HQ 113585

June 6, 1996

VES-13-18-RR:IT:EC 113585 PH

CATEGORY: Carriers

Chief, Liquidation Section

U. S. Customs Service

P. O. Box 2450

San Francisco, California 94126

RE: Vessel Repair; Application for relief; S/S ARCO JUNEAU,

Voyage CF491; Entry No. C31-0015284-3; Modifications;

Inspection; Cleaning; Parts; Anchor chain; Texaco Marine

Services, Inc. v. United States; T.D. 44359; T.D. 44886;

T.D. 44913; T.D. 45453; 19 CFR 4.14; 19 U.S.C. 1466; 19

U.S.C. 1466(h)(3)

Dear Sir:

This letter is in response to your memorandum dated September 14,

1995, which forwarded for our review an application for relief

from duties relating to the above-referenced vessel repair entry.

Our ruling follows.

FACTS:

The vessel ARCO JUNEAU, a United States-flag vessel owned by

Metaric Corporation and operated by Arco Marine, Inc., arrived at

the port of Valdez, Alaska, on April 12, 1995. A vessel repair

entry was timely filed (April 12, 1995, according to Customs

records). According to the vessel repair entry and other

documents in the file, the vessel underwent certain work at the

Hyundai Mipo Shipyard in Ulsan, Korea.

On July 10, 1995, the vessel operator submitted an application

for relief from duty (dated June 29, 1995) for certain items of

the work done abroad. You request us to review certain items in

the entry and provide you with our determination as to the

dutiability of those items. Those items, with descriptions and

other information from the invoice and other materials in the

file, are listed below:

Item no. Invoice description, etc.

002 Services and Facilities. This item consists

of expenses related to a Gas free certificate,

expenses related to docking and shifting the

vessel, facilities (shore power, shore steam,

fresh water, compressed air, fire main,

refrigeration, fire watches, air conditioning

units cooling water, communications, garbage

and trash removal, crane services, stores,

heat lamps or straps, protective covers (for

bridge electronic equipment) (conceded to be

dutiable), covering passageways and furniture

(conceded to be dutiable), security guard

services, and furnishing a portable

generator), engine room and pump room bilge

cleaning, and transportation.

108 Rudder. The portions of this item in

controversy are stated to consist of the

modification of the rudder by removing the

side shell plating from both sides of the

rudder, machining the area of the forging

which supports the pintle pin, and welding in

a new section of plate with improved geometry.

A drawing, with an approval letter from the

Coast Guard, is submitted in regard to this

item. According to the invoice for this item,

the work included \"\[g\]ouged up and welded on

crack area\" and \"\[d\]ismantled rudder and laid

down to dock bottom for repair in sert plate

as necessary\". Staging is included in this

item, and the cost of the staging is

segregated from other costs. The cost of

inspection relating to this item is also

segregated. The part of the ABS survey (No.

UL 5475 I) appearing to relate to this item is

not included in the file (i.e., the \"Summary

Report of Class Surveys\" refers to a number of

suffixes and states that the total pages

(including checksheets) is 44, but the

checksheet for this item is not included in

the file).

329 Engine room bilge. This item is stated to

consist of the permanent mounting of two 100

gallon vertical FRP storage tanks in addition

to the two existing tanks. The item includes

the fabrication and installation of straps and

angle iron support, fabrication of foundation,

fabrication of new piping, hose and tubing,

and hydro testing upon completion of

installation. According to the application

for relief, the additional tanks allow for

storage of bilge water when the vessel is in

restricted waters.

330 Machinery space clean drain overboard pumping

system. This item is stated to consist of

installing owner-furnished piping from

discharge of existing overboard pump to

existing fitting installed in overboard piping

for the fire pump. According to the

application, this system permits the pumping

directly overboard of clean water, rather than

allowing it to drain to the bilge where it

must be processed through the oil/water

strainer.

401 IGS inspection and repairs. The portion of

this item in controversy is stated to consist

of installing level alarm sensors and two

stainless steel bosses on the deck steel \"U-lopp\" cover for the
installation of the level

alarms, as well as the installation of pipe

conduit and mounting brackets, and armored

cable. According to the application, the

purpose of this item was to allow monitoring

the water seal level, which results in a

higher level of safety.

403 IGS piping inspection and repairs. The

portion of this item in controversy is stated

to consist of disconnecting one 20 inch blind

flange on the forward end of the IGS main,

providing adequate ventilation, furnishing

labor to crawl inside the pipe, inspecting and

cleaning the interior of the IGS main deck 20

inch line, 500 feet long, and removing

approximately one ton of deposit (there is a

notation in the invoice indicating that the

total deposit removed was 3 tons). Temporary

ventilation costs are segregated in this item.

According to the application, this cleaning

was not in preparation for coating, it

consisted of cleaning and inspection only.

414 Fire station No. 5. This item is stated to

consist of releasing four angle iron supports

for the fire station hose rack, moving the

hose rack forward 10 feet, reattaching the

angle iron supports to the deck, grinding the

locations affected, and touch-up painting.

According to the application, this work

involved permanent welding. The reason given

for the relocation was to make the hose rack

more accessible (previously, personnel had to

climb over pipe lines while avoiding cross

braces of the accommodation ladder storage

rack).

415 Fire station No. 6. This item is stated to

consist of the installation of straight run

piping with one flanged offsticker, fitting

flanged fire station hydrants at both ends of

crossover, and attaching a new section of

piping to the existing offsticker on the 10

inch fire main. After welding, the

fabrication of the piping section was to be

hot-dip galvanized. The item included the

fabrication and installation of piping

brackets. According to the application, this

work was to allow for laying out fire hoses at

the port and starboard manifold while the

vessel is engaged in cargo operations.

419 Pump room access platform. This item is

stated to consist of extending the existing

walkway approximately four feet toward the

centerline of the vessel. Involved in the

item is the installation of an angle support

and handrail, cutting part of the edge of the

existing walkway, welding the new platform

deck to existing walkway, and coating welded

fabrication and deck plating. According to

the application, the reason for this extension

of the ladder platform was to allow the sensor

for the combustible gas detector to be

serviced (previously no access to the sensor

was readily available).

420 King posts, radar mast, foremast, and IGS mast

riser. The portion of this item in

controversy (C., Forward mast) is stated to

consist of the installation of one padeye at

the top of the forward mast. Staging costs

are segregated in this item. According to the

application, this padeye was installed for the

hook-up of a personnel safety line for people

going aloft for the purpose of maintaining the

whistle and flood lights.

425 Rigging cleats. This item is stated to

consist of installing four owner-furnished

deck cleats at locations on the top of the

forward breakwater, and touching up of the

welded attachments. According to the

application, the purpose of the addition of

the cleats was to allow for safer handling of

the booms during the setup period (when

rigging the booms for handling hoses).

605 Room heaters. This item is stated to consist

of the installation of owner-furnished steam

heaters in oiler #1 staterooms. The item

includes removal of overhauled panels in each

stateroom and one panel in each water closet

space, insulation of tubing, and installation

of stainless steel sheet metal covers over

lines mounted on bulkheads and new entrance

door hold-back hooks and cushions in way of

the new tubing runs. According to the

application, the existing forced air heating

system which provided heat to these rooms was

insufficient to meet heating requirements.

The steam heating system was changed to

incorporate steam heaters in these rooms.

901 Vapor recovery system. This item is stated to

consist of modifying the existing inert gas

system to include a vapor recovery manifold.

According to the application, under the new

system, \"\[a\]s the vessel loads cargo the

vapors will collect in the shipboard piping

system and will flow through a dedicated

manifold connection to a shoreside facility

where the vapors will be incinerated.\" This

\"is soon to be a requirement at the Valdez

Marine Terminal for all tank vessels loading

out of the port of Valdez, and is a

requirement at Pacific Coast ports such as San

Francisco and Long Beach.\"

Cheung Hae Slop removal. This item is stated to consist

03/15/95 of the receipt and disposal of slop wash

Invoice water, sludge removal and disposal, and

mucking out from No. 5 cargo tank center and

starboard slop tank.

Halla Marine Anchor chain. This item is for the cost of

03/13/95 anchor chain. In the file is a copy of an

Invoice Entry Summary Continuation sheet for \"stud

link chain\" and \"chain & parts, other parts\",

with an invoice and entry value the same as

the value of the anchor chain listed in the

referenced invoice.

ISSUES:

Whether the work described in the FACTS portion of this ruling is

dutiable under the vessel repair statute (19 U.S.C. 1466).

LAW AND ANALYSIS:

Initially we note that the vessel repair entry and the

application for relief in this matter were timely filed (see 19

CFR 4.14(b)(2) and 4.14(d)(1)(ii)).

Under 19 U.S.C. 1466:

The equipments, or any part thereof \... 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 to engage in the foreign

or coasting trade, or a vessel intended to be employed in

such trade, shall, on the first arrival of such vessel in

any port of the United States, be liable to entry and the

payment of an ad valorem duty of 50 per centum on the cost

thereof in such foreign country. \...

Section 1466 also provides, generally, for remission or refund of

such duties if it is established that the purchases or repairs

were compelled by stress of weather or other casualty, that the

equipments or repairs were manufactured or produced in the United

States and the labor necessary to install them or make the

repairs was performed by United States residents or members of

the regular crew of the vessel, or that the equipments or

materials or labor were used as dunnage for cargo, or similar

purposes. In addition, section 1466 provides for the exemption

from vessel repair duties for certain materials with respect to a

vessel which arrives in a United States port two years or more

after its last departure from a United States port, and for

certain materials for LASH (Lighter Aboard Ship) barges, or

certain spare parts or materials subject to various specified

conditions. The Customs Regulations issued under section 1466

are found in 19 CFR 4.14.

The Customs Service has issued many rulings applying and

interpreting 19 U.S.C. 1466. See, e.g., ruling 112851, dated

March 22, 1996, copy enclosed. Ruling 112851, describes the

general rules for the determination of what are modifications to

the hull and fittings of a vessel (held not to be dutiable under

section 1466). Generally, qualifying modifications to the hull

and fittings of a vessel involve a permanent incorporation into

the hull or superstructure of a vessel, provide an improvement or

enhancement in operation or efficiency of the vessel, and may not

involve the replacement of a current part, fitting, or structure

which is not in good working order. The LAW AND ANALYSIS portion

of ruling HQ 112851 is incorporated by reference into this

ruling, in regard to its description of the interpretation of

this issue.

Insofar as cleaning operations are concerned, Customs has held

that cleaning operations which remove rust and deterioration or

worn parts, and which are a necessary factor in the effective

restoration of a vessel to its former state of preservation,

constitute vessel repairs. Analogous to Customs position

regarding the dutiability of surveys (described in ruling 112851,

referred to above), Customs has long held that the cost of

cleaning is not dutiable unless it is performed as part of, in

preparation for, or in conjunction with dutiable repairs or is an

integral part of the overall maintenance of the vessel (see

C.I.E.\'s 18/48; 125/48; 910/59; 820/60; 51/61; 569/62; and

698/62).

Insofar as the applicability of 19 U.S.C. 1466(h)(3) is concerned

(subsection 1466(h) expired on December 31, 1992, and again

became effective on January 1, 1995, and so is applicable to the

entry under consideration), that provision provides that duties

imposed by subsection 1466(a) shall not apply to \"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 \[HTSUS\] upon first entry into the United States

of each such spare part purchased in, or imported from, a foreign

country.\" In a memorandum of May 31, 1995 (File: VES-13-R:IT:C

113291), Customs stated that for treatment under this provision

Customs would require a vessel operator to complete continuation

sheets normally submitted with entries for consumption and attach

them to the vessel entry form. Also according to this

memorandum, Customs stated it would \"\... apply the provision to

all parts \[but not, obviously, to materials or equipments\] which

are purchased and installed abroad.\"

The recent Court decision in Texaco Marine Services, Inc. v.

United States, 44 F. 3d 1539 (Fed. Cir. 1994), is applicable in

this case (see memorandum dated March 3, 1995, from the Assistant

Commissioner of Customs, Office of Regulations and Rulings and

published in the Customs Bulletin of April 5, 1995 (Customs

Bulletin and Decisions, vol. 29, no. 14, page 24), in which

Customs took the position that the decision in that case was

applicable, in its full weight and effect, to all vessel repair

entries filed with Customs on or after the date of that decision

(December 29, 1994)). Customs has considered the effect of

Texaco in several rulings (see, e.g., ruling 226485, dated

February 5, 1996). In ruling 226485, we noted, basically, that

the Court upheld the \"but for\" test which had been proffered by

Customs in the lower court trial (i.e., the costs involved (post-

repair cleaning and protective coverings) were an integral part

of the dutiable repair process and would not have been necessary

\"but for\" the dutiable repairs). We noted that the Court

provided clear guidance with respect to the proper interpretation

of 19 U.S.C. 1466, in that it rejected Customs Court and CIT

cases as incorrectly decided if they were inconsistent with the

\"but for\" test (see American Viking Corp. v. United States, 37

Cust. Ct. 237, C.D. 1830, 150 F. Supp. 746 (1956) (expense of

providing lighting for dutiable repairs); International

Navigation Co. v. United States, 38 Cust. Ct. 5, C.D. 1836, 148

F. Supp. 448 (1957) (transportation expenses for foreign repair

crew to travel to and from an anchored vessel being repaired);

and Mount Washington Tanker Co. v. United States, 1 CIT 32, 505

F. Supp. 209 (1980) (transportation costs for members of a

foreign repair crew performing dutiable repairs)) and explained

how the case of United States v. George Hall Coal Co., 142 F.

1039 (2d Cir. 1906) (see also T.D. 24932 and 134 F. 1003 (1905)),

was consistent with the \"but for\" test in that the expenses there

were dry-docking expenses which \"would have been incurred

irrespective of whether or not dutiable repairs were performed\"

(44 F. 3d at 1546).

As we noted in ruling 226485, the decision in Texaco is

dispositive of many vessel repair issues (in that it changes

Customs interpretations of 19 U.S.C. in regard to a \"myriad of

foreign repair expenses.\" In a memorandum dated January 18,

1995, the Assistant Commissioner of Customs, Office of

Regulations and Rulings, described some of these changes (this

memorandum, published in the Customs Bulletin of February 8, 1995

(Customs Bulletin and Decisions, vol. 29, no. 6, page 59) was

modified in other respects by the March 3, 1995, memorandum from

the Assistant Commissioner (see above)). According to the

January 18, 1995, memorandum:

\... \[W\]e currently do not consider the following foreign

costs dutiable under the vessel repair statute: air, crane,

drydocking charges, electricity, travel/transportation,

launch use, lodging, security and staging. Absent these

costs being incurred pursuant to events such as a regularly

scheduled survey or in conjunction with work that would

otherwise be nondutiable or remissible (e.g., a modification

or casualty), they would undoubtedly constitute \[dutiable\]

\"expenses of repairs\" under the \"but for\" test discussed

above. \* \* \* We emphasize that this list is not all

inclusive; other foreign costs not herein discussed should

undergo the same scrutiny \[i.e., scrutiny to ensure

consistency with the \"but for\" test\].

The LAW AND ANALYSIS portion of ruling HQ 226485, and the
above-referenced January 18 and March 3, 1995, memorandums from the

Assistant Commissioner (a copy of each is enclosed for your

convenience) are incorporated by reference into this ruling, in

regard to their description and interpretation of this issue

(i.e., the applicability of Texaco).

The applicant claims that items 108 (portions only), 329, 330,

401 (portions only), 414, 415, 419, 420 (portions only), 425,

605, and 901 are non-dutiable, as modifications to the hull and

fittings of the vessel. Item 108 is dutiable because the invoice

refers to work which appears to be repairs (i.e., as noted in the

FACTS portion of this ruling, the work included \"\[g\]ouged up and

welded on crack area\" and \"\[d\]ismantled rudder and laid down to

dock bottom for repair in sert plate as necessary\"). In the

absence of evidence to the contrary (e.g., the specific part of

the ABS survey, referred to in the FACTS portion of this ruling,

could possibly establish that there were no repairs involved in

this work, but that part of the ABS survey is not included in the

file). We note that in ruling 110639 (invoice item 108 D),

similar work was held to be non-dutiable as a modification, but

in that case there was no evidence of dutiable repairs. Of

course, under the \"but for\" test in Texaco, as described above,

the costs for staging and inspection associated with this item,

even though segregated, would be dutiable.

Item 329 is non-dutiable, as the permanent mounting of two FRP

storage tanks in addition to the two existing tanks (see United

States v. Admiral Oriental Line et al., 18 CCPA 137, T.D. 44359

\(1930\) (installation of a steel swimming tank held not to a

dutiable repair under 19 U.S.C. 1466); and Admiral Oriental Line

v\. United States, T.D. 45453 (1932) (enlarging of steel emergency

generator house in order to house additional machinery held not

to be dutiable under section 1466 as an addition to the hull and

fittings of the vessel)). We note that there is no evidence that

the existing tanks were defective or in need of repair or

replacement and we note that the new tanks were installed in

addition to the existing tanks (see discussion of modifications

in ruling HQ 112851 - qualifying modifications may not involve

the replacement of a current part, fitting, or structure which is

not in good working order).

Item 330 is non-dutiable, as the permanent installation of piping

between the existing overboard pump to the existing overboard

piping for the fire pump (see Admiral Oriental Line v. United

States, T.D. 45453 (1932) (installation of a new independent

filling line to the fresh-water tank, necessary because water

obtained at a named port was satisfactory for boiler purposes but

not for drinking purposes so that a separate and independent

filling line was necessary, held not to be dutiable under 19

U.S.C. 1466 as an addition to the hull and fittings of the

vessel). We note that there is no evidence that the work was to

replace defective piping and we note that the new piping added a

new feature (permitting the pumping of clean water directly

overboard).

The portion of item 401 in controversy (installation of level

alarms) is non-dutiable as an addition to the hull and fittings

(see ruling 112972, January 4, 1994, invoice item 904

(installation of a new gas detection sensor in pump room and a

monitor in engine room console held non-dutiable on the same

basis)).

Item 414 (disconnection and reattachment at a new location of the

fire station hose rack) is non-dutiable as an alteration to the

hull and fittings (see ruling 112972, invoice item 513

(disconnection and relocation of ballaster for flood lights held

non-dutiable on the same basis)).

Item 415 (installation of piping between fire station hydrants

and offsticker) is non-dutiable as an addition to the hull and

fittings on the same basis as item 330 above.

Item 419 (extension of the existing pump room access platform) is

non-dutiable as a modification or alteration to the hull and

fittings of the vessel (see above, see also ruling 112641, March

21, 1996, invoice items 427 (enlarging of life raft platform held

non-dutiable) and 429 (extension of catwalk held non-dutiable)).

The portion of item 420 in controversy (installation of a padeye

at the top of the forward mast) is non-dutiable as an addition to

the hull and fittings of the vessel (see ruling 112553, February

16, 1993, invoice item 426, in which installation of bracket with

pad eye to kingposts was held non-dutiable on this basis).

Item 425 (installation of rigging cleats) is non-dutiable as an

addition to the hull and fittings (see Abstract 18861 (1932

protest decision of the 3rd Division of the Customs Court,

Admiral Oriental Line) holding that installation of teakwood hand

rails was a non-dutiable addition to the hull and fittings);

C.I.E. 1294/58 (installation of \"MacGregor\" hatches held non-dutiable
on this basis); and ruling 112454, March 31, 1993,

invoice item 514 (installation of pad-eyes held non-dutiable on

this basis)).

Item 605 (installation of steam heaters in staterooms) is non-dutiable
as an alteration or modification to the hull and

fittings (see E.E. Kelly & Co. v. United States, T.D. 44913

\(1931\) (permanent installation of lavatory and deck-chair

compartments for storing deck chairs held to be non-dutiable on

this basis), and Admiral Oriental Line v. United States, T.D.

44886 (1931) (installation of heating coils in the deep tanks of

vessels held to be non-dutiable on this basis)).

Item 901 (installation of a vapor recovery manifold system) is

nondutiable as an addition to the hull and fittings of the vessel

(see ruling 112553, invoice item 912-6, in which the installation

of a vapor recovery manifold was held non-dutiable on this

basis).

The applicant claims that the portion in controversy in item 403

(disconnecting one end of the IGS main, providing ventilation,

and crawling inside pipe to inspect and clean the interior and

remove deposits) and the work described in the Cheung Hae

03/15/95 invoice (slop removal) are non-dutiable as consisting of

cleaning and inspection only. As stated above, Customs has long

held that the cost of cleaning is not dutiable unless it is

performed as part of, in preparation for, or in conjunction with

dutiable repairs or is an integral part of the overall

maintenance of the vessel (see, in addition to the C.I.E.\'s cited

above for this proposition, ruling 111730, September 19, 1991,

and American Mail Line, Ltd. v. United States, 35 Cust. Ct. 142,

C.D. 1735 (1955) (sweeping and cleaning the holds of a vessel

held non-dutiable); and Northern Steamship Co., Inc. v. United

States, 54 Cust. Ct. 92, C.D. 2514 (1965) (scraping and cleaning

grain, dirt, and other material (including, but only

incidentally, rust) from the Rose Boxes (iron boxes containing

perforations and fitted at the end of bilge suctions in order to

prevent the pipes from being obstructed with solid matter) and

removal of the material held non-dutiable as cleaning not related

to a dutiable repair)).

In the case of item 403, we note that there are other portions of

this item (relating to IGS piping inspection and repairs) which

are clearly dutiable (and which are conceded to be dutiable by

the applicant). We note that the ABS Survey worksheet and other

information which could possibly clarify whether the portion of

item 403 in controversy consisted of work performed in

conjunction with dutiable repairs (ABS Report UL 5475-F) is not

included in the file. Because of the presence of these dutiable

repairs in item 403 which may be related to the cleaning in

controversy, and because of the absence of evidence which could

possibly clarify the matter, we conclude that the portion of this

item in controversy is dutiable.

In the case of the work described in the Cheung Hae invoice,

there is no indication that this work was performed in

conjunction with repairs (see invoice items 701-703, concerning

tank repairs, and note that those items provide separately for

cleaning (referring to invoice item 005)). Therefore, we

conclude that this item is non-dutiable (see above authorities in

regard to cleaning and, in particular, ruling 111730).

The applicant claims that the cost in the Halla Marine 03/13/95

invoice (purchase of an anchor chain) is exempt from the 50% duty

in 19 U.S.C. 1466(a) under section 1466(h)(3), citing the
above-referenced May 31, 1995, memorandum (113291). The May 31, 1995,

memorandum defines a \"part\", for purposes of section 1466(h), as

\"\... 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.\" The definition also states

that \"\[i\]t would be possible to disassemble an apparatus and

still \... readily identify a part.\" An anchor chain meets this

definition (it does not lose its essential character or identity

but is incorporated into a larger whole and it would be possible

to disassemble an apparatus and still readily identify the anchor

chain) (see also ruling 112202, May 20, 1992, invoice item 14,

holding that an anchor chain kit may qualify for treatment under

section 1466(h)(2)). Therefore, if the other requirements

(proper filing of a vessel repair entry and appropriately

completed continuation sheets for consumption entries and payment

of applicable duty) for treatment under section 1466(h)(3) are

met (we note that the vessel repair entry and continuation sheets

have been filed), this item is dutiable under section 1466(h)(3)

and is not subject to the 50% duty under section 1466(a).

The applicant claims that item 002 (services and facilities) is

subject to apportionment (or proration) on the basis of dutiable

and non-dutiable foreign costs or duty-free as electricity, air,

water, telephone, etc.; staging, crane service, or rigging;

cleaning; drydocking; charges for other than equipment, repairs,

or labor in connection therewith; or consumables (the applicant

concedes that the portions of this item consisting of protective

covering (C.14 and C.15) are dutiable). We have taken the

position that charges such as those in controversy in this item,

basically consisting of drydocking and related charges, are

subject to the same apportionment rule Customs has long followed

for gas-freeing costs (see C.I.E. 1188/60) (see ruling 226826,

May 2, 1996, invoice item 002). Therefore, the costs in this

item are subject to apportionment (or proration) on the basis of

dutiable and non-dutiable foreign costs.

(As noted above, the decision in Texaco is applicable to this

entry. Therefore, portions of many of the items relating to

dutiable repairs (e.g., staging) may be dutiable under the \"but

for\" test approved in that case. In this regard, you should be

guided by that case, the rulings regarding this issue referred to

in this ruling (copies provided), and the January 18 and March 3,

1995, memorandums from the Assistant Commissioner referred to

above.)

HOLDING:

Among the items about which you requested advice, items 329, 330,

401 (including only the portion in controversy), 414, 415, 419,

420 (the portion in controversy), 425, 605, 901, and the Cheung

Hae 03/15/95 invoice are NON-DUTIABLE. Items 108 (the portion in

controversy, including staging) and 403 (the portion in

controversy), are DUTIABLE. The cost in the Halla Marine

03/13/95 invoice qualifies as the cost of a spare part within the

meaning of 19 U.S.C. 1466(h)(3) and, provided that the

requirements in that provision are met (see above), this item is

dutiable under section 1466(h)(3) and is not subject to the 50%

duty under section 1466(a). The costs for the portions of item

002 in controversy are subject to apportionment (or proration) on

the basis of dutiable and non-dutiable foreign costs.

Sincerely,

William G. Rosoff Chief

Entry and Carrier Rulings Branch

Enclosures