Vessel Repair; 19 U.S.C. 1466; Modification; Hatch Support Structure; Advisory Ruling; SEA-LAND CONSUMER; SEA-LAND PRODUCER

HQ 112112 June 16, 1992 VES-13-18-CO:R:IT:C 112112 MLR CATEGORY: Carriers Robert S. Zuckerman Deputy General Counsel-Corporate Sea-Land Service, Inc. P.O. Box 800 Iselin, New Jersey 08830 RE: Vessel Repair; 19 U.S.C. 1466; Modification; Hatch Support Structure; Advisory Ruling; SEA-LAND CONSUMER; SEA-LAND PRODUCER Dear Mr. Zuckerman: This is in reference to your letter dated February 13, 1992, seeking an advisory ruling on the assessment of duty to certain changes to the hatch support structure on the SEA-LAND CONSUMER and SEA-LAND PRODUCER. FACTS: Sea-Land plans to change the support structures of hatch groups 2, 3, 6, 8, 9 and 10 on the SEA-LAND CONSUMER and SEA-LAND PRODUCER, SL-18P class vessels, in a foreign shipyard. The hatch groups will be changed from continuous skirt supports to discrete supports. At this time, the project is described in "SL-18P Hatch Cover Liner Modifications, October 1991," (Exhibit 2), as follows: 1. Hatch Groups 2, 3, 8, 9 and 10 a. Hatch coamings and box girders shall be inspected for skirt wear all around. Any wear shall be cleaned or ground out and filled with weld, then ground down to a smooth surface level with surrounding structure. b. Box girders shall be inspected for trapped water and drained if water is found. c. Remove existing seal bar all around and replace with 1/2" flat bar as shown on drawing 265.501. Care shall be taken when levelling so that a minimum of 3/8" penetration in the rubber gasket is achieved all around when cover is resting evenly on all liner support pads, as described in (j) below. d. Repair or replace gasket channel as shown on drawing. Replace rubber gasket all around. Details to be as shown on drawing 256.501. Sand blast or clean to bare metal and apply two coasts with inorganic zinc before installing new rubber gasket. e. Inspect and repair hatch cover skirt plate where damaged. f. Fabricate and install landing liner support brackets on hatch covers as shown on drawing 265.501. The drawing shows an acceptable approach to achieving proper alignment. Other methods are acceptable subject to Owner's approval. g. Fabricate and install landing liner support "stools" on hatch coamings and box girders as shown on drawing 265.501. h. Install owner supplied Merriman Lubrite F permanently lubricated sliding bearings to the adjacent mating surfaces of the stools and the support brackets. Overall thickness of the Lubrite F bearings is 1". See drawing 265.501 for mounting details of the Lubrite F bearing. Temperature shall be kept below 400 degrees F when welding teflon plate to support bracket. i. Reinforce hatch coamings and box girders in way of new stools and relocated guide fittings as shown on drawing 265.501. j. The liner pads shall be levelled and aligned so that contact is made simultaneously over the entire surface of all bearing surfaces. k. The contractor shall assure that the above modifications do not compromise the jaw engagement at the connection between stacking frames and buttress towers as a result of possibly raising the hatch covers. l. Inboard dog bolts and securing brackets shall be relocated as shown on drawing 265.501. m. Hatch cover positioning guides shall be relocated and modified as shown on drawing 265.501. n. Hatch coaming stacking fittings and positioning guide block shall be relocated as shown on drawing 265.501. o. The positioning guides and guide block shall be installed with dimensional tolerances as shown on drawing 265.501 when the covers are aligned as described in 1(c) and 1(j) above. 2. Hatch Group 6 a - j. Work will be the same as (a - j) above. k. Install new dog bolts and securing brackets similar to arrangement on hatch groups 5 & 7 at locations as shown on drawing 265.501. l. Same as (m) above. m. Guide stoppers, guide stopper blocks and doubler plates shall be modified and relocated as shown on drawing 265.501. Their placement shall be such as to assure that dimensional tolerances shown on drawing 265.501 are met when the covers are aligned as described in 2c and 2j above. Drawings entitled "Sea-Land Consumer/Producer Hatch Cover & Coaming Modifications," (Exhibit 3), are also attached. ISSUE: Whether the changes to the hatch groups on the subject vessels are considered non-dutiable modifications/alternations/ additions or dutiable repairs pursuant to 19 U.S.C. 1466. LAW AND ANALYSIS: Title 19, United States Code, section 1466, provides in pertinent part for payment of duty in the amount of 50 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 engage in such trade. Sea-Land states that the modifications it proposes are new features which will be incorporated into the vessels and will result in more efficient and effective use of the subject vessels. The modifications will not cure any defect or repair any damage, and will be permanently incorporated or permanently attached to the vessels. Further, Sea-Land states that the modifications are not consumables nor are they "portable articles" since they would remain on board the vessel were it to be laid up for any period of time. Accordingly, under the principles enunciated in United States v. Admiral Oriental Line, et al., T.D. 44359 (1930) and related rulings, the proposed modifications should not be dutiable under 19 U.S.C. 1466. In its application of the vessel repair statute, Customs has held that modifications/alterations/additions 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 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 layup. 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. For purposes of section 1466, 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)}. Sea-Land acknowledges that certain work described in Exhibit 2 above, specifically 1(d) and (e), and 2(d) and (e), represent work in the nature of repairs. Sea-Land states that although these items are necessary to the completion of the modification work, it intends to invoice these items separately so that there will be no intermingling of the non-dutiable modification costs with any dutiable repair costs. Upon reviewing the evidence submitted, the work appears to be akin to procedures we have previously found to be non-dutiable (see ruling 110741, 111844, and 112225). Accordingly, we determine that the work to change the support structure of the hatch groups under consideration on the SEA-LAND CONSUMER and SEA-LAND PRODUCER would constitute non-dutiable modifications to the subject vessels, with the exception of 1(d) and (e), and 2(d) and (e), described above. It also appears that 1(a) and 2(a) are in the nature of dutiable repairs. In all cases, modification costs must be fully segregated from other charges, since mixed repair/modification charges are assessed duty. HOLDING: The foreign work for which relief is sought constitutes a modification/alteration/addition so as to render it non-dutiable under 19 U.S.C. 1466. It is noted, however, that this ruling is merely advisory 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 sections 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 section 4.14(d)(1), Customs Regulations {19 CFR 4.14(d)(1)}. Sincerely, B. James Fritz Chief Carrier Rulings Branch