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HQ 114053

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December 12, 1997

VES-13-18-RR:IT:EC 114053 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-89E; Vessel Repair Entry No. 110- 7994463-0; Protest

Dear Madam:

This ruling is in response to your memorandum dated July 29, 1997, which forwarded the protest submitted by American President Lines, Inc. (the "protestant") 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 December 12, 1996. The subject vessel repair entry was timely filed. Certain foreign shipyard work was performed in November 1996.

By letters dated March 28, 1997 and May 9, 1997, your office denied the application for relief and petition with respect to the subject items.

ISSUE:

Whether the cost of the subject foreign shipyard items 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 subject items are 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 Schedule of the United States.

With respect to the subject items, the CF 226 provides:

Item 5. SPO 065232 Hong Yang
Fabricate Piston Resting Console

Item 6. SPO 065230 Hong Yang
Fabricate Galvanized Grating

The invoice for item 5 provides, in pertinent part:

Provided service of qualified burner/welder with necessary tool and equipment to attend onboard to make a resting console for main engine piston same size and properties as Sulzer part no. U 94336. And delivery onboard as directed.
Labor
Cost for fabrication of piston stand and delivery.

The pertinent invoice for item 6 provides, in pertinent part:

Provided service of qualified burner/welder with necessary tool and equipment to attend onboard to prefabrication and install new galvanized grating ...

The pertinent purchase order for item 5 provides, in pertinent part:

Recommend: Provide the services of vendor to make a resting console for main engine piston...

The pertinent purchase order for item 6 provides, in pertinent part:

Recommend: Provide the services of vendor to instal[l] new grating at aft mooring station...

In a letter dated June 20, 1997 with respect to item 5, the vendor, Hong-Yang Marine Service Machinery Co., Ltd. ("Hong-Yang") states:

Please be advised that the cost of supplying the pre-fabricated piston stand spare part to the subject vessel was in fact NY$9,900 and there was no delivery or installation costs included in the NT$9,900.

In a letter dated June 17, 1997 with respect to item 6, Hong-Yang states:

Please be advised that the cost of the pre-fabricated spare part, the galvanized steel grating, which was supplied to the subject vessel was in fact NTD7,631 exclusive of the installation cost.

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 items are dutiable pursuant to 19 U.S.C. 1466(a).

HOLDING:

As detailed above, the protest is denied.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, the Freedom of Information Act and other public access channels.

Sincerely,

Jerry Laderberg
Chief,
Entry Procedures and Carriers
Branch

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