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HQ 114029

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December 12, 1997

VES-13-18-RR:IT:EC 114029 GOB

CATEGORY: CARRIER

Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 107 P.O. Box 2450
San Francisco, CA 94126

RE: 19 U.S.C. 1466; PRESIDENT TRUMAN, V-91E; Vessel Repair Entry No. 110- 7994473-9; Petition

Dear Madam:

This ruling is in response to your memorandum dated July 15, 1997, which forwarded the petition submitted by American President Lines, Inc. (the "petitioner") with respect to the above-referenced vessel repair entry.

FACTS:

The PRESIDENT TRUMAN (the "vessel"), a U.S.-flag vessel, arrived at the port of Seattle, Washington on February 20, 1997. The subject vessel repair entry was timely filed. Certain foreign shipyard work was performed in Hong Kong, Taiwan, and Japan in January and February of 1997.

By letter dated June 3, 1997, your office denied the application for relief with respect to the subject item.

ISSUE:

Whether the cost of the subject foreign shipyard item is dutiable pursuant to 19 U.S.C. 1466(a) or is eligible for treatment pursuant to 19 U.S.C. 1466(h)(3)?

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 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.

19 U.S.C. 1466(h)(3) provides:

The duty imposed by section (a) of this section shall not apply to -
...
(3) the cost of spare parts necessarily installed before the first entry into the United states, but only if duty is paid under appropriate commodity classifications of the Harmonized Tariff Schedules of the United States upon first entry into the United States of each such spare part purchased in, or imported from, a foreign country.

For the purpose of 19 U.S.C. 1466(h), we have defined a "part" as follows:

A part is determined to be something which does not lose its essential character or its identity as a distinct entity but which, like materials, is incorporated into a larger whole. It would be possible to disassemble an apparatus and still be able to identify a part. The term part does not mean part of a vessel, which practically speaking would encompass all elements necessary for a vessel to operate in its designed trade. Examples of parts as defined are seen in such items as piston rings and pre-formed gaskets, as opposed to gaskets which are cut at the work site from gasket material. (Emphasis in original.)

As indicated above, the issue is whether the item is dutiable under 19 U.S.C. 1466(a) at a rate of duty of fifty percent ad valorem or under 19 U.S.C. 1466(h)(3) under the appropriate commodity classification of the Harmonized Tariff Schedules of the United States.

The item at issue is stated on the CF 226 as "fabricate cylinder cover stands."

The Hong-Yang Marine Service Machinery Co., Ltd. invoice dated February 5, 1997 provides:

Provided service of qualified fitter with necessary tools/equipment and material to attend onboard at APL berth to fabricate a set of main engine cylinder cover stand and deliver to vessel as directed.

That invoice indicates the invoiced sum of NTD 8,793 was for "labor" and "fabrication cost." A materials cost of NTD 6,560 is also reflected on the invoice.

The petitioner's Service Purchase Order #065299 provides:

Job: Cylinder Cover Stands
...
Supply labor and material to fabricate a set of cylinder cover maintenance stands as per vessel chief engineer and deliver to vessel.

After a careful consideration of the record, we determine that the record reflects a fabrication of items from materials. We have ruled previously that materials are not eligible for treatment under 19 U.S.C. 1466(h)(3). For example, in Ruling 113835 dated March 20, 1997, we stated:

In regard to the stainless steel material in question, the record indisputably reflects that as originally purchased it in fact constituted material rather than parts as defined above. Consequently, notwithstanding its subsequent fabrication by Hong-Yang into two new spindle shafts, it does not qualify as parts for purposes of subsection (h)(3).

Accordingly, relief is denied. The subject item is dutiable pursuant to 19 U.S.C. 1466(a).

HOLDING:

As detailed above, the petition is denied.

Sincerely,

Jerry Laderberg
Chief,

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