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HQ 115132

June 15, 2001

VES-13-18-RR:IT:EC 115132 RSD


Chief, Liquidation Branch
U.S. Customs Service
Post Office Box 2450
San Francisco, CA 94126

RE: Vessel Repair Entry No. C32-0027581-7, S.S. EWA V-802D Modification of container stowage; 19 U.S.C. 1466

Dear Sir:

This is in response to your memorandum dated August 8, 2000, which forwards for our consideration an application for relief from vessel repair duties assessed pursuant to 19 U.S.C. § 1466. Your office requests our review with respect to certain of the applicant’s alleged modifications of the vessel. Our findings are set forth below.


S.S. EWA is a U.S.-flag vessel owned by Matson Navigation Company, which incurred costs at foreign shipyards. Subsequent to the completion of the work, the vessel arrived at the port of Honolulu, Hawaii on March 27, 2000. A vessel repair entry was filed on March 27, 2000. An application for relief with supporting documentation was submitted on July 24, 2000. The entry contains many alleged modifications, which are marked on attached spreadsheets. You have asked us to review several of these items to determine if they are eligible for relief from duty.

During the interval of February 12, 2000 through March 17, 2000, the S.S. EWA was at the Hyundai Mipo Dockyard in Ulsan, Korea for a mandatory regulatory ABS Special Survey No. 7. In addition, in order to accommodate the stowage of additional 24-foot containers on deck, certain modifications to the vessel were completed at the dockyard. The S.S. EWA is currently configured to carry 20-foot and 40-foot containers. Matson intends to employ the S.S. EWA in the Hawaiian trade which dictates the stowage of 24-foot containers and which is unique to this service.


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”

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 are 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.

Whether an item under consideration provides an improvement or enhancement in operation or efficiency of the vessel.

ITEM NO. 244 Modifications to No. 2 & No. 3 Double Bottom Vent & Overflow Piping

According to the applicant the No. 2 and No. 3 D.B. Tanks (P&S) are in salt-water ballast service. This item concerns alterations to and relocation of the vent and overflow piping serving the No. 2 and No. 3 D.B. Tanks (P&S) so that the piping will run outside of the No. 2B and No. 3 Wing Tanks (P&S), which are in fuel oil service. The work was completed as an environmental protection to eliminate the passage of salt-water double bottom vent piping from running through fuel oil to the wing tank. Prior to the completion of the work, any leakage in the vent line in the fuel oil tanks would result in contamination of the salt-water ballast tanks. This alteration eliminated this potentially undesirable condition by relocating the vent and overflow lines outside of the fuel oil tanks. It was an anti-pollution protection. In this instance, after a review of the invoice submitted, we conclude that the work described therein constitutes modifications to the vessel which are non-dutiable under 19 U.S.C. §1466.

ITEM Nos. 244.5 and 244.6 No 2. & 3 P&S D.B Vent Line Mods-Add’l and F.O. Tanks Cleaning for Vent Piping Mods

No 2 & No.3 P&S D.B. Vent Line Mods –Additional

These items provided for the removal and disposal of salt-water ballast from the No. 2A, P/S S.W. wing tank to facilitate the modifications of the vent lines described in Item no. 244. The work consisted of the removal sludge and the cleaning No. 2B P/S and No. P/S F.O. wing tanks to permit piping modification (double bottom vent pipe removal within fuel oil tanks.) Because this work was part of the procedures performed to complete the work on item no. 244, we believe that these items should be considered non-dutiable modification as well.

ITEM NO. 254 Hatch Cover Gasket

According to the applicant this item relates to the improvement of the hatch cover. The purpose of the work was to provide additional clearance around the container entry guides in the cargo holds, so that the hatch cover could be guided and landed in place without coming into contact with these guides and without damaging the existing gasketing on the cover. Previously, the removal and the replacement of the hatch covers resulted in the hatch covers hanging up on the cargo hold container entry guides, which could damage or destroy the watertight gasket on the covers. This allowed seawater to enter the cargo. The prior hatch cover arrangement provided very little clearance around the container guides and there were inadequate hatch cover positioning girders. As a consequence the gaskets on hatch covers had repeated damage.

A new permanent and previously non-existent gasket arrangement around the cargo hold container guides was put in place. In addition, the gasket arrangement on the hatch covers was changed to be compatible to the previously non-gasketed arrangement in the way of the cargo hold container guides thereby combating the problem of seawater entry into the cargo hold. We believe that this work represented a permanent improvement to vessel, which would constitute a non-dutiable modification.

ITEM No. 254.1 Hatch Cover Gasket Material

According to the applicant the rubber gasket material to accomplish the hatch cover work described in item no. 254 was originally intended to be owner supplied material. However, during the process of the work on item no. 254, additional gasket material was required. Due to time constraints, it was necessary for the shipyard to supply this additional required rubber gasket material. We agree with the applicant that because the additional material was required as part of a non-dutiable modification, it qualifies for non-dutiable status.

ITEM No. 283 Misc. Engine Room Piping Modifications

The applicant indicates that this work was related to installation of the Petra Combustion Control System. The invoice from Hyundai Mipo Dockyard states that it provided labor, material and equipment to the owner’s representative with engine piping modifications for the following:

Modify condenser hotwell sensing lines to receive new Gems level sensor. Modify sensing lines to exhaust pilot valves. Modify piping of existing 850-35# reducing station to receive new designed valve.

We believe that this work constitutes a non-dutiable modification.

ITEM 301 Hatch Cover Modification

This work was done to adapt the existing hatch cover in accordance with contract Plan 3A. The changes included the adaptation and the addition of a primary hatch cover girder and new structural headers. Also included in the procedure was the installation of new base sockets and padeyes. The work also required the installation of the associated local reinforcement for 24-foot container stowage. New (or enlarged) bearing pads were provided and installed at the ends of the transverse girders where higher loads have been introduced. Where necessary, the lifting sockets were relocated to center and prepared about the transverse center of gravity of the hatch cover. The contractor prepared a plan for determining the center of gravity of the covers and submitted it to the owner for approval.

Previously, in Headquarters Ruling 114918 dated May 30, 2000, we ruled that if this work is accomplished as described, and there is no need for repair of existing damage at the time that operations are began on the hatch covers, Customs would consider the work to be in the nature of non-dutiable modification rather than repair. However, we added that a final determination must necessarily await examination of the evidence submitted after the work is completed. In this instance we find that the work on the hatch cover was strictly a modification and not a repair and thus it was non-dutiable.

ITEM No. 302 Pedestal Fabrication and Installation

This item is part of the hatch cover modification. The pedestals were designed such that no reinforcement was required below the main deck. There were removals and relocation of existing deck mounted fittings that were required at certain locations. Base sockets were installed once the adjacent hatch covers were fitted in place. The pedestals were fitted with removable handrails. Suitable storage for the handrail stanchions was provided as shown on the contract plan. The pedestal platforms were fitted with “Fibergrate” grating. Hinged covers over access openings were installed and shown to be of lightweight construction, and they were arranged to lie flat on the platform when in the “open” position. We find that this item was part of a modification and thus non-dutiable.

ITEM No. 302.1 P/S Davit Relocation

The pedestal modification described in item No. 302 created interference not foreseen with the davit arms Rows 4 and 5. This item clears this interference which was occasioned by a modification. The shipyard provided labor, material and equipment to relocate the port and starboard davit arms from Row 5 and Row 9. Davit arms were relocated due to the interference associated with the new container support pedestal being installed at Rows 4 and 5. We find that this item was part of a modification and thus non-dutiable.

ITEM No. 303 Reinforcement of Longitudinal Hatch Cover & Longitudinal Coamings

The reconfiguration of the hatch covers to accommodate 24-foot containers necessitated the fabrication and installation of additional structure to transmit these new loading conditions in the vessel structure. This item accomplishes this requirement. Accordingly, we find that this item was also a non-dutiable modification.

ITEM No. 304 Surface Preparation and Coatings

All new and disturbed steel in Items 301, 302, 302.1 and 303 was prepared and coated to required standards. Since the surface preparation and coating was part of the process of completing the modification specified in items 301, 302 302.1 and 303, it also will be considered a non-dutiable modification.

ITEM No. 400 Electrical-New Refrigerated Container Outlets

This item involved installing additional electrical outlets for more refrigerated container capacity. In Headquarters Ruling 110814, dated July 24, 1990, there was an item which involved the installation of electrical cable and outlets where none had previously been installed. We ruled that the operation was a duty-free modification. Similarly, we believe that this item constitutes a non-dutiable modification.

ITEM No. 400.01 Additional Electrical Removals

During the progress of the electrical installation of item 400, it became apparent that electrical removals in addition to item 400 were required as permanent removals. As in item No. 400, we find that work to install additional electrical outlets constitutes a non-dutiable modification.

ITEM No. 500 Bilage System

This item concerns the existing oily water bilge system on the S.S. EWA. The EWA was built in 1972 and since that date, regulatory changes required that the oily water bilge system be improved. The existing World Water System Heli-Sep Model 2000 oil water separator was removed and discarded. A new World Water System Heli-Sep Model 5000-OC oily water separator was installed together with all necessary accessories. A new bilge water decanting tank was also provided and installed and the obsolete decanting tank removed. We find that this work constitutes a non-dutiable modification.

Item No. 500.1 Bilge Manifold Discharge Line--Removal

The bilge system modification, Item No. 500, made obsolete a section of 2-inch piping in the lower level engine room below the floor plates. This item made permanent the removal of this obsolete piping occasioned by the Item No. 500 improvement. We find that this item would also qualify as a non-dutiable modification.

Item No. 500.2 Existing Bilge Decanting Tank--Removal

The installation of the oily water bilge system in Item no. 500 included a new bilge water decanting tank installed in cargo hold #4. This made obsolete the previous holding/decanting tanks in the lower engine room. Since this item was part of the installation of Bilge System, we find that this work constitutes a non-dutiable modification.

Item No. 500.3 Engine Room Holding Tank Slops

This item covers the removal and disposal of slops. It is related to the bilge system modification, Item no. 500. Accordingly, this work is also non-dutiable.

Additional Item No. 1 ABS Surveys

According to the applicant, the S.S. EWA was due for her No. 7 Special continuous survey. This survey was initiated at this dry-docking. The specific portion of the survey you have asked us to consider is identified as a modification survey for $2,250.00. The description from the American Bureau of Shipping indicates that the survey was conducted to review modifications carried out to the S.S. EWA of Honolulu, Hawaii, USA on 14 February 2000 and subsequent dates as the vessel lay afloat and in dry-dock at Hyundai Mipo Dockyard Inc. at Ulsan, Korea.

With respect to surveys or inspections, the general rule is that a survey undertaken to meet the specific requirements of a governmental entity, classification society, or insurance carrier is not dutiable even when dutiable repairs are effected as a result of a survey. When an inspection or survey is conducted to ascertain the extent of damage sustained or whether repairs are necessary, the survey’s cost is dutiable as part of the repairs which are accomplished. In this case, we note that there is a statement from the American Bureau of Shipping that indicates that the surveys were performed in connection with a modification of the vessel. There is no indication that this part of the survey was connected to a repair of the vessel and thus the cost of this part of survey, which is labeled a modification survey, would not be dutiable.

Additional Item No. 5 Petra Control Services

The original Bailey Combustion System was obsolete and unworkable. The vessel in effect was being operated on manual control. This item provided for the replacement of the old obsolete system and the installation of a new modern Gem hot well level control system and associated electronic controls and sensing lines. It also provides for sensing and control of the new decanting tanks installed as part of the bilge system modification. In effect this item modernizes the combustion control system on this vessel and as such permanently improves the operation efficiency of the vessel. The item was, however, unworkable when replaced. As such, it does not qualify as a modification even though it provides an improvement over the previous model.


Following a thorough analysis of the facts as well as of the law and applicable precedents, we have determined that the Application for Relief should be granted in part, and denied in part, as specified in the Law and Analysis portion of this ruling.


Larry L. Burton
Entry Procedures and Carriers Branch

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