HQ 0110462 - Petition for Review for Vessel Repair Entry #C27-0034983-3 Vessel: PRESIDENT POLK V-2 - United States International Trade Commision Rulings

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HQ 110462
January 21, 1990

VES-13-18-CO:R:P:C 110462 LLB

CATEGORY: CARRIER

Chief, Technical Branch
Pacific Region
300 North Los Angeles Street
Post Office Box 2071
Los Angeles, California 90053-3379

RE: Petition for Review for Vessel Repair Entry #C27-0034983-3 Vessel: PRESIDENT POLK V-2
Date of Arrival: October 3, 1988
Port of Arrival: San Pedro, California

Dear Sir:

Reference is made to your memorandum of September 8, l989, which forwards for our consideration a petition for review regarding our decision in Customs Letter Ruling 110059 (dated June 21, 1989).

FACTS:

The vessel in question was delivered new to the owner on July 17, l988. According to Coast Guard records, the vessel was documented as a U.S.-flag vessel on July 18, 1988, in San Francisco, California. On September 3, 1988, while on a voyage from Oakland, California, to Yokohama, Japan, the vessel sustained damage to the port anchor. On September 7, 1988, the owner contacted the builder regarding a replacement for the damaged anchor.

One anchor was airlifted from Kiel, West Germany to Hong Kong for installation, which was completed on September 18, 1988.

On September 7, 1988, a second anchor was ordered from the foreign builder for delivery in Oakland, California. The invoice price listed for the anchor is 33,730 DM.

The owner filed an application for relief on the grounds that the installed anchor was covered under the vessel's warranty clause. This application for relief was denied in Customs Letter Ruling 110059 (June 21, 1989) for lack of sufficient information. The owner now files a petition for review on the grounds that the anchor installed was a "spare part" and therefore entitled to duty-free status.
ISSUE:

Whether an anchor airlifted from a foreign builder to a foreign port and immediately installed can be considered a "spare part" and entitled to duty-free status.

LAW AND ANALYSIS:

Title 19, United States Code, section 1466, provides, in pertinent part, that the equipment purchased for and the repairs made in a foreign country upon a vessel documented under the laws of the United States to engage in the foreign or coasting trade or intended to be employed in those trades shall be subject to the payment of an ad valorem duty of 50 percent on the cost of that equipment and those repairs.

It is Customs position that, in certain cases, foreign shipyard costs for work performed on a vessel prior to its U.S. documentation are dutiable under section 1466. The particular circumstances involved in a case may result in the assessment of duty. Such is the case, for instance, when a vessel, although not documented under U.S. law at the time work is performed, is intended to be used in foreign or coastwise trade once documented. In this case the vessel was intended to be and in fact was documented for the foreign trade.

The vessel owner asserts that a listing of the anchor in a specification booklet which covers the class of vessel under consideration under "Spare Parts", is sufficient to classify the anchor as a duty-free spare part. The Customs Service has held that a part which is not of such immediate necessity as to be carried aboard ship is not a spare (see Customs Letter 109463). Furthermore, Customs Letter Ruling 109424 LLB, upon which the owner relies, specifically states that only "materials loaded on the vessels prior to documentation, including spare parts", may be excused from duty consideration.

In the instant case the anchor was not loaded onto and carried with the vessel prior to the date of the vessel's documentation. Here, the vessel in question was documented on July 18, 1988. The replacement anchor had not been placed aboard the vessel at that time, but remained with the foreign builder until being airlifted to Hong Kong in September, l988. Therefore, the so-called "fleet spare" replacement anchor cannot be classified as a duty-free spare part within the ambit of 19 U.S.C. 1466.

HOLDING:

An anchor which is not carried aboard a vessel as a spare, but rather is airlifted from a foreign builder to a foreign port and installed cannot be classified as a duty-free spare part. Accordingly, the petition for review is denied.

Sincerely,

B. James Fritz

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