HQ 110188: Imported components for Panama Canal Commissiontugboats

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 110188

                          June 7, 1989

VES-13-18-CO:R:P:C 110188 GV

CATEGORY: Carriers

Cynthia J. Thomas
Assistant General Counsel
Panama Canal Commission
APO Miami 34011-5000

     RE:  Imported components for Panama Canal Commission
tugboats

Dear Ms. Thomas:

     This is in reference to your letter dated April 18, 1989,
requesting a confirmation of your belief that imported components
used in the construction of tugboats in the United States are not
dutiable under 19 U.S.C. 1466.

FACTS:

     The Panama Canal Commission is an executive agency of the
United States Government, established by section 1101 of the
Panama Canal Act of 1979, Pub. L. 96-70, 93 Stat. 456.  This
section is codified at 22 U.S.C. 3611.  The Commission has a
fleet of tugboats at the Canal that assist transiting vessels
through the locks of the waterway.

     New tugboats currently under construction in Louisiana will
in the near future join the working fleet at the Canal in the
Republic of Panama.  These vessels have a cycloidal propeller
system manufactured in Europe.  They also use imported components
in their fire fighting units.

ISSUE:

     Whether vessel equipment/parts landed in the United States
to be installed on a vessel being built in the United States are
dutiable under 19 U.S.C. 1466 upon importation.

LAW AND ANALYSIS:

     Title 19, United States Code, section 1466, provides in
pertinent part for payment of an ad valorem duty of 50 percent of
the cost of foreign repairs to or equipment purchased for a
vessel documented under the laws of the United States to engage
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in the foreign or coastwise trade, or intended to be employed in
such trade.

     Section 4.14(a)(2)(ii), Customs Regulations (19 CFR
4.14(a)(2)(ii)) provides that vessels owned or chartered by the
United States Government, if documented with a registry,
coastwise trade, or Great Lakes trade endorsement, or if
undocumented, intended to engage in foreign, coastwise or Great
Lakes trade, are subject to 19 U.S.C. 1466.  It is apparent that
the subject tugboats, currently under construction and
undocumented, are not to be used in any of the aforementioned
trades.  As an aside, we note that undocumented Military Sealift
Command vessels do not fall within the scope of 19 U.S.C. 1466.

     It is therefore the position of the Customs Service that
work done and/or equipment/parts added in the United States prior
to the subject vessels' initial documentation and pursuant to the
original specifications of the contracts for the construction of
the vessels renders the duty provision of 19 U.S.C. 1466
inapplicable.

     It is noted that the Court in United States v. Standard Oil
Co. of California, 27 C.C.P.A. 334, C.A.D. 108 (1940) found that
equipment purchased abroad for a U.S. vessel is dutiable under 19
U.S.C. 1466 when brought into the United States for installation
on the importing vessel.  The question of whether section 1466
would apply to equipment imported on a vessel other than the one
on which it was to be installed was left open by the Court.  The
Court was somewhat more favorably disposed to applying the vessel
repair duty provisions when equipment was designed to be
installed domestically on a particular vessel, than when the
importation was of a more general nature.  This specific question
was left unanswered, however, since it was not directly before
the Court.

     In view of the above, the Customs Service issued ruling VES
13-18-CO:R:P:C 109914 LLB, dated April 19, 1989 (see page 14 of
Customs Bulletin dated May 10, 1989) which provides, in pertinent
part, that when foreign-made repair parts/materials are placed
aboard or installed on a United States-documented vessel while it
is in the United States, the cost of the parts/materials is
dutiable under section 1466 if installed on the importing vessel
or on a vessel owned or operated by the same or related carrier.
If placed aboard or installed in the United States on other than
a vessel described in the preceding sentence, duty is limited to
that applicable under the proper provision of the Harmonized
Tariff Schedule of the United States (HTSUS; 19 U.S.C. 1202, as
amended).

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     Accordingly, since the imported components under
consideration are part of the original construction of the
tugboats in the United States, they would not be dutiable under
19 U.S.C. 1466 but rather under the applicable provisions of the
HTSUS.

     Should you have any questions concerning the tariff
classification of the imported components in question, you should
direct your inquiries to:

          John E. Elkins, Esq.
          Chief, General Classification Branch
          1301 Constitution Ave., NW., Room 2209
          Washington, D.C. 20229

HOLDING:

     Vessel equipment/parts landed in the United States to be
installed on a vessel being built in the United States are not
dutiable under 19 U.S.C. 1466 upon importation but rather under
the applicable provision(s) of the Harmonized Tariff Schedule of
the United States (HTSUS; 19 U.S.C. 1202, as amended).

                              Sincerely,




                              B. James Fritz
                              Chief
                              Carrier Rulings Branch