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HQ 115413




August 10, 2001

VES-13-18-RR:IT:EC 115413 GEV

CATEGORY: CARRIER

Chief, Liquidation Branch
U.S. Customs Service
Post Office Box 2450
San Francisco, CA 94126

RE: Vessel Repair Entry No. C30-0109476-3; APL THAILAND; V-045; Parts; 19 U.S.C. § 1466(h)(3)

Dear Sir:

This is in response to your memorandum dated June 21, 2001, forwarding a petition for review of your office’s decision on an application for relief for vessel repair duties assessed pursuant to 19 U.S.C. § 1466. Our ruling on this matter is set forth below.

FACTS:

The APL THAILAND is a U.S.-flag vessel which incurred foreign repair costs. Subsequent to the completion of the work in question, the vessel arrived at the port of Seattle, Washington, on February 10, 2001. A vessel repair entry was timely filed.

An application for relief with supporting documentation was timely filed which your office granted in part and denied in part by letter dated May 10, 2001. A petition for review of your decision was timely filed. The only item for which the petitioner seeks relief is Item no. 1 listed on the CF 226 covering a power supply for an x-band radar transceiver. The protestant seeks relief pursuant to 19 U.S.C. § 1466(h)(3) for this item.

ISSUES:

Whether the item for which the petitioner seeks relief is classifiable under subheading 9818.00.05, HTSUS (19 U.S.C. § 1466(h)(3)).

LAW AND ANALYSIS:

Title 19, United States Code, § 1466 (19 U.S.C. § 1466), provides in pertinent part for the payment of an ad valorem duty of 50 percent of the cost of “equipments, or any part thereof, including boats, purchased for, or the repair parts or materials to be used, or the expenses of repairs made in a foreign country upon a vessel documented under the laws of the United States”

With respect to the protestant’s claims under 19 U.S.C. § 1466(h)(3), we note that statutory provision provides as follows:

(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 spare part purchased in, or imported from, a foreign country.

A part under § 1466 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 readily 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.

For purposes of § 1466, the term materials is determined to mean something which is consumed in the course of its use, and/or loses its identity as a distinct entity when incorporated into the larger whole. Some examples of materials as defined are seen in such items as a container of paint which is applied to vessel surfaces, and sheets of steel which are incorporated into the hull and superstructure of a vessel.

The term equipment is determined to mean something which constitutes an operating entity unto itself. Equipment retains at least the potential for portability. Equipment may be affixed to a vessel in a non-permanent fashion, such as by means of bolts or other temporary methods, which is a feature distinguishing it from being considered an
integrated portion of the hull and superstructure of a vessel. Examples of equipment as defined are seen in such items as winches and generators.

Subsection (h)(3) is administered by maintaining the requirement that a vessel repair entry (Customs Form 226) must be filed upon first arrival in the United States of vessels covered by the repair statute. Since issuance of instructions by Customs Headquarters on May 31, 1995 (Headquarters Memorandum 113291), in instances in which a vessel operator claims certain foreign parts expenditures to be within the terms of subsection (h)(3), it has been required that continuation sheets normally submitted with entries for consumption (Customs Form 7501-A) be completed and attached to the vessel repair entry form. The continuation sheets must provide all required information necessary to assign the proper duty rate as listed in the Harmonized Tariff. The vessel repair entry number is the sole number assigned to the entry, and such an entry with continuation sheets attached is considered to be a vessel repair entry. For entries which followed the January 1, 1995, effective date of the statutory amendments, but which preceded the issuance of Headquarters guidance, the form of entry was guided by local Customs practice, and most commonly saw a vessel repair entry accompanied by an entry for consumption.

With respect to the petitioner’s § 1466(h)(3) claim, upon further review of the record in its entirety we concur that Item no. 1 covering a power supply for an x-band radar transceiver qualifies for treatment thereunder.

HOLDING:

The item for which the petitioner seeks relief is classifiable under subheading 9818.00.05, HTSUS (19 U.S.C. § 1466(h)(3)).

Accordingly, the petition is granted.

Sincerely,

Larry L. Burton
Chief

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