the appropriate lines and remove from the vessel in a suitable manner and store ashore until the internal hull along with the ballast and cargo piping have been installed. Since cargo volume is lost with the installed internal hull, the deck is to be raised approximately 8'-6" to compensate. The proposed work is a new design feature for the vessel and it is not a repair. ISSUE: Whether the above-described work 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, and equipment purchased in a foreign country for, 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 19 U.S.C. 1466, Customs has held that (contrary to the treatment of vessel repairs and vessel equipment) modifications, alterations, and additions to the hull of a vessel are not subject to duty under the vessel repair statute. The identification of work constituting modifications vis-a-vis work constituting repairs has evolved from judicial and administrative precedent. See, for example, Otte v. U.S., 7 Ct. Cust. Appls. 166, T.D. 36489 (1916); U.S. v. Admiral Oriental Line et al., 18 C.C.P.A. 137, T.D. 44359 (1930), and Customs Bulletin and Decisions of June 18, 1997 (Vol. 31, No. 24/25, p. 23) and October 1, 1997 (Vol. 31, No. 40, p. 13). The various factors discussed within those authorities are not by themselves necessarily determinative, nor are they the only factors which may be relevant in a given case. The description of the work which you have provided contains no indication that the work to be performed is resultant from a state of disrepair or that such work is in the nature of maintenance or preventive maintenance. Absent such conditions, and based upon the above-described facts which appear to describe the alteration and/or conversion of a vessel, it is our determination that the proposed work would constitute a modification to the vessel . Such a modification is not dutiable under 19 U.S.C. 1466. HOLDING: After a review of the documentation submitted, we conclude that the work described therein constitutes a modification to the vessel which is nondutiable under 19 U.S.C. 1466. We note that there is no indication from the description of the work provided that repairs will be involved. Vessel repairs and repair-related items are dutiable under 19 U.S.C. 1466. This ruling does not eliminate the requirement of 19 CFR 4.14(b) to declare and enter work performed abroad at the vessel's first port of arrival. Customs' final determination as to dutiability of foreign shipyard work will be made within the procedure outlined in 19 CFR 4.14 and will be based upon an examination of all pertinent documentation, including shipyard invoices. Sincerely, Jerry Laderberg Chief, Entry Procedures and Carriers Branch