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HQ 114258

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March 10, 1998

VES-13-18-RR:IT:EC 114258 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. 110-7994402-8; PRESIDENT TRUMAN, V-95E; 19 U.S.C. 1466; Protest

Dear Madam:

This is in response to your memorandum of February 13, 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 TRUMAN (the "vessel"), a U.S.-flag vessel, arrived at the port of Seattle, Washington on July 10, 1997. The subject vessel repair entry was subsequently filed. The vessel underwent certain foreign shipyard work in Korea and Taiwan.

ISSUE:

Whether the costs of the subject items are dutiable pursuant to 19 U.S.C. 1466(a) or are 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.

The protestant requests relief with respect to item nos. 3 (entitled "deck welding repairs") and 5 (entitled "cell guide longitudinal support"). The protestant claims that these items are 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.]

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 invoice for item 3 provides as follows in pertinent part (It appears that the protestant is not protesting the cost in item 3 which is itemized as: "cost for repairing various section handrailing."):
cost for fabrication turnbucle hook 800 x 4pcs. cost for fabrication the port anchor switch box cost for fabrication port & stbd locker hings. [Emphases supplied.]

The invoice for item 5 provides as follows in pertinent part (It appears that the protestant is only protesting part of this item.):
prefabrication cost for stiffner and brackets in workshop.
[Emphasis supplied.]

With respect to item 3, the protestant's Exhibit A, a letter dated September 18, 1997 from Hong-Yang Marine Service Machinery Co., Ltd. ("Hong-Yang") to American President Lines, Ltd., provides:

We thank you for your kind fax dated 16 September, 1997 in connection with the captioned invoice.

We are pleased to confirm that the cost of supply only of the following parts was:

4 Turnbuckle hooks NT$ 3,200.00
1 Port Anchor Switch Box " 13,500.00
1 set of Port & Starboard
Locker Hinges " 7,800.00
NT$24,500.00

Please do not hesitate to contact us if you have any further question.

With respect to item 5, the protestant's Exhibit B, a letter dated September 18, 1997 from Hong-Yang to American President Lines, Ltd., provides:

We thank you for your kind fax dated 16 September, 1997 in connection with the captioned invoice.

We are pleased to confirm that the total cost of supply only one ISO #271018 Longitudinal Cell guide complete with End Brackets was NT$13,800.00 and no installation cost included.

Please do not hesitate to contact us if you have any further question.

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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