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 > 1998 HQ Rulings > HQ 114268 - HQ 114493 > HQ 114344

Previous Ruling Next Ruling
HQ 114344

October 21, 1998

VES-13-18-RR:IT:EC 114344 GEV


Chief, Liquidation Branch
U.S. Customs Service
Post Office Box 2450
San Francisco, California 94126

RE: Vessel Repair Entry No. C27-0167411-4; PRESIDENT ROOSEVELT; V-136
Painting; Modification; Parts; 19 U.S.C. ? 1466

Dear Sir:

This is in response to your memorandum dated April 3, 1998, forwarding an application for relief from duties assessed pursuant to 19 U.S.C. ? 1466. You request our review of Item nos. 338, 241, 245, 501, 502, and 503, as well as various costs for which relief is sought pursuant to 19 U.S.C. ? 1466(h)(3). Our findings are set forth below.


The PRESIDENT ROOSEVELT a U.S.-flag vessel owned by American President Lines, Inc. ("APL"). Subsequent to the completion of foreign shipyard work the vessel arrived in the United States at San Pedro, California, on December 9, 1997. A vessel repair entry was timely filed as was an application for relief with supporting documentation.


Whether the foreign costs contained within the subject entry for which our review is sought are dutiable under 19 U.S.C. ? 1466.


Title 19, United States Code, ? 1466 (19 U.S.C. ? 1466), 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..."

Item no. 338 covers engine room cleaning alleged by the applicant to be nondutiable. We note, however, that the record indicates that this cleaning was in preparation for dutiable painting. Customs has long-held that cleaning in preparation of dutiable painting is dutiable as well (C.I.E. 820/60). Item no. 339 is therefore dutiable.

Item nos. 241 (Modification to Hand Railing), 245 (Cargo Hold Modifications for 20 Foot Containers), 501 (Modification of Outboard Longitudinal Stiffener of Box Girder), 501 (Modification of Inboard Longitudinal Bulkhead of the Box Girder), and 503 (New Fuel Oil System) are alleged by the applicant to be nondutiable modifications.

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-a-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 work as described on Hyundai Mipo Dockyard Co., Ltd. invoice no. 961511, it is readily apparent that each of the above-described alleged modifications are permanent installations replacing existing parts/fittings/structures currently in good working order. Accordingly, Item nos. 241, 245, 501, 502 and 503 are nondutiable modifications.

With respect to the applicant's claims pursuant to ? 1466(h)(3), it should be noted that the vessel repair statute 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. (Emphasis added)

The scope of the amendment 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 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.

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 the applicant claims that certain articles contained within the subject entry are classifiable under the provisions of subsection 1466(h)(3). We have examined the record regarding those articles specified for our review (Repair Item #s 178, 179, 206, 229, 231, 248 and 249 marked as such on the CF 7501-A) and find that it supports the applicant's claim that as originally purchased the articles in question constituted uninstalled parts and are classifiable under 19 U.S.C. ? 1466(h)(3).


The foreign costs contained within the subject entry for which our review is sought are dutiable in part under 19 U.S.C. ? 1466 as discussed in the Law and Analysis portion of this ruling.


Jerry Laderberg
Entry Procedures and Carriers

Previous Ruling Next Ruling