Vessel Repair; Modification; 19 U.S.C. § 1466; Conversion of container hold; MATSONIA; HQ 114380

HQ 114735 July 23, 1999 VES13-18-RR:IT:EC 114735 CC CATEGORY: Carriers Kevin C. O’Rourke Senior Vice President and General Counsel Matson Navigation Company P.O. Box 7452 San Francisco, CA 94120-7452 RE: Vessel Repair; Modification; 19 U.S.C. § 1466; Conversion of container hold; MATSONIA; HQ 114380 Dear Mr. O’Rourke: This is in response to your letter of June 18, 1999, requesting that we rule that certain foreign shipyard work performed on the “combination roll-on, roll-off/lift-on, lift-off vessel” MATSONIA (the vessel) is not dutiable under 19 U.S.C. § 1466. FACTS: You describe the work to be performed on the vessel as follows: Due to the growing demand for 40 foot container stowage, Matson has found it necessary to convert one of MATSONIA’S two forward 24 foot container holds to a 40 foot configuration. The reconfiguration of this container hold will involve removing and scrapping two existing 24 foot hatch covers, lengthening four existing 24 foot hatch covers, removing and scrapping one internal cell guide structure, and relocating and modifying one other cell guide structure. It will also require the fabrication and installation of new on-deck container pedestals, access platforms and associated fittings for the reconfigured cargo stowage pattern to provide additional 40 foot container positions. In addition, there will be a limited number of modifications to the ship’s existing internal structure, primarily within the double bottom tanks and along the transverse bulkheads, to provide proper foundation for and attachment of the new structure. It is anticipated that these modifications will necessitate changes to refrigerated container power distribution and associated ventilation systems. Also, one container row in the remaining 24 foot hold will be converted from 24 foot to 20 foot containers by installing new cell guides at one end and new stiffening at the tank top. ISSUE: Whether the described foreign shipyard work is dutiable pursuant to 19 U.S.C. § 1466. LAW AND ANALYSIS: 19 U.S.C. § 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. In its application of the vessel repair statute, the Customs Service has held that modifications, alterations, or 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. The foreign shipyard work described is very similar to the work we ruled upon in Headquarters Ruling (HQ) 114380, dated June 18, 1998. In that ruling, we stated that “[t]he conversion or reconfiguration of a vessel to enable it to accommodate different sized containers, in the absence of repairs or a state of disrepair, is typically held to be a nondutiable modification.” We found that the work described in that ruling constituted modifications to the vessel which were nondutiable. Consequently, based on HQ 114380, we find that the subject foreign shipyard work constitutes modifications which are nondutiable under 19 U.S.C. § 1466. HOLDING: The described foreign shipyard work is not dutiable pursuant to 19 U.S.C. § 1466. As we stated in HQ 114380, 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. We note that no specifications were submitted with this request. Such specifications, as well as the pertinent invoices, will comprise important elements of the documentary evidence which will be reviewed within the 19 CFR § 4.14 process. Sincerely, Jerry Laderberg Chief Entry Procedures and Carriers Branch