HQ 110929

August 7, 1990

VES-13-11/18 CO:R:P:C 110929 JBW

CATEGORY: Carriers

Deputy Assistant Regional Commissioner

Classification and Value Division

ATTN: Regional Vessel Repair Liquidation Unit

6 World Trade Center

New York, New York 10048-002980

RE: Vessel Repair Entry No. C10-4907958-0; Date of Arrival:

October 12, 1989; Port of Arrival: Linden, N.J.; Vessel: M/V

FRANCES HAMMER.

Dear Sir:

This letter is in response to your transmittal of March

14, 1990, regarding a request for relief submitted by Ocean

Chemical Carriers, Inc., on the above referenced vessel repair

entry.

FACTS:

The record reflects that the subject vessel arrived at

the port of Linden, New Jersey, on October 12, 1989. Vessel

repair entry number C10-4907958-0, Customs Form 226, was filed

the same day indicating foreign repairs to the ship\'s radar

performed by Marel Technical, S.A., in St. Theodore, Greece, on

September 25, 1989. This document reveals labor charges in the

amount of 64,940 drachma (\$386.26 entered U.S. cost) for repair

services. The form indicates no charges for material parts or

equipment.

On December 13, 1989, the Vessel Repair Unit issued a

notice of action that requested the submission of invoices for

the cost of spare parts used in the repairs and indicated a

proposed increase in duty based on these costs. On December 20,

1989, the ship\'s owner submitted two invoices from Raytheon

Service Company (Raytheon), both dated November 8, 1989, for the

spare parts replaced in Jacksonville, Florida, on October 19,

1989:

\- Invoice No. B0345-01895 for replaced CRT Tube in the

amount of \$703.80.

\- An unnumbered invoice for an indicator power module

replaced without charge \"as item is covered under

WARRANTY CONTRACT.\"

The ship\'s owner asserts in this letter that it incurred \"no

actual labor charges\" for the labor performed in Greece, for such

charges were covered by Raytheon under a maintenance contract.

On January 4, 1990, the Vessel Repair Unit issued

another notice of action in which it sought, among other things,

a copy of the maintenance agreement and the amount of the total

premiums for the service contract covering the ship\'s items

repaired. Enclosed with a letter dated January 19, 1990, the

ship\'s owner forwarded the maintenance agreement and

documentation showing a monthly premium for the contract of

\$974.00. Under the maintenance agreement, Raytheon agrees to

maintain electronic equipment manufactured by it. The

maintenance includes, among other items, materials and labor to

replace worn out or defective parts and to replace parts or

supplies used from the normal equipment spares during a voyage.

The agreement excludes coverage of the magnetron and picture tube

and replacement of damaged or defective parts caused by other

than normal use or wear and tear. Both companies to the contract

are United States companies. Payment is made in United States

dollars and is drawn on a United States bank.

ISSUES:

\(1\) Whether an application for relief from vessel

repair duties that is submitted after sixty days from the date of

arrival of the vessel is timely under the regulations.

\(2\) Whether the costs of foreign repairs performed

under a maintenance or service contract between United States

companies and paid for in United States dollars is dutiable under

19 U.S.C. 1466(a) (1982).

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 vessel repairs to a vessel documented under

the law of the United States to engage the foreign or coastwise

trade.

Section 4.14(d) of the Customs Regulations provides

specific time limitations for the submission of an application

for relief of vessel repair duties. This section states:

The application for relief, with supporting

evidence, shall be filed within 60 days from

the date of first arrival of the vessel.

However, if good cause is shown, the

appropriate vessel repair unit may authorize

one 30-day extension of time to file beyond

the 60-day filing period.

19 C.F.R. 4.14(d)(1)(ii) (1989). Unless steps are taken to

validate or complete an application within the time period

established by the regulations, the entry is subject to

immediate liquidation upon the expiration of this time period.

Headquarters Ruling Letter 110739, dated March 21, 1990.

The vessel under consideration first arrived on October

12, 1989. The 60-day filing period in this case expired December

11, 1989. Yet, the first communication by the ship\'s owner

appearing in the record is dated December 20, 1989.

Notwithstanding subsequent compliance by the ship\'s owner to your

requests for additional information, we are of the opinion that

the request for relief was untimely filed and consequently should

be denied. We caution, however, that the use of the \"Notice of

Action\" forms might be construed by applicants to be extensions

of time. We urge you to use these forms only within the time

periods authorized in the regulations for submission of

applications for relief or evidence of costs and to reiterate on

the form that the notice of action does not constitute an

extension of time.

In your transmittal memorandum, you address the

question of whether costs for foreign repairs covered under a

service contract are dutiable. We have held that the vessel

repair statute authorizes no exception where the cost of repairs

is either prepaid or paid in the United States under a service or

maintenance contract. Headquarters Ruling Letter 101748, June 9,

1976; see also, Headquarters Memorandum 104516, November 18,

1980\. That the ship\'s owner itself incurred no foreign labor

costs does not exempt it from payment of duty assessed against

its ship for repairs performed by foreign labor in a foreign

shipyard.

Citing this precedent, we stated that the fact that

foreign repairs to a radar of a United States-flag vessel were

performed under a warranty contract does not, by itself, exempt

the repairs from vessel repair duties. Headquarters Ruling

Letter 107004, dated December 31, 1984. The repairs must be

satisfactorily shown to have been due to casualty under 19

U.S.C. 1466(d)(1) (1982), as interpreted by the Customs Service

(e.g., the \"one-round-voyage\" rule), for the duties thereon to be

remitted, or they must meet some other statutorily-authorized

criterion for remission or exemption of duty. In this case, the

ship\'s owner has submitted no evidence or documentation that

supports a casualty claim or other statutorily permitted

exemption. The labor costs for repair of the radars by Marel

Technical, S.A., in Greece are therefore dutiable.

No declaration was made regarding parts and materials

used for the repairs. The description of the repairs and the

invoices submitted by the ship\'s owner indicate that a CRT tube

and indicator power module were replaced from the ship\'s spares.

The record does not indicate whether these spares were of United

States origin, nor does the ship\'s owner make such a claim. We

have held in the past that parts, manufactured in the United

States, purchased by the vessel owner in the United States, and

installed by foreign labor, have not been included in determining

foreign costs for vessel repair duty. T.D. 75-257, 9 Cust. B. &

Dec. 576, 576-77 (1975). (Note that the continued application of

this rule has been called into question in a Headquarters

Memorandum dated April 19, 1989. 23 Cust. B. & Dec. No. 19, 15,

15-16 (1989)). However, absent evidence or proof of the origin

and place of purchase of these parts, we conclude that the cost

of the CRT tube and the indicator power module must be included

in determining the cost of foreign repairs.

You requested a \"like cost\" for the indicator power

module. We are unable to provide this from our files. We

suggest that you contact the radar company directly to determine

the cost.

HOLDING:

The request for relief should be denied for it was

untimely filed. The foreign labor costs to the vessel under

consideration are dutiable under 19 U.S.C. 1466 regardless of

the fact that, because of a service contract, the ship\'s owner

did not directly incur these cost. Furthermore, the costs for

parts used from the ship\'s spares should be included in the

calculation of the foreign repair costs.

Sincerely,

B. James Fritz

Chief

Carrier Rulings Branch