19 U.S.C. §1466; M/V LIBERTY; Vessel Repair Entry NF4-4331128-9; Protest 2002-10-100010

HQ H096095 March 8, 2010 VES-3-18-RR:BSTC:CCI H096095 GOB CATEGORY: Carriers Supervisory Import Specialist c/o Vessel Repair Unit U.S. Customs and Border Protection 1515 Poydras Street, Suite 1700 New Orleans, LA 70112 RE: 19 U.S.C. §1466; M/V LIBERTY; Vessel Repair Entry NF4-4331128-9; Protest 2002-10-100010 Dear Sir: This is in response to your memorandum of February 18, 2010, forwarding for our review the application for further review of a protest filed on behalf of Interocean American Shipping Corporation (“protestant”) with respect to Vessel Repair Entry NF4-4331128-9. Our ruling follows. FACTS: The M/V LIBERTY (the “vessel”), a U.S.-flag vessel, incurred foreign shipyard costs. The vessel arrived in the port of Wilmington, Delaware on November 27, 2008. A vessel repair entry was timely filed. Your office issued a letter of duty determination on August 14, 2009 with respect to the application for relief. A protest was subsequently filed seeking relief from duty on numerous expenditures. ISSUE: Whether certain costs are eligible for treatment under 19 U.S.C. §§ 1466(h)(2) or (h)(3)? LAW AND ANALYSIS: Initially, we note that the information in the file indicates that the protest, with application for further review, was timely filed under the statutory and regulatory provisions for protests. 19 U.S.C. § 1514(c)(3) and 19 CFR § 174.12(e). Title 19, United States Code, section 1466 (19 U.S.C. §1466) provides for the payment of duty at a rate 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 be employed in such trade. Title 19, United States Code, sections 1466(h)(2) and (3) provide as follows: The duty imposed by subsection (a) of this section shall not apply to- . . . (2) The cost of spare parts or materials (other than nets or nettings) 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 Schedules of the United States upon first entry into the United States of each such spare part purchased in, or imported from, a foreign country, or (3) 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 Schedules 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 its administration of the vessel repair statute, Customs and Border Protection (“CBP”) has frequently used the following definitions: Equipment – An article 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 would include winches and generators. Material – An item which is consumed in the course of its use and/or loses its identity as a distinct entity when incorporated into the larger whole, e.g., paint and sheets of steel. Part – An article 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 identify a part. Examples would include piston rings and pre-formed gaskets. You request our review with respect to the items discussed below. Tab 14. The protestant claims that certain costs are eligible for treatment under 19 U.S.C. § 1466(h)(3). With its protest, the protestant has submitted additional documentation and a revised CBP Form 7501a. We find that these costs are eligible for treatment under 19 U.S.C. § 1466(h)(3). Tab 15. The protestant claims that these costs are eligible for treatment under 19 U.S.C. § 1466(h)(2), or, alternatively, under 19 U.S.C. § 1466(h)(3). Our review of the documentation of record indicates that the pertinent costs are eligible for treatment under 19 U.S.C. § 1466(h)(2). Tab 18. The protestant claims that certain costs are eligible for treatment under 19 U.S.C. § 1466(h)(3). At the application stage, the costs for which relief is now claimed were not segregated from certain labor costs which were clearly not eligible for treatment under 19 U.S.C. § 1466(h)(3). With its protest, the protestant has submitted additional documentation and a revised CBP Form 7501a. We find that the pertinent costs are eligible for treatment under 19 U.S.C. § 1466(h)(3). HOLDING: The costs discussed in this ruling are eligible for treatment under 19 U.S.C. §§ 1466(h)(2) or (h)(3), as discussed in the Law and Analysis section of this ruling. You are instructed to grant the protest with respect to the costs discussed in this ruling. In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2007), you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any final duty determination of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, Glen E. Vereb Chief Cargo Security, Carriers and Immigration Branch