VES-13-18-RR:IT:EC 115346 GEV
Sharon Steele Doyle, Esq.
Givens and Associates, PLLC
950 Echo Lane, Suite 360
Houston, Texas 77024-2788
RE: Proposed Vessel Modification; 19 U.S.C. § 1466
Dear Ms. Doyle:
This is in response to your letter dated April 20, 2001, on behalf of your client, Sheridan Transportation Company, the operators of the subject vessel, the ITB GROTON. Pursuant to 19 CFR § 177.2(d), you request that we give immediate consideration as to whether the work proposed by your client to be done in a foreign shipyard on the subject vessel will constitute a nondutiable modification under the vessel repair statute. Our position in this matter is set forth below.
FACTS:
The vessel in question is U.S.-flagged and fully double bottomed below the cargo tanks. The inner bottom of the vessel is supported in an “egg crate” fashion with eighteen inch (18”) channels spaced three feet (3’) from each other running fore and aft, and, with floors spaced fourteen feet (14’) from each other running port to starboard. The inner bottom panels measure 14 ft. x 3 ft. between this support system.
The proposed modification is a new design feature which involves the permanent installation of 194 steel panel breakers throughout the double bottom of the ITB GROTON below the cargo tanks. This work would locally strengthen the hull of the vessel by reducing the distance between the inner bottom support systems from spans of 14 ft. x 3 ft. down to spans of 14 ft. x 1.5 ft. This added support would also reduce the overall plate loading thus improving the local structural performance of the vessel.
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In support of your claim, you submit the following: an affidavit from Joseph George, Manager of Engineering, Sheridan Transportation Company (Exhibit 1); drawings depicting the proposed modifications (Exhibit 2); and prior Customs rulings on modification work (Exhibits 3-8).
ISSUE:
Whether the proposed work constitutes a modification to the subject vessels and is therefore nondutiable under 19 U.S.C. § 1466.
LAW AND ANALYSIS:
Title 19, United States Code, § 1466 (19 U.S.C. § 1466), provides in pertinent part for the payment of an ad valorem duty of 50 percent of the cost of “…equipments, or any part thereof, including boats, purchased for, or the repair parts or materials to be used, or the expenses of repairs made in a foreign country upon a vessel documented under the laws of the United States…”
In its application of the vessel repair statute, Customs has held that modifications, alterations, or additions to the hull and fittings of a vessel are not subject to vessel repair duties. The identification of work constituting modifications vis-à-vis work constituting repairs has evolved from judicial and administrative precedent. (See Otte v. United States, 7 Ct. Cust. Appls. 166, T.D. 36489 (1916); United States v. Admiral Oriental Line et al., 18 C.C.P.A. 137, T.D. 44359 (1930); and Customs Bulletin and Decisions, Vol. 31, Number 40, published October 1, 1997.) The factors discussed within the
aforementioned authority are not by themselves necessarily determinative, nor are they the only factors which may be relevant in a given case. However, in a given case, these factors may be illustrative, illuminating, or relevant with respect to the issue of whether certain work may be a modification of a vessel which is nondutiable under 19 U.S.C. § 1466.
Upon reviewing the proposed work as described in your letter in conjunction with the supporting documentation you submitted (see Exhibits 1-2, cited above), in light of the above-referenced authority and prior Customs rulings cited in your letter (Exhibits 3-8), it is readily apparent that the work constitutes a nondutiable modification to the subject vessel.
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HOLDING:
The proposed work constitutes a modification to the subject vessel and is therefore nondutiable 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 §§ 4.14(d) and (e), Customs Regulations (19 CFR §§ 4.14(d) and (e)). Furthermore, any final ruling on this matter is contingent on Customs review of the evidence submitted pursuant to § 4.14(i), Customs Regulations (19 CFR § 4.14(i)).
Sincerely,
Larry L. Burton
Chief
Entry Procedures and Carriers Branch