"I think it is up to the USCG officer that sees it... "
Yeah well...that's like the way the USCG got into trouble about overboard discharges being sufficiently "secured" or not. Good statutes leave no room for questions, poorly written ones are subject to interpretation and then ultimately to lawsuits throwing them down as "arbitrary and capricious".
USCG National Vessel Documentation Center, FAQ Page
"How do I mark my vessel?"
"The official number assigned to documented vessels, preceded of the abbreviation "NO." must be marked in block-type Arabic numerals at least three inches high on some clearly visible interior structural part of the hull. The number must be permanently affixed so that alteration, removal, or replacement would be obvious and cause some scarring or damage to the surrounding hull area."
Since the statute says "affixed" that means "attached to" and grinding off epoxy, or a bronze plate, would render anything "affixed" a-goner. One could argue that welding onto a steel bulkhead is not permanent or sufficient, since welds can be ground down and panels cut out and replaced for that matter as well.
There are, ah, diplomatic
ways to remind an officer in any service that what he is about to conlcude has been concluded differently by large numbers of his colleagues, and that should he force an issue into the courts, it is likely to become an adverse mark in his jacket regardless of how the courts ultimately rule.
Now, if you really wanted to pull the tiger's tail...the letters can be 3 or 4 inches tall and engraved by laser--leaving them quite literally hairline thin and quite close to invisible to the naked eye. That's how a lot of contract boilerplate winds up meeting standards for type size, and being totally illegible at the same time. (Long lines of cramped all-uppercase text...there are ways to make things perfectly legible but totally unreadable, without using invisible ink.)