VES-13-18-RR:IT:EC 115639 GEV
Chief, Vessel Repair Unit
U.S. Customs Service
423 Canal Street
New Orleans, Louisiana 70130
RE: Vessel Repair Entry No. C18-0023445-7; M/V STRONG
VIRGINIAN; Modification; Parts; 19 U.S.C. § 1466(h)(3)
Dear Sir:
This is in response to your memorandum dated March 22, 2002, forwarding a petition for review of your office’s decision on an application for relief for vessel repair duties assessed pursuant to 19 U.S.C. § 1466. Our ruling on this matter is set forth below.
FACTS:
The M/V STRONG VIRGINIAN is a U.S.-flag vessel which incurred foreign repair costs. Subsequent to the completion of the work in question, the vessel arrived at Port Canaveral, Florida, on March 1, 1998. A vessel repair entry was timely filed.
An application for relief with supporting documentation was timely filed which your office granted in part and denied in part by letter dated September 25, 2001. A petition for review of your decision was timely filed seeking relief for a myriad of articles.
ISSUES:
Whether the items for which the petitioner seeks relief are dutiable under 19 U.S.C. § 1466(a).
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LAW AND ANALYSIS:
Title 19, United States Code, § 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…”
Section 1466(h)(3), provides that the duty imposed by § 1466(a) shall not apply to--
(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
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integrated portion of the hull and superstructure of a vessel. Examples of equipment as defined are seen in such items as winches and generators.
Exhibit 15 covers articles alleged to comprise a nondutiable modification. In its application of the vessel repair statute, Customs has held that modifications, alterations, or additions to the hull and fittings of a vessel are not subject to vessel repair duties. The identification of work constituting modifications vis-à-vis work constituting repairs has evolved from judicial and administrative precedent. (See Otte v. United States, 7 Ct. Cust. Appls. 166, T.D. 36489 (1916); United States v. Admiral Oriental Line et al., 18 C.C.P.A. 137, T.D. 44359 (1930); and Customs Bulletin and Decisions, Vol. 31, Number 40, published October 1, 1997.) The factors discussed within the aforementioned authority are not by themselves necessarily determinative, nor are they the only factors which may be relevant in a given case. However, in a given case, these factors may be illustrative, illuminating, or relevant with respect to the issue of whether certain work may be a modification of a vessel which is nondutiable under 19 U.S.C. § 1466.
Upon reviewing the proposed work as described in your letter and in the supporting documentation enclosed therewith, it is readily apparent that the work constitutes a nondutiable modification to the subject vessel. The conversion or reconfiguration of a vessel to enable more efficient use or greater options in such use, in the absence of repairs or a state of disrepair, is typically held to be a nondutiable modification. Exhibit 15 is therefore non-dutiable.
With respect to the petitioner’s claims concerning Exhibits 18, 23 and 29, the articles referenced therein are alleged to be nondutiable by virtue of their being of U.S.-manufacture or duty-paid. (Customs ruling letter 111619, dated October 21, 1991) Upon further review of the record, we are in accord with the petitioner’s claims in regard to Exhibits 18 and 29. We disagree with the petitioner as to Exhibit 23 in view of the fact that those articles listed on the foreign invoice for which relief is sought (Exhibit 23) differ from those listed on the shipper’s bill (Exhibit 23(a). Those articles covered by Exhibit 23 therefore remain dutiable.
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The petitioner also claims relief under § 1466(h)(3) for articles claimed under the following: Exhibits 22; 25; 26; 30; 34; 35; and 37(a). Upon reviewing the record in its entirety, we are in accord with the petitioner’s claims as to these articles with the exception of Exhibit 25 which covers oil heaters. We maintain our position that these articles are dutiable equipment.
HOLDING:
The items for which the petitioner seeks relief are dutiable in part under 19 U.S.C. § 1466(a) as discussed in the Law and Analysis portion of this ruling.
Accordingly, the petition is granted in part.
Sincerely,
Jeremy Baskin
Acting Chief
Entry Procedures and Carriers Branch