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HQ 116626

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May 24, 2006

VES-13-18-RR:BSTC:CCI 116626 IDL

CATEGORY: CARRIER

Chief, Vessel Repair Unit
U.S. Customs and Border Protection
P.O. Box 1389
Kenner, Louisiana 70112

RE: 19 U.S.C. § 1466; Vessel Repair Entry C20-0059024-3; Protest No. 2002-03-100461; M/V MOKIHANA, V. 061

Dear Sir:

This is in response to your memorandum of March 3, 2006, forwarding for our review the protest filed by counsel on behalf of Matson Navigation Company, Inc. with respect to Vessel Repair Entry C20-0059024-3. Our ruling on this matter is set forth below.

FACTS:

The M/V MOKIHANA, a U.S.-flagged vessel owned by Matson Navigation Company, Inc. (“protestant”), incurred foreign shipyard costs. On June 4, 2002, the vessel arrived in the Port of Los Angeles, California, where Vessel Repair Entry C20-0059024-3 was timely filed. On March 28, 2003, a determination of duty occurred in the amount of $13,953.52.

The ensuing Protest No. 2002-03-100461, filed on June 12, 2003, pertained to duty charged on all repair items used by the regular crew and 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).

Title 19, United States Code, section 1466(a) (19 U.S.C. § 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.”

We further note that counsel for the protestant filed a supplemental submission, dated May 9, 2005, with the VRU, pursuant to section 1554 of the “Miscellaneous Trade and Technical Corrections Act of 2004.” 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 section 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 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 June 12, 2003, and counsel for the protestant filed a supplemental submission dated May 9, 2005 with respect to the following items:

(i) TR Nos. 360, 361, 378, 389-393, 397, 400, and 402-405; (ii) TR Nos. 379, 381, 394, 395, and 401; (iii) TR Nos. 377 (Signal Horn) and 382 (Filter).

The protestant seeks relief on the items listed in section (i), (ii), and (iii) pursuant to 19 U.S.C. § 1466(h)(2), which exempts from duty spare repair parts or materials that have been manufactured in the United States or entered the United States duty-paid and are used aboard a cargo vessel engaged in foreign or coasting trade. However, we note that the invoices for items listed in section (i) are dated after the date of arrival of the vessel. An invoice dated after the date of arrival of a vessel is not probative evidence with respect to a claim that an item listed thereon is eligible for an exemption from any provision of 19 U.S.C. § 1466 with regard to the subject voyage. HQ 116452 (May 10, 2005). Furthermore, we note that the invoices submitted for TR Nos. 378 and 405 reference a vessel other than the subject vessel, which, in and of itself, constitutes grounds to deny relief with respect to the subject entry.

In addition, with regard to the group of items listed in section (ii), the protestant failed to submit an invoice, which is necessary for verification of the dates of purchase. We note that the invoice submitted for TR No. 401 references a vessel other than the subject vessel. Therefore, all items listed in sections (i) and (ii) are dutiable. See HQ 116452.

With regard to the group of items listed in section (iii), which includes TR Nos. 377 and 382, a “part” is determined to be something that 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 that 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.”

It is our position that TR Nos. 377 (Signal Horn) and 382 (Filters) constitute dutiable “equipment,” which includes “portable articles necessaryfor theoperationor maintenance of a vessel, but not permanently incorporated in or permanently attached to its hull or propelling machinery, and not constituting consumable supplies.” HQ 112191 (February 18, 1993), quoting T.D. 34150 (1914). As such, these items are not eligible for relief under section 1466(h)(2), and are dutiable. (See also HQ 111654 (December 24, 1991), wherein we held that a “portable waste-oil filter” and an “arctic air horn” are equipment).

In its original protest, the protestant disputes cleaning costs relating to the engine room (Item 3 in the original entry). The evidence indicates that extensive repairs occurred to the main engine, and the protestant has failed to provide evidence that the cleaning costs were not associated with such repairs. As such, this item is dutiable. See, for example, Texaco Marine Services, Inc. and Texaco Refining and Marketing, Inc. v. United States, 44 F.3d 1539 (Fed. Cir. 1994), aff’g 815 F.Supp. 1484 (Ct. Int’l Trade 1993).

HOLDING:

The costs for which the protestant seeks relief are dutiable under 19 U.S.C. § 1466 consistent with the analysis above. The protest should be DENIED.

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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