VES-13-18-RR:IT:EC 115117 GEV
Chief, Liquidation Branch
U.S. Customs Service
Post Office Box 2450
San Francisco, CA 94126
RE: Vessel Repair Entry No. C27-0171362-3; Rental Charges; Parts;
PRESIDENT POLK; V-120; 19 U.S.C. § 1466(h)(3)
Dear Sir:
This is in response to your memorandum dated July 14, 2000, which forwards for our consideration a petition for review of your office’s decision on an application for relief from duty assessed pursuant to 19 U.S.C. § 1466. Our finding is set forth below.
FACTS:
The PRESIDENT POLK is a U.S.-flag vessel that incurred foreign shipyard costs in February of 2000. Subsequent to the completion of the work the vessel arrived in the United States at Los Angeles, California, on March 11, 2000. A vessel repair entry was timely filed as was an application for relief with supporting documentation.
By letter dated June 9, 2000, your office rendered its decision on the application for relief, denying it in part, and informed the applicant of the right to file a petition for review of this decision.
A petition for review was timely filed and forwarded to this office for review. At issue is Item no. 1 of the entry (Hong Tah Marine Service & Engineering Co., Ltd. Invoice no. YZ82581715) covering portable hand lamps used during the course of fuel oil tank cleaning. The petitioner contends that these lamps were not purchased but rather were rented for the purpose of illumination while the aforementioned
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cleaning was in progress and brought back ashore after the cleaning was completed. In support of this claim the petitioner has submitted additional documentation in the form of a letter from an official from Hong Tah Marine Service & Engineering Co., Ltd.
Also at issue is Item no. 5 of the entry (Hong Yang Marine Service Machinery Co., Ltd. Invoice no. YZ82582321) covering the purchase of aluminum lashing bridge doors with stainless steel hinges and bolts/nuts which your office deemed to be dutiable equipment. The petitioner contends that these are parts eligible for treatment under 19 U.S.C. § 1466(h)(3).
ISSUES:
1. Whether Item no. 1 covering rental charges for portable hand lamps is dutiable under 19 U.S.C. § 1466(a).
2. Whether Item no. 5 covering aluminum lashing bridge doors with stainless steel hinges and bolts/nuts is 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.
With respect to Item no. 1, the record corroborates the petitioner’s claim that the portable hand lamps were rental charges incurred pursuant to a non-dutiable cleaning operation. In accordance with the decision of the U.S. Court of Appeals for the Federal Circuit in Texaco Marine Services, Inc. v. United States, 44 F.3d 1539 (1994), these charges are not dutiable.
In regard to Item no. 5, we note the following. Section 1466 was amended by the reinstatement of subsections (h)(1) and (2), the wording of which remains 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
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January 1, 1995, also added a new subsection (h)(3) which provided 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
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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.
The petitioner maintains that Item no. 5 constitutes a part for purposes of 1466(h)(3) because it does not lose either its essential character or identity when incorporated into the larger whole of the lashing bridge system of a modern containership which is stated to consist of narrow skeletal structures containing access points, fitting foundations, securing points, electrical pathways, etc. The petitioner states that the lashing bridge access door itself when closed is horizontal, and is raised when workers and crew climb or descend the access ladders in the normal routine of container securing, inspecting cargo stowage and monitoring refrigerated cargo containers.
Upon further review of this matter, it is our position that notwith-standing the necessity for human exertion, lashing bridge access doors operate as entities unto themselves. They are affixed to the vessel with hinges and bolts/nuts (also included in Item no. 5) evidencing non-permanent attachment to the vessel. Furthermore, the record contains no evidence to corroborate the petitioner’s claim that a lashing bridge system is a distinct operating entity separate and apart from other distinct systems on board a containership. Consequently, Item no. 5 is dutiable as equipment.
HOLDINGS:
1. Item 1 covering rental charges for portable hand lamps is not dutiable under 19 U.S.C. § 1466(a).
2. Item no. 5 covering aluminum lashing bridge doors with stainless steel hinges and bolts/nuts is equipment not classifiable under subheading 9818.00.05, HTSUS (19 U.S.C. § 1466(h)(3)).
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Accordingly, the petition is granted in part and denied in part.
Sincerely,
Larry L. Burton
Chief
Entry Procedures and Carriers Branch