United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1991 HQ Rulings > HQ 0109491 - HQ 0110350 > HQ 0110188

Previous Ruling Next Ruling

HQ 110188

June 7, 1989

VES-13-18-CO:R:P:C 110188 GV


Cynthia J. Thomas
Assistant General Counsel
Panama Canal Commission
APO Miami 34011-5000

RE: Imported components for Panama Canal Commission tugboats

Dear Ms. Thomas:

This is in reference to your letter dated April 18, 1989, requesting a confirmation of your belief that imported components used in the construction of tugboats in the United States are not dutiable under 19 U.S.C. 1466.


The Panama Canal Commission is an executive agency of the United States Government, established by section 1101 of the Panama Canal Act of 1979, Pub. L. 96-70, 93 Stat. 456. This section is codified at 22 U.S.C. 3611. The Commission has a fleet of tugboats at the Canal that assist transiting vessels through the locks of the waterway.

New tugboats currently under construction in Louisiana will in the near future join the working fleet at the Canal in the Republic of Panama. These vessels have a cycloidal propeller system manufactured in Europe. They also use imported components in their fire fighting units.


Whether vessel equipment/parts landed in the United States to be installed on a vessel being built in the United States are dutiable under 19 U.S.C. 1466 upon importation.


Title 19, United States Code, section 1466, provides in pertinent part for payment of an ad valorem duty of 50 percent of the cost of foreign repairs to or equipment purchased for a vessel documented under the laws of the United States to engage 2
in the foreign or coastwise trade, or intended to be employed in such trade.

Section 4.14(a)(2)(ii), Customs Regulations (19 CFR 4.14(a)(2)(ii)) provides that vessels owned or chartered by the United States Government, if documented with a registry, coastwise trade, or Great Lakes trade endorsement, or if undocumented, intended to engage in foreign, coastwise or Great Lakes trade, are subject to 19 U.S.C. 1466. It is apparent that the subject tugboats, currently under construction and undocumented, are not to be used in any of the aforementioned trades. As an aside, we note that undocumented Military Sealift Command vessels do not fall within the scope of 19 U.S.C. 1466.

It is therefore the position of the Customs Service that work done and/or equipment/parts added in the United States prior to the subject vessels' initial documentation and pursuant to the original specifications of the contracts for the construction of the vessels renders the duty provision of 19 U.S.C. 1466 inapplicable.

It is noted that the Court in United States v. Standard Oil Co. of California, 27 C.C.P.A. 334, C.A.D. 108 (1940) found that equipment purchased abroad for a U.S. vessel is dutiable under 19 U.S.C. 1466 when brought into the United States for installation on the importing vessel. The question of whether section 1466 would apply to equipment imported on a vessel other than the one on which it was to be installed was left open by the Court. The Court was somewhat more favorably disposed to applying the vessel repair duty provisions when equipment was designed to be installed domestically on a particular vessel, than when the importation was of a more general nature. This specific question was left unanswered, however, since it was not directly before the Court.

In view of the above, the Customs Service issued ruling VES 13-18-CO:R:P:C 109914 LLB, dated April 19, 1989 (see page 14 of Customs Bulletin dated May 10, 1989) which provides, in pertinent part, that when foreign-made repair parts/materials are placed aboard or installed on a United States-documented vessel while it is in the United States, the cost of the parts/materials is dutiable under section 1466 if installed on the importing vessel or on a vessel owned or operated by the same or related carrier. If placed aboard or installed in the United States on other than a vessel described in the preceding sentence, duty is limited to that applicable under the proper provision of the Harmonized Tariff Schedule of the United States (HTSUS; 19 U.S.C. 1202, as amended).


Accordingly, since the imported components under consideration are part of the original construction of the tugboats in the United States, they would not be dutiable under 19 U.S.C. 1466 but rather under the applicable provisions of the HTSUS.

Should you have any questions concerning the tariff classification of the imported components in question, you should direct your inquiries to:

John E. Elkins, Esq.
Chief, General Classification Branch
1301 Constitution Ave., NW., Room 2209
Washington, D.C. 20229


Vessel equipment/parts landed in the United States to be installed on a vessel being built in the United States are not dutiable under 19 U.S.C. 1466 upon importation but rather under the applicable provision(s) of the Harmonized Tariff Schedule of the United States (HTSUS; 19 U.S.C. 1202, as amended).


B. James Fritz

Previous Ruling Next Ruling