VES-13-18 CO:R:IT:C 111849 JBW
Robert S. Zuckerman
Deputy General Counsel-Corporate
Sea-Land Service Inc.
P. O. Box 800
Iselin, New Jersey 08830
RE: Vessel Repair; Modification; Advisory Ruling; 19 U.S.C.
1466; 19 C.F.R. 4.14.
Dear Mr. Zuckerman:
This letter is in response to your requests for an advisory
ruling on proposed modifications to certain of your vessels.
FACTS:
Sea-Land Service, Inc., is the owner or demise owner of the
NEDLLOYD HOLLAND, SEA-LAND ATLANTIC, SEA-LAND QUALITY, NEWARK
BAY, SEA-LAND PERFORMANCE, SEA-LAND ACHIEVER, RALEIGH BAY, SEA-
LAND VALUE, SEA-LAND INDEPENDENCE, and SEA-LAND FREEDOM. These
vessels are fully cellularized D-9J class container vessels.
At this time, Sea-Land intends to modify the vessels as
follows:
(1) NEDLLOYD HOLLAND, SEA-LAND ATLANTIC, SEA-LAND QUALITY,
NEWARK BAY, SEA-LAND PERFORMANCE, SEA-LAND ACHIEVER, RALEIGH
BAY, and SEA-LAND VALUE: These vessels will be converted to
permit the vessels to carry two twenty-foot containers in
one forty-foot cell space. (Letter dated August 8, 1991)
(2) SEA-LAND ACHIEVER and RALEIGH BAY: The plans and
descriptions submitted call for: (a) shortening the
foremast; (b) removing and remounting the forward anchor
light, the forward masthead light, the steering light, and
the amber crane warning light; (c) relocating the port and
starboard sidelights; and (d) removing the telescopic
aftermast and its light. (Letter dated September 25, 1991)
(3) SEA-LAND INDEPENDENCE and SEA-LAND FREEDOM: Sea-Land
intends to convert one or both of these vessels to permit
the carriage of certain twenty and forty foot containers.
(Letter dated November 18, 1991)
In each case, Sea-Land has submitted descriptions or
drawings of the proposed conversions.
ISSUE:
Whether the foreign shipyard work described herein would
constitute modifications to the hull and fittings so as to
render the work nondutiable under 19 U.S.C. 1466.
LAW AND ANALYSIS:
Title 19, United States Code, section 1466, provides in
pertinent part for payment of an ad valorem duty of fifty 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.
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 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, by 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.
Upon reviewing the evidence submitted, we determine that
the work to reconfigure the container cells of the NEDLLOYD
HOLLAND, SEA-LAND ATLANTIC, SEA-LAND QUALITY, NEWARK BAY, SEA-
LAND PERFORMANCE, SEA-LAND ACHIEVER, RALEIGH BAY, SEA-LAND VALUE,
SEA-LAND INDEPENDENCE, and SEA-LAND FREEDOM to permit them to
carry two twenty-foot or one forty-foot container in each cell--
as described in your letters of August 8, 1991, and November 18,
1991, and the accompanying documentation--would constitute
nondutiable modifications to the subject vessels.
The proposed work on the SEA-LAND ACHIEVER and the RALEIGH
BAY, as described in your letter of September 25, 1991, is more
problematic. The letter includes work specifications that make
reference to certain sketches, but these sketches were not
included with the letter. Without these details, we cannot
comment on whether these operations constitute non-dutiable
modifications. Furthermore, the descriptions provided include
orders to "refurbish" certain items. Without specific
descriptions of the work required, such refurbishment of parts
may constitute "repairs" that are dutiable under the vessel
repair statute.
HOLDING:
The proposed shipyard work described herein to reconfigure
the vessels to carry forty-foot containers would constitute
modifications to the hull and fittings so as to render the work
nondutiable under 19 U.S.C. 1466. Without further details, we
cannot comment on whether operations to shorten the foremast, to
remove and remount the forward anchor light, the forward
masthead light, the steering light, and the amber crane warning
light, to relocate the port and starboard sidelights, and to
remove the telescopic aftermast and its light are modifications
or dutiable repairs 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 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