VES-13-01/18-RR:IT:EC 113796 GEV
Chief, Liquidation Branch
U.S. Customs Service
Post Office Box 2450
San Francisco, California 94126
RE: Vessel Repair Entry No. C28-0200669-5; M/V STRONG VIRGINIAN;
Parts;
19 U.S.C. 1466(h)(3)
Dear Sir:
This is in response to your memorandum dated December 30,
1996, forwarding a petition for review of Customs ruling letter
113689 denying in part an application for relief from duties
assessed pursuant to 19 U.S.C. 1466. You request our review of
Item nos. 100 and 165 listed on the spreadsheets and contained
within the above-referenced vessel repair entry. Our findings in
this matter are set forth below.
FACTS:
The M/V STRONG VIRGINIAN is a U.S.-flag vessel operated by
Strong Virginian Navigation Company. Subsequent to the
completion of various foreign shipyard work, the vessel arrived
in the United States at Oakland, California, on July 19, 1995. A
vessel repair entry and an application for relief with supporting
documentation were timely filed.
By Customs ruling letter 113689, dated October 3, 1996, the
application for relief was granted in part and denied in part. A
petition for review of the aforementioned decision was timely
filed seeking relief with respect to Item nos. 100 and 165,
covered by ABB Industry PTE Ltd. invoice nos. 951113 and 951549,
respectively. The former covers articles installed on the vessel
in one of the Wartsila R22HF turbocharged diesel generators. The
latter covers articles installed on the vessel in the
turbocharger on the MAK Model 601 port main engine. The
petitioner requests that the subject costs for these articles be
classified pursuant to 19 U.S.C.
1466(h)(3).
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In support of its claim, the petitioner has submitted
various documentation including invoices, letters, diagrams,
statements and supporting documentation from a naval architect/
mechanical engineer (Exhibit 1) and the Fleet Technical Manager
of the owner and operator of the subject vessel (Exhibit 2), and
an Entry Summary Continuation Sheet listing the articles in
question (Exhibit 3).
ISSUES:
Whether the articles covered by Item nos. 100 and 165 are
classifiable under 19 U.S.C.
1466(h)(3).
LAW AND ANALYSIS:
Title 19, United States Code, 1466(a), provides in part
for payment of an ad valorem duty of 50 percent of the foreign
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 to vessels
documented under the laws of the United States to engage in the
foreign or coastwise trade, or vessels intended to engage in such
trade.
Section 1466 was amended by the reinstatement of
subsections (h)(1) and (2), the wording of which remain unchanged
from their previous enactment as part of the Customs and Trade
Act of 1990 ( 484E of Pub.L. 101-382), which had expired by its
terms on December 31, 1992. The amendment, which is effective
for all vessel entries made on or after January 1, 1995, also
added a new subsection (h)(3) which 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 com-
modity 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.
The scope of the amendments is narrow. It is useful to bear
in mind that the limiting language of (h)(3) refers only to
"spare parts", whereas subsection (a) of the statute assesses
duty on a broad range of costs including "equipments, or any part
thereof, including boats,...or the repair parts or materials to
be used, or the expenses or repairs..." (Emphasis added). It is
clear that the Congress has extended a vessel repair duty
limitation under subsection (h)(3) only to certain qualifying
parts.
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
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all elements 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.
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, 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) must 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.
As noted above, in the present matter, claims for relief
under the provisions of subsection (h)(3) are made with respect
to Item nos. 100 and 165. We have reviewed the supporting
invoices for the items listed above and find that they represent
the purchase of qualifying parts as required under subsection
(h)(3).
HOLDING:
The articles covered by Item nos. 100 and 165 are
classifiable under 19 U.S.C.
1466(h)(3). Accordingly, the petition is granted in its
entirety.
Sincerely,
Jerry Laderberg
Acting Chief
Entry and Carrier Rulings Branch