Vessel Repair; United States Parts; Spares; Entry; 19 U.S.C. 1466; GREEN WAVE; Entry No. T64-0001101-5.

HQ 111729 February 19, 1992 VES-13-18 CO:R:IT:C 111729 JBW CATEGORY: Carriers Chief, Technical Branch Commercial Operations Pacific Region 1 World Trade Center Long Beach, CA 90831 RE: Vessel Repair; United States Parts; Spares; Entry; 19 U.S.C. 1466; GREEN WAVE; Entry No. T64-0001101-5. Dear Sir: This letter is in response to your memorandum of May 14, 1991, which forwards for our review the application for relief filed in conjunction with the above-referenced vessel repair entry. FACTS: The record reflects that the subject vessel, the GREEN WAVE, arrived at the port San Francisco, California, on December 27, 1990. Vessel repair entry, number T64-0001101-5, was filed on December 28, 1990. The entry lists various parts purchased for the vessel during the course of its foreign voyage. A bond was filed to cover the cost of the estimated duties. Notwithstanding the possible eligibility of these parts for treatment under 19 U.S.C. 1466(h), no consumption entry was made and no duty was paid under the Harmonized Tariff Schedule for these parts. The vessel operator states that the reason consumption entry was not made was because of the uncertainty surrounding the entry and duty treatment by the Customs Service of parts that are purchased for a vessel and that are carried on that vessel at the time of first entry of the parts. In support of its claim, the vessel operator submits correspondence between this office and Mr. Edward L. Merrigan in which the treatment of these parts is discussed. ISSUE: Whether spare parts purchased in a foreign country for a cargo vessel are subject to vessel repair duties if such parts at the time of first were not entered under a consumption entry and duty was not paid under the Harmonized Tariff Schedule of the United States (HTSUS). LAW AND ANALYSIS: Title 19, United States Code, section 1466, provides in pertinent part for payment of duty in the amount of fifty percent ad valorem on the cost of foreign repairs to vessels documented under the laws of the United States to engage in foreign or coastwise trade, or vessels intended to engage in such trade. The vessel repair statute exempts from duty spare repair parts or materials that have entered the United States duty-paid and are used aboard a cargo vessel engaged in foreign or coasting trade. 19 U.S.C. 1466(h). The Customs Service has held that spare parts purchased for a United States-flag cargo vessel during a foreign voyage are exempt from vessel repair duty under 19 U.S.C. 1466(h) if duty is paid on those parts under the appropriate HTSUS commodity classification "at the time of their first entry into the United States" on board that vessel, provided that the parts are not installed on that vessel. Headquarters Ruling Letter 111474, dated March 6, 1991. This office has stressed, however, that spare parts and materials of foreign origin were not meant to benefit from nor will they be permitted to benefit from the duty exemption under section 1466(h)(2) unless they are landed and regularly entered as merchandise at the HTSUS rates of duty prior to their foreign installation. See Headquarters Letter 111665, dated May 2, 1991. From the facts presented, no consumption entry was made, nor was duty paid under the HTSUS. Rather, a vessel repair entry was made. Notwithstanding the alleged confusion, we find the parts to be subject to duty as provided for under 19 U.S.C. 1466(a). HOLDING: Spare parts purchased for a United States-flag cargo vessel during a foreign voyage are exempt from vessel repair duty under 19 U.S.C. 1466(h) if duty is paid on those parts under the appropriate HTSUS commodity classification "at the time of their first entry into the United States" on board that vessel, provided that the parts are not installed on that vessel. Moreover, parts entered for consumption must be landed in the United States, not merely carried aboard ship. From the facts presented, no consumption entry was made, nor was duty paid under the HTSUS. Rather, a vessel repair entry was made. We find the parts to be subject to duty as provided for under 19 U.S.C. 1466(a). The application for relief is therefore denied. Sincerely, B. James Fritz Chief Carrier Rulings Branch