VES-13-18-RR:IT:EC 114286 GOB
Thomas W. Lord
Manager, Fleet Services
Sea-Land Service, Inc.
6000 Carnegie Blvd.
Charlotte, NC 28209-4637
RE: 19 U.S.C. 1466; Vessel repair; Vessel equipment; Coolers for
scavenge air system
Dear Mr. Lord:
This is in response to your ruling request of March 10, 1998
with respect to the installation and fitting of new air coolers
into the main engine scavenge air system of your Atlantic Class
vessels. Our ruling follows.
FACTS:
You describe the work to be performed as follows.
The function of the scavenge coolers within the main
engine scavenge system is to reduce the temperature,
and increase the density, of air discharged from the
main engine turbochargers. The efficiency of the
coolers has a profound effect on the efficiency of the
engine. A three percent improvement in scavenge
efficiency typically results in a one percent
improvement in fuel efficiency. The improved scavenge
efficiency also reduces thermal loading on other main
engine components, and so results in improved main
engine reliability.
Scavenge coolers are designed for each specific vessel
application and are optimized for the way in which the
engine is expected to be operated. Because of this
design/optimization process coolers designed and built
for one class of vessel cannot, generally, be removed
and used elsewhere.
During the next upcoming regulatorily required dry-docking we plan to fit newly designed and optimized
coolers to the scavenge air system. If successful, the
new coolers will be installed on all ACV Class vessels.
These coolers are re-designed to be optimally efficient
for our current vessel operating profile. In addition,
these coolers incorporate new material combinations and
advances in manufacturing processes since the original
coolers were built. The net result will be increased
engine fuel efficiency and improved reliability.
...
The scope of shipyard work includes the removal of the
old coolers and installation and fitting of two new air
coolers into the Main Engine Scavenge Air system. The
design and manufacture of the new air coolers will be
completed in the United Kingdom.
You state that the scavenge air coolers are a required
integral part of the main propulsion system and thus are critical
to the operation of the vessel. The current system is
operational and not in a state of disrepair. The purpose of the
work is improved fuel efficiency and main engine reliability.
In a subsequent submission, you submitted drawings for the
air coolers which were described as "turbocharger intercooler
replacements." In that submission, it is indicated that "the
internal arrangement of the intercooler in entirely different
from the original equipment, having a different number of tubes,
a different fin arrangement, ... and a new design of waterbox,
all built to match the new pressure frame housing."
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.
We have thoroughly considered the issue of the dutiability
of the subject work under 19 U.S.C. 1466.
It is our determination that the subject work (described as
redesign of coolers to the scavenge air system and turbocharger
intercooler replacements) is dutiable under 19 U.S.C. 1466 as
equipment of the vessel. We find that the subject work is
essentially a modification to equipment of the vessel (i.e., a
modification to the main engine or a modification to an accessory
to the main engine), and is therefore dutiable as equipment of
the vessel.
As a modification to equipment of the vessel, it is
different from a modification to the hull of the vessel. A
modification to equipment of the vessel is equivalent, for the
purpose of 19 U.S.C. 1466, to equipment of the vessel and is
dutiable under 19 U.S.C. 1466.
For example, in Ruling 105414 dated May 24, 1982, we stated:
It should be noted that the fact that a change or
addition of equipment is made to conform with a new
design scheme, or for the purpose of complying with the
requirements of statute or code, is not a relevant
consideration. Therefore, any change accomplished
solely for these reasons, and which does not constitute
a permanent addition to the hull and fittings of the
vessel, would be dutiable under section 1466.
HOLDING:
The subject work (described as redesign of coolers to the
scavenge air system and turbocharger intercooler replacements) is
dutiable pursuant to 19 U.S.C. 1466.
Sincerely,
Jerry Laderberg
Chief,
Entry Procedures and Carriers
Branch