> HQ 116061

November 17, 2003

VES-13-18 RR:IT:EC 116061 CK

CATEGORY: Carriers

Chief, Vessel Repair Unit

Bureau of Customs and Border Protection

423 Canal Street, Room 303

New Orleans, Louisiana 70130-2341

RE: Application for further review; Protest No. 2002-02-101201; Vessel
Repair entry number C20-0038543-8; PAUL BUCK; V-339; 19 U.S.C. §1466

Dear Sir:

This is in response to your memorandum of September 22, 2003 that
forwarded the protest submitted by counsel on behalf of Ocean Ships,
Inc. with respect to the above-referenced vessel repair entries.

**FACTS:**

The PAUL BUCK departed Pearl Harbor, Hawaii on July 18, 2000 and
returned to the Port of Norfolk, Virginia on May 14, 2001. A vessel
repair entry was filed on May 16, 2001. An application for relief was
received by the Vessel Repair Unit (VRU) New Orleans on September 13,
2001. By letter dated August 30, 2002, the VRU denied and in part and
granted in part the application for relief. Counsel timely filed a
protest on November 29, 2002 in response to the partial denial of the
application for relief.

The items in dispute are numbers: 26, 39, 7, 16, 20, 22, 32, 40, 46, 49,
66, 75, 76, 82, 83, 85, 90, 91, 94, 105, 108, and 110.

**ISSUE:**

Whether the items listed above, for which the protestant seeks relief,
are dutiable under 19 U.S.C. §1466.

**LAW AND ANALYSIS:**

> Title 19, United States Code, §1466(a) (19 U.S.C. §1466(a)) states in
> pertinent part:
>
> 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.

Title 19, United States Code, §1466(h)(2) (19 U.S.C. §1466(h)(2)),
provides, in pertinent part, that the duty imposed by subsection (a) of
this section shall not apply to...

> "...the cost of spare repair parts or materials (other than nets or
> netting) which the owner or master of the vessel certifies are
> intended for use aboard a cargo vessel, documented under the laws of
> the United States and engaged in the foreign or coasting trade, for
> installation or use on such vessel, as needed, in the United States,
> at sea, or in a foreign country, 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 such spare part purchased in, or imported from a foreign
> country..."

In regard to the administration of 19 U.S.C. §1466(h)(2) we note that it
contemplates entry of the pertinent part or material, and the payment of
duty under the appropriate commodity classification of the HTSUS, prior
to its use. We further note that while §1466(h)(2) applies by its terms
only to foreign-made imported parts or materials, there was ample reason
to extend its effect to U.S.-made parts or materials as well. To fail to
do so would act to discourage the use of U.S.-made parts or materials in
effecting foreign repairs since continued linkage of remission
provisions of subsection 1466(d)(2) with the assessment provisions of
subsection (a) of §1466 would obligate operators to pay duty on such
materials unless they were installed by crew or resident labor.
Consequently, CBP so extended the duty-free treatment of subsection (h)
to U.S.- manufactured parts or materials. ([See, e.g.]{.underline}, HQ
110980, dated April 16, 1991).

In order to implement proper enforcement of §(h)(2), it is necessary
that the key terms be defined. In defining parts, materials, and
equipment, it is most beneficial to do so in descriptive terms rather
than in the form of specific lists of items which fit the categories. In
compiling lists it is inevitable that items will be inadvertently
omitted which may lead to improper or inconsistent application of the
law.

For purposes of 19 U.S.C. §1466 the term [materials]{.underline} is
determined to mean something which is consumed in the course of its use,
and/or loses its identity as a distinct entity 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.

A [part]{.underline} 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]{.underline} does not mean part of a
vessel, which practically speaking would encompass all elements
necessary for a vessel to operate in its designated 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.

The term [equipment]{.underline} 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.

ITEM 26: is listed on the foreign invoice as a 14" monitor. Item 26 is a
line item on the CF 7501A. Protestant seeks relief pursuant to 19 U.S.C.
§1466(h)(2). However, the monitor is equipment. Equipment is not
entitled to relief from duties under §1466(h)(2).

ITEM 39: is listed on the foreign invoice as various valves. Item 39 is
listed on the CF 7501A. Protestant seeks relief pursuant to 19 U.S.C.
§1466(h)(2). We agree that the valves are parts entitled to relief under
§1466(h)(2), which would make the valves dutiable at the lower HTSUS
rate. However, the port has already granted relief on this item and duty
was assessed at the lower HTSUS rate. No further relief for this item is
warranted.

ITEM 7: is an illegible US invoice. As there is no evidence that this
invoice lists parts, rather than equipment no relief can be granted
under §1466(h)(2).

ITEM 16: is listed on the US invoice as a water clock. There is no
evidence that this item is a part to a larger whole, rather than a
clock, which would constitute equipment. As there is no evidence that
this item is a part, it is not entitled to relief under §1466(h)(2).

ITEM 20: consists of a US invoice which lists: a socket head cap screw,
valve, air motor, worm gear speed reducer, and an air valve. These items
are parts that are entitled to relief under §1466(h)(2) as the
protestant has supplied an invoice from a US company.

ITEM 22: consists of two US invoices, one for an ultraviolet water
purifier, and another for a replacement sleeve for the water purifier.
The ultraviolet water purifier is equipment, therefore no relief under
§1466(h)(2) can be granted. However, the replacement sleeve is a part,
for which a US invoice was supplied, therefore, relief under §1466(h)(2)
can be granted for the sleeve.

ITEM 32: consists of a US invoice for 1000w ballast lights. The lights
are equipment, therefore no relief under §1466(h)(2) can be granted.

ITEM 40: consists of a US invoice with no information listed other than
a reference to two attached invoices which were not included. As there
is no evidence that this invoice is for parts, rather than equipment,
this item is not entitled to relief under §1466(h)(2)

ITEM 46: consists of a US invoice listing a variety of items such as:
worm wheels, worms, cutter bundle felt, bowl pin, grease screw, screw
handle, key and washers, woodruff keys, guard screen and washers, rod
valve, plug valve, bolts, and washers. These items are parts, and as a
US invoice was provided they are entitled to relief under §1466(h)(2).

ITEM 49: consists of a US invoice that lists P-traps, and soap dishes.
The P-traps are plumbing parts that are entitled to relief under
§1466(h)(2). However, the soap dishes are equipment that are not
entitled to relief under §1466(h)(2).

ITEM 66: consists of a US invoice that refers to a reconditioned
impeller and a hydraulic motor. However, no description is contained
regarding the use of such items, therefore, they stand on their own, and
are considered equipment. As equipment, no relief from duty should be
allowed under §1466(h)(2).

ITEM 75: consists of a US invoice for a DGPS System. Attached is a
certificate from the seller that the goods were either US made or
imported duty-paid before sale to Ocean Ships. The DGPS System is
equipment, and is not entitled to relief under §1466(h)(2).

ITEM 76: consists of a US invoice for a "AQ/Flamm. Assy, in blue
housing." The invoice is from Status Scientific Controls Inc., which
according to its website is the "World leaders in the design and
manufacture of gas detection products." Since there is no evidence that
the merchandise is a part rather than equipment, no relief from duty
should be allowed under §1466(h)(2).

ITEM 82: consists of a US invoice for a voltage hour meter. The voltage
meter is equipment, and is not entitled to relief under §1466(h)(2).

ITEM 83: consists of a US invoice for respirators, ½ masks, and
strap/clamp brackets. The respirators, and ½ masks are equipment, which
are not entitled to relief under §1466(h)(2). However, the strap/clamps
are parts that are entitled to relief under §1466(h)(2).

ITEM 85: consists of a US invoice for polyethylene Jerry can, chemical
light, mini flashlights, hazardous location waterproof light, and a
replacement bulb. These items are equipment, which are not entitled to
relief under §1466(h)(2).

ITEM 90: consists of a US invoice for a t-strainer with ss screens,
u-bolts with nuts, hex nuts and fasteners. These items are parts, and as
a US invoice was provided they are entitled to relief under §1466(h)(2).

ITEM 91: consists of a US invoice for items described as "spool pc fixed
with float." Since there is no evidence that the merchandise is a part
rather than equipment, no relief from duty should be allowed under
§1466(h)(2).

ITEM 94: consists of a US invoice for, "Inspection of the Tk
coatings...for repair."\
We note, however, that although the protestant includes this item under
the heading "Requirement of U.S. Manufacture for Equipment purchased in
the United States," no equipment is listed on this invoice. Accordingly,
the protestant's argument with respect to this item is misplaced and its
treatment by the VRU is unchanged.

ITEM 105: consists of a US invoice for a keyboard RAF/TRM and fans. As
there is no explanation or evidence that these items are parts, they
instead stand alone, and are considered equipment. Equipment is not
entitled to relief under §1466(h)(2).

ITEM 108: consists of a US invoice for a pre-focus bulb, lamp, remote
speaker microphone, and headset. These items are equipment, and are
therefore not entitled to relief under §1466(h)(2).

ITEM 110: consists of a US invoice for two liferaft inspections and
various items. The inspections are alleged to be US Coast Guard (USCG)
required surveys, however, the record is devoid of USCG documentation to
support this claim. Furthermore, this item includes the costs of
batteries, hand flares, parachute flares, smoke signals, battery tests,
first aid kits, tape, decals, straps, and document crating are all
equipment. Equipment is not entitled to relief under §1466(h)(2).
However, the nuts and bolts assembly is a part, which is not dutiable
pursuant to §1466(h)(2). Finally, seasick pills are consumables and are
also not dutiable.

The final item from which protestant seeks relief is the dutiability of
"shipping costs" incurred in sending US items abroad while the vessel
was being repaired abroad. The port assessed duty on all freight
invoices submitted since those freight invoices covered numerous
purchase orders and the freight costs were not itemized. In HQ 113813,
dated October 15, 1998, we stated that US prepaid freight/shipping costs
for identified non-dutiable parts are non-dutiable. In this case, the
freight invoices cover numerous merchandise invoices and a plentitude of
articles, without any itemized costs of freight for each article.
Pursuant to C.I.E.'s 1325/58 and 565/55, relief may not be granted where
the invoices do not show a complete breakdown of what is dutiable and
what is not. *[See]{.underline}*, HQ 108567, dated September 10, 1986.
The freight/shipping costs are therefore dutiable in their entirety.

**HOLDING:**

Following a thorough analysis of the facts as well as of the law and
applicable precedents, we have determined that the protest with respect
to the items considered should be denied in part and granted in part as
specified in the Law and Analysis portion of this ruling.

Sincerely,

Glen E. Vereb

Chief

Entry Procedures and Carriers Branch