VES-13-18-RR:IT:EC 114571 GEV
Chief, Liquidation Branch
U.S. Customs Service
Post Office Box 2450
San Francisco, California 94126
RE: Vessel Repair; Protest; APL SINGAPORE; V-22; Entry No. C27-0167477-5;
Protest No. 2704-98-102706; Parts; 19 U.S.C. § 1466(h)(3)
Dear Sir:
This is in response to your memorandum dated December 30, 1998, which forwarded for our review a protest concerning duties assessed pursuant to the above-referenced vessel repair entry. Our findings are set forth below.
FACTS:
The APL SINGAPORE is a U.S.-flag vessel owned by Wilmington Trust Company, trustee for American President Lines, Ltd. The vessel incurred foreign expenditures in May of 1998. The vessel subsequently arrived in the United States at San Pedro, California, on May 23, 1998. A vessel repair entry was timely filed. This entry was previously reviewed by your office and liquidated on October 16, 1998. A protest, dated December 21, 1998, was timely filed.
At issue are Item nos. 4 (antenna mast stays), 6 (catchment sumps), 7 (marine VHF antenna), and 8 (pneumatic system parts). With respect to Item no. 7, the record reflects that the antenna that was replaced was damaged in San Pedro, California, on April 11, 1998. However, the subject vessel subsequently proceeded to Singapore where the replacement antenna was purchased and installed. (See Sonco (Pte) Limited invoice no. APL/E/98/18, dated May 6, 1998, with accompanying service purchase order #220088.)
The protestant contends that all four items at issue are classifiable under subheading 9818.00.05, HTSUS (19 U.S.C. § 1466(h)(3)). In support of this contention the protestant has submitted the following: a copy of an e-mail from the vessel (Enclosure A); invoice no. 101681
from Metalock Seaserv (Singapore) Pte Ltd. (Enclosure B); and an Entry Summary Continuation
Sheet (Enclosure C). The record also contains the following additional documentation not
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previously cited: (1) Sonco (Pte) Limited invoice no. APL/E/98/19 with accompanying service purchase order #220084; and (2) Sonco (Pte) Limited invoice no. APL/E/98/20 with accompanying service purchase order #220085.
ISSUE:
Whether the articles covered by Item nos. 4, 6, 7 and 8 in the subject entry are classifiable under subheading 9818.00.05, HTSUS (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.
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.
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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.
As noted above, in the present matter the protestant claims that the articles covered by Item nos. 4, 6, 7 and 8 of the subject entry are classifiable under the provisions of subsection 1466(h)(3). We have reviewed the record in its entirety and find as follows.
With respect to Item no. 4, notwithstanding the protestant’s claim that the antenna mast stays in question were installed by the vessel’s crew (see Enclosure A), we note that the vendor’s invoice covering this cost nonetheless states, “Provide Labor, Equip & Engineering to Replace Antenna Mast Stays...” We further note that this invoice is signed and stamped by both the subject vessel’s Master and Chief Engineer. The great weight of evidence regarding Item no. 4 is there-fore probative of the fact that the unsegregated cost appearing on the invoice covers more than
just the parts in question (i.e., labor, equipment and engineering). In view of the fact that the scope of (h)(3) is limited solely to parts, the protestant’s claim with respect to Item no. 4 is denied.
Item no. 6 covers catchment sumps. These articles constitute equipment rather than parts as discussed above. Consequently, the protestant’s claim for this item is denied.
Item no. 7 covers a marine VHF antenna. Upon reviewing the record, we have determined that this antenna is a part falling within the duty-free exemption of 19 U.S.C.
§ 1466(h)(3). The protestant’s claim for Item no. 7 is therefore granted.
Item no. 8 covers pneumatic system parts. The protestant’s claim for this item is granted. - 4 -
HOLDING:
The articles covered by Item nos. 4 and 6 in the subject entry are not classifiable under subheading 9818.00.05, HTSUS (19 U.S.C. § 1466(h)(3)). The articles covered by Item nos. 7 and 8 in the subject entry are classifiable under subheading 9818.00.05, HTSUS (19 U.S.C.
§ 1466(h)(3)).
The protest should be granted in part. In accordance with § 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, 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 this decision must be accomplished prior to mailing the decision. Sixty days from the date of the decision, the Office
of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers Branch