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HQ 114257

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March 10, 1998

VES-13-18-RR:IT:EC 114257 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. 110-7994475-4; PRESIDENT KENNEDY, V-89E; 19 U.S.C. 1466; Protest

Dear Madam:

This is in response to your memorandum of February 5, 1998, which forwarded the protest submitted by American Ship Management, LLC ("protestant") with respect to the above-referenced vessel repair entry.

FACTS:

The evidence of record indicates the following. The PRESIDENT KENNEDY (the "vessel"), a U.S.-flag vessel, arrived at the port of Seattle, Washington on March 8, 1997. The subject vessel repair entry was timely filed. Certain foreign shipyard work was performed in Korea, Taiwan, and Japan in February 1997.

By Ruling 114000 dated July 8, 1997, the application with respect to the subject entry was granted in part and denied in part.

By Ruling 114077 dated September 17, 1997, the petition with respect to the subject entry was granted in part and denied in part.

ISSUE:

The dutiability of the subject costs pursuant to 19 U.S.C. 1466.

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.

The protestant claims that general services costs should not be prorated.

As stated in Ruling 114077, we have stated on many occasions that general services costs are to be prorated. Our position has not changed. General services costs are to be prorated. In connection with this claim, the protestant asserts that the cost of a gas free certificate should be dutiable, and should not be prorated. Our position continues to be that the cost of a gas free certificate is to be prorated.

The protestant claims that certain stainless steel, in connection with item 206 ("hatch coaming top plate"), is eligible for treatment under 19 U.S.C. 1466(h)(3).

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. [Emphases in original.]

The issue here 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 pertinent part of the invoice provides:

Material: 345 Kg Prefabricated Steel
345 Kg @ $4.00/Kg = $ 1,380.00

After a consideration of the record, we determine that the item at issue is not eligible for treatment pursuant to 19 U.S.C. 1466(h)(3). 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 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,

Director,
International Trade Compliance
Division

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