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HQ 116490

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August 29, 2005

VES-3-18-RR:IT:EC 116490 CK

CATEGORY: CARRIER

Chief, Vessel Repair Unit
U.S. Customs and Border Protection
423 Canal Street
New Orleans, LA 70130

RE: 19 U.S.C. §1466; Vessel Repair Entry C20-0058511-0; Protest 2002-03-100048; M/V MANOA; V-054

Dear Sir:

This is in response to your memorandum of June 9, 2005 forwarding for our review the protest filed by Matson Navigation Company, Inc. (“protestant”) with respect to Vessel Repair Entry C20-0058511-0. Our ruling follows.

FACTS:

The M/V MANOA, a U.S.-flag vessel owned by the protestant,

The CF 226 reflects that Matson Navigation Company, Inc. is the owner of the vessel. The supplemental submission states that Matson Navigation Company, Inc. is the operator of the vessel. incurred foreign shipyard costs. The vessel arrived in the port of Los Angeles on July 23, 2001. A vessel repair entry was timely filed. However, an application for relief from duties was untimely filed with the New Orleans Vessel Repair Unit (“VRU”), and the application was denied. The determination of duty occurred on October 25, 2002.

The ensuing protest, received on January 23, 2003, pertained to duty charged on all repair items used by the regular crew of the vessel during the voyage. The VRU did not finalize the protest, as well as other similar Matson protests and vessel repair entries involving spare parts used by the vessel’s crew, pending the passage of the “Miscellaneous Trade and Technical Corrections Act of 2004” (Public Law No. 108-429).

ISSUE:

Whether the costs for which the protestant seeks relief are dutiable under 19 U.S.C. § 1466.

LAW AND ANALYSIS:

Initially, we note that the information in the file indicates that the protest, with application for further review, was timely filed under the statutory and regulatory provisions for protests. 19 U.S.C. 1514(c)(3) and 19 CFR 174.12(e). We further note that counsel for the protestant filed a supplemental submission dated April 8, 2005 with the VRU, pursuant to section 1554 of the “Miscellaneous Trade and Technical Corrections Act of 2004.”

Title 19, United States Code, § 1466(a) 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 . . . “

Section 1554 of the Miscellaneous Trade and Technical Corrections Act of 2004, signed by the President on December 3, 2004, amended the vessel repair statute by adding the following exemption to §1466(a) found in 19 U.S.C. 1466(h):

(4) the cost of equipment, repair parts, and materials that are installed on a vessel documented under the laws of the United States and engaged in the foreign or coasting trade, if the installation is done by members of the regular crew of such vessel while the vessel is on the high seas.

Declaration and entry shall not be required with respect to the installation, equipment, parts, and materials described in paragraph (4).

This newly-enacted legislation further provides for a retroactive effective date for that equipment, repair parts, and materials installed on or after April 25, 2001.

As noted above, the subject protest was received by the VRU on January 23, 2003 and counsel for the protestant filed a supplemental submission dated May 6, 2005. You have asked us to review the items described below. We will use the T.R. numbers used in the supplemental submission. The protestant seeks relief pursuant to 19 U.S.C. §1466(h)(2) with respect to these items. The first T.R. numbers at issue are 289, 606, 607, 609, 610, 611, 613, 614, 615, 622, and 623. The VRU recommends denial of relief for these items as the invoices are dated after the arrival of the M/V MANOA at Los Angeles, California on July 23, 2001.

T.R. Number
Invoice Date
289
8/7/2001
606
3/27/2002
607
9/28/2001
609
4/10/2002
610
4/10/2002
611
10/29/2001
613
7/26/2001
614
4/2/2002
615
4/2/2002
622
7/26/2001
623
7/26/2001

Therefore, protestant has submitted invoices for parts that were after the M/V MANOA arrived on July 23, 2001 concluding voyage 54. The above-referenced invoices cannot possibly be used as evidence of parts used during voyage 54 in order to claim relief under 19 U.S.C. §1466(h)(2).

Additionally, no relief should be granted on any invoice dated after July 23, 2001 because the invoice cannot possibly be evidence of a part used during voyage 54.

The next T.R. numbers in dispute, which share a common argument for relief are 554, 556, 608, and 624. Protestant has made a claim for relief from duties paid for: a lens retaining clip (554); a telephone (556); high pressure hose (608); and a bearing (624). However, no invoices or purchase orders have been submitted for these items. Relief from duties under section 1466 may not be granted where no evidence has been submitted. See, HQ 116452 (May 10, 2005), HQ 115953 (June 5, 2005), and HQ 116457 (June 20, 2005).

T.R. numbers 290, 297, and 555 are also in dispute. Protestant seeks relief for these items under section 1466(h)(2).

Title 19, United States Code, §1466(h)(2) (19 U.S.C. §1466(h)(2)), provides, in pertinent part, that the duty imposed by subsection (a) of this section shall not apply to

“the cost of spare repair parts or materials (other than nets or netting) which the owner or master of the vessel certifies are intended for use aboard a cargo vessel, documented under the laws of the United States and engaged in the foreign or coasting trade, for installation or use on such vessel, as needed, in the United States, at sea, or in a foreign country, 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”

In order to implement proper enforcement of §(h)(2), it is necessary that the key terms be defined. In defining parts, materials, and equipment, it is most beneficial to do so in descriptive terms rather than in the form of specific lists of items which fit the categories. In compiling lists it is inevitable that items will be inadvertently omitted which may lead to improper or inconsistent application of the law.

For purposes of 19 U.S.C. §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 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.

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 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 designated 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.

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.

T.R. # 290 is a timer. A timer constitutes an operating entity unto itself and is therefore equipment. No relief under section 1466(h)(2) can be granted for equipment.

T.R.# 297 is a pilot light, which is an operating entity unto itself and is therefore equipment. No relief under section 1466(h)(2) can be granted for equipment.

T.R.# 555 is a telephone. A telephone is an operating entity unto itself and is therefore equipment. No relief under section 1466(h)(2) can be granted for equipment.

HOLDING:

The costs for which the protestant seeks relief are dutiable under 19 U.S.C. § 1466 as discussed in the Law and Analysis section of this ruling.

You are instructed to deny the protest with respect to the above-discussed items.

In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), you are to mail this decision, together with the Customs Form 19, 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 make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

Glen E. Vereb
Chief

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