HQ 112466: Vessel Repair; Spare Parts; Rehabilitated Parts; Consumption Entry; 19 U.S.C. 1466(h).

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 112466

                          March 3, 1993

VES-13-18  CO:R:IT:C  112466  JBW

CATEGORY:  Carriers

Mr. Stephen F. Schmidt
Senior Vice President
Marine Operations/Engineering
American President Lines, Ltd.
1111 Broadway
Oakland, CA 94607

RE:  Vessel Repair; Spare Parts; Rehabilitated Parts; Consumption
     Entry; 19 U.S.C.  1466(h).

Dear Sir:

     This letter is in response to your request for a ruling on
the appropriate customs duty treatment of vessel parts of foreign
manufacture that are repaired in foreign countries.

FACTS:

     In your letter, you state that on occasion your operations
require the repair or rehabilitation of foreign built equipment
or parts on American President Lines ships.  In such cases, the
equipment or parts are returned to the foreign manufacturer or to
foreign repair facilities to accomplish the repairs.  The
equipment or parts are then returned to the United States where a
consumption entry is made and duty is paid under the Harmonized
Tariff Schedule of the United States (HTSUS).  The equipment or
parts are then warehoused for distribution to ships around the
world as needed.

ISSUE:

     Whether vessel equipment or parts that are repaired or
rehabilitated outside of the United States are subject to duty
under 19 U.S.C.  1466 if the equipment or parts had been imported
duty-paid into the United States following such repair prior to
their foreign reinstallation.
 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)(2).  However, this latter provision applies
only to entries made on or after August 20, 1990, and before
December 31, 1992.  Customs and Trade Act of 1990,  484E(b), Pub.
L. No. 101-382, 104 Stat. 709-10 (1990).

      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)(2) 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 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.  The statute does not distinguish between new or used
parts.  See 19 U.S.C.  1466(h)(2). 

     From this discussion, we conclude that equipment or parts
that are repaired or rehabilitated outside of the United States
are not subject to duty under 19 U.S.C.  1466 upon installation
if the equipment or parts had previously been imported duty-paid
into the United States.  To be eligible for this treatment, the
equipment or parts that are imported under the HTSUS must be
transported on a vessel other than one owned or operated by
American President Lines, for carriage by a company-owned vessel
would be construed to be the purchase or repair of a vessel
spare.  The purchase or repair of ship's spares, other than the
ship's original complement of spares as established by contract
or by warranty, is subject to duty under 19 U.S.C.  1466.  See
Sea-Land Service Inc. v. U.S., 683 F. Supp. 1404, 1409 (CIT
1988).
 HOLDING:

     Equipment or parts that are repaired or rehabilitated
outside of the United States are not subject to duty under 19
U.S.C.  1466 upon installation if the equipment or parts had been
entered as merchandise following such repair at the HTSUS rates
of duty prior to their foreign reinstallation.  This holding
applies only to such equipment or parts entered between August
20, 1990, and December 31, 1992.


                              Sincerely,




                              Acting Chief