HQ 110876: New York Vessel Repair Entry No. C10-4907895-4, NEW YORK SUN, Voyage No. 177. Application; modifications; inspection and cleaning; U.S. spare parts and owner-supplied spare parts; Customs and Trade Act of 1990; P.L. 101-382; 19 U.S.C. 1466; 19 U.S.C. 1466(h); 19 CFR 4.14

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 110876

                          June 11, 1991

VES-13-18-CO:R:P:C  110876 BEW

CATEGORY:  Carriers

Chief, Residual Liquidation Branch
U.S. Customs Service
6 World Trade Center
New York, New York 10048-0945

RE:  New York Vessel Repair Entry No. C10-4907895-4, NEW YORK
     SUN, Voyage No. 177.  Application; modifications; inspection
     and cleaning; U.S. spare parts and owner-supplied spare
     parts; Customs and Trade Act of 1990; P.L. 101-382; 19
     U.S.C. 1466; 19 U.S.C. 1466(h); 19 CFR 4.14

Dear Sir:

     This is in reference to an application for relief from
duties filed by E. Charles Routh on behalf of Sun Transport,
Inc., in relation to the above referenced vessel repair entry
dated October 11, 1989.  The application for relief was filed
following a timely filed request for an extension of time.  The
vessel arrived at the port of New York, New York, on October 7,
1989.

FACTS:

     The record shows that the shipyard work in question was
performed on the subject vessel in Tyne, England from August 16
through September 24, 1989, and in Immingham, England from
September 24 through September 28, 1989.

     The entire vessel repair entry involves a potential duty of
$1,200.000.

     The applicant claims that relief for the subject items
should be granted because the items should be classified as
nondutiable items covered under title 19, United States Code,
section 1466 and section 4.14 of the Customs Regulations.

     You have referred a total of approximately 618 items to us
for our review.  We have reviewed the comprehensive computerized
worksheet and breakdown of each item along with all of the
invoices filed with this entry.  We will refer to the work using
the item numbers listed on the computerized worksheet and invoice
descriptions shown on the invoices submitted with your
memorandum.

     The shipyard contract or workorder from A&P Appledore (Tyne)
Limited is broken down by specific operational categories into
four main divisions as follows:

               A.  General
               B.  Alterations
               B.  Inspections
               D.  Repairs.

     In addition, the computerized sheet contain a fifth
category, U.S. Spare parts and owner-supplied parts (Category
(E)).

ISSUES:

     1.   Whether sufficient evidence is presented to establish
          that the certain repairs were modifications and/or
          inspections and cleaning which are remissible under
          the vessel repair statute (19 U.S.C. 1466).

     2.   Whether sufficient evidence is presented to establish
          that certain parts used in the repairs are owner-
          supplied spare parts which are free under the vessel
          repair statute (19 U.S.C. 1466(h)).

LAW AND ANALYSIS:

     Section 1466 provides, in pertinent part, for payment of
duty in the amount of 50 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.

     Section 4.14(b)(2)(ii), Customs Regulations (19 CFR
4.14(b)(2)(ii), provides that whenever a repair entry is
submitted as a full and complete account, the entry papers shall
include evidence showing the cost of each item listed on the
entry.  If a repair entry is submitted as a incomplete account,
as is the case here, the evidence must be submitted within 60
days of the vessel's arrival.  The operator may, upon good cause
shown, obtain an extension of 30 days to file cost evidence, such
extensions to be obtained from the appropriate Vessel Repair
Liquidation Unit.  In this case, the vessel arrived October 7,
1989, and the initial 60-day period would have expired
December 6, 1990.  A 30 extension of time to file was granted.
Cost evidence in the form of a foreign shipyard workorder and
foreign and domestic invoices, along with an Application for
Relief from duties were filed on January 4, 1990.

     It is provided in part under section 4.14(d)(1)(iii) of the
Customs Regulations (19 CFR 4.14(d)(1)(iii), that:

          Unless such evidence is already filed with
          Customs, each application for relief shall
          include duplicate copies of the following
          evidence,...

          (A)  All itemized bills, receipts, and
          invoices covering items specified in
          paragraph (a)(1) of this section, segregating
          the cost of those items for which relief is
          sought from all other items listed in the
          vessel repair entry.

     We have reviewed the complete file submitted with the
subject application, however we find no invoice from A & P
Appledore (Tyne) Limited; the only indicia of cost are the
amounts listed on the workorder which is not in and of itself
sufficient evidence of cost.  The evidence required by 19 CFR
4.14(d)(1)(iii)(A) includes itemized bills, receipts, and
invoices.  Internal documents, such as the computerized
worksheets, are insufficient, but will be considered in support
of the evidence mentioned above.

     The regulations provide clear direction regarding the
necessary course of action in such cases. Section 4.14(e),
Customs Regulations (19 CFR 4.14(e)), provides, in pertinent
part:

          In... cases in which evidence of cost is available,
          the entry may be liquidated 60 days after arrival of
          the vessel, or at the expiration of any extension of
          time granted under paragraph (b)(2)(ii) of this section
          to furnish evidence of cost, unless an application for
          relief is filed timely as provided in paragraph
          (d)(1)(ii) of this section.

     Since the invoices relating to the A&P Appledore (Tyne)
Limited workorder has not been submitted, you may proceed with
immediate liquidation using the best evidence available, and in
the absence of other evidence, your best cost estimates based on
your experience.

     For your general information, our review of the A&P
Appledore (Tyne) Limited workorder (Exhibit 1) reveals the
following:

     Subdivision A (General), are, for the most part, considered
     classifiably free items under authority of United States v.
     George Hall Coal Co., 134 F. 1003 (1905).  The exception is
     Item 00001-0001 - gas free certificate.  The cost of
     obtaining a gas-free certificate constitutes and ordinary
     and necessary expense incident to repair operations and is
     pro-rated between dutiable and non-dutiable work.

     Following a thorough review of the evidence submitted in
     support of the subject Application for Relief, as well as a
     careful analysis of the law and applicable precedents, the
     materials described as (B) Alterations, items No. 00002-0001
     through 00002-0035 on the computerized worksheet, with the
     exception of 00002-0029 Boiler controls, may constitute
     alterations/modifications/additions, which are non-dutiable
     under title 19, United States Code, section 1466 (for a
     general discussion see  Otte v. United States, 7 C.C.P.A.
     166 (1916); United States v. Admiral Oriental Line et al.,
     18 C.C.P.A. 137 (T.D. 44359 (1930))).

     Cleaning operations (subdivision (C) Inspections) which
     remove rust and deterioration or worn parts, and which are a
     necessary factor in the effective restoration of a vessel to
     its former state of preservation, constitute vessel repairs.
     Customs has long held that the cost of cleaning is not
     dutiable unless it is performed as part of, in preparation
     for, or in conjunction with dutiable repairs or is an
     integral part of the overall maintenance of the vessel; see
     C.I.E.'s 18/48, 125/48, 910/59, 820/60, 51/61, 429/61;
     569/62, 698/62; C.D. 2514; T.D.'s 45001 and 49531.

     It appears that the repair work and equipment purchases
     (subdivision D) which are listed on the workorder are for
     the most part dutiable.

     With respect to those items listed in subdivision (E)
exhibits 100 through 296, a finding of non-dutiability is
dependent upon evidence establishing that the materials were
manufactured or produced in the United States.

     The applicant has submitted certain invoices listed in the
following exhibits which are alleged to be owner-supplied and
U.S. spare parts.
      Exhibit No.    Exhibit No.     Exhibit No.  Exhibit No.

          00100        00115         00133         00154
          00102        00116         00134         00155
          00105        00117         00143         00156
          00106        00121         00144         00157
          00107        00122         00145         00158
          00108        00123         00146         00159
          00109        00125         00147         00160
          00110        00126         00148         00161
          00111        00128         00151   200 through 296
          00113        00129         00152
          00114        00132         00153

     The climate with regard to parts shipped abroad from the
United States for foreign installation was transformed on August
20, 1990, when the President signed Public Law 101-382 which
added a new subsection (h) to section 1466.  While this
provision applies by its terms only to foreign-made imported
parts, there is ample reason to extend its effect to U.S.-made
materials as well.  To fail to do so would act to discourage the
use of U.S.-made materials in effecting foreign repairs since
continued linkage of remission provisions of subsection (d)(2)
with the assessment provisions of subsection (a) of section 1466
would obligate operators to pay duty on such materials unless
they were installed by crew or resident labor.  If an article is
claimed to be of U.S. manufacture, there must be proof of its
origin in the form of a bill of sale or domestic invoice.  If an
article is claimed to have been previously entered for
consumption, duty paid by the vessel operator, there must be
proof of this fact in the form of a reference to the consumption
entry number for that previous importation, as well as to the
U.S. port of importation.  If imported articles are purchased
from third parties in the United States, a domestic bill of sale
to the vessel operator must be presented.  Further, with regard
to imported articles, there must be presented a certification
from the owner or master that the vessel at issue is a cargo
vessel and that the imported articles were purchased for
installation aboard the company's vessels.

     If the elements stated above are proven to the satisfaction
of Customs, the cost of foreign labor utilized for installation
of U.S.-made or previously imported articles will be subject to
duty under section 1466 in matters concerning repairs, and only
the cost of qualifying materials used in repairs will be free of
duty.  All costs for freight, travel, customs duties listed on
the invoices submitted as Exhibits 100 through 296 would be non-
dutiable costs.  Modifications will of course continue to be
treated as duty-free, both materials and labor.

     Please proceed with liquidation on that basis.

     With respect to certain other invoices listed in the
following exhibits, all costs are dutiable with the exception of
costs relating to expenses incurred for packing, transportation,
hotel and travel expenses, mileage expenses, train fares, air
freight, customs duties and handling charges.

                   Exhibit Nos.                 Exhibit Nos.

                       00112                       00127
                       00118                       00130
                       00119                       00131
                       00120             00135 through 00142,
                       00124             00149 and 00150

     With respect to Exhibit Nos. 00162, 00163, and 00164 all
costs are non-dutiable.

     With respect to Exhibit No. 00165, all costs are non-
dutiable with the exception of labor, parts and charts.

     Customs has held that where periodic surveys are undertaken
to meet the specific requirements of a classification society,
insurance carrier, etc., the cost of the surveys is not dutiable
even when dutiable repairs are effected as a result thereof;
however, in the liquidation process Customs should go beyond the
mere labels of "continuous" or "ongoing" before deciding whether
the item is dutiable.  Very often an inspection or survey is
conducted as a part of a vessel manager's or operator's ongoing
maintenance and repair program.  The cost of that "continuous" or
"ongoing" survey is dutiable.  Also, if the survey is to
ascertain the extent of damage sustained, or to ascertain if the
work is adequately completed, the costs are dutiable as part of
the repairs which are accomplished pursuant to holdings in C.I.E.
429/61, C.S.D. 79-2, and C.S.D. 79-277.  With respect to the
American Bureau of Shipping (ABS) Surveys, we find as follows:

          ABS invoice No. 10530, all items are non-dutiable.
          ABS invoice No. 10531, all items are non-dutiable.

     With respect to ABS invoice No. 10532, since the shipyard
invoice has not been submitted to show the exact nature of the
repair work which was performed, all surveys listed on this
invoice are dutiable except drydocking.

HOLDING:

     Following a thorough review of the law and analysis of the
evidence, we recommend that the application be granted with the
exception of the items enumerated above.

                                     Sincerely,




                                     B. James Fritz
                                     Chief
                                     Carrier Rulings Branch