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HQ 114182





December 12, 1997

VES-13-18-RR:IT:EC 114182 GOB

CATEGORY: CARRIER

Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 415 P.O. Box 2450
San Francisco, CA 94126

RE: Vessel Repair Entry No. 110-7994372-3; PRESIDENT JACKSON, V-90E; 19 U.S.C. 1466; Protest

Dear Madam:

This is in response to your memorandum of November 13, 1997, which forwarded the protest submitted on behalf of American President Lines, Ltd. (the "protestant") with respect to the above-referenced vessel repair entry.

FACTS:

The evidence of record indicates the following. The PRESIDENT JACKSON (the "vessel"), a U.S.-flag vessel owned and operated by the protestant, arrived at the port of Seattle, Washington on June 12, 1997. The subject vessel repair entry was subsequently filed. The vessel underwent certain foreign shipyard work in Japan, Taiwan, and Hong Kong.

ISSUE:

Whether the cost of 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(a) 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 that:

The duty imposed by subsection (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 Schedule 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.

The items at issue are described on the CF 226 as: "SPO#055439, Hong Yang Marine, Fabricate and Install Piston Stand Liners."

The Hong-Yang Marine Service Machinery Co., Ltd. ("Hong-Yang") invoice dated May 29, 1997 provides:

Provided service of qualified fitters/welders with necessary tools, equipment and material to attend onboard at APL berth to install copper liners for two M/E piston stands, and removed paint & clean bronze liners in piston rod holes in deck framing at E/R total of six locations as directed by chief engineer.

That invoice reflects amounts for: "fabrication & installation cost;" "cleaning cost;" and "one supervisor attending for steel work for 2 daytime."

The protestant has submitted a letter of June 24, 1997 from Hong-Yang which states, in pertinent part: "Please be advised that the total amount of NT$31,982 as cost for fabrication and installation of two pieces of piston stand liner as parts ..." This letter contains separate amounts for the following: "copper liner as part supplied;" "installation cost;" "cleaning cost;" and "one supervisor attending for steel work for 2 daytime."

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

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