United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1991 HQ Rulings > HQ 0110804 - HQ 0111053 > HQ 0110929

Previous Ruling Next Ruling



HQ 110929


August 7, 1990

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

CATEGORY: CARRIER

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

Previous Ruling Next Ruling