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HQ 111443


January 3, 1991

VES-13-18-CO:R:IT:C 111443 GEV

CATEGORY: CARRIER

Gerald A. Malia, Esq.
Ragan & Mason
1156 Fifteenth Street, N.W.
Washington, D.C. 20005

RE: Vessel Repair; S/S KINSMAN INDEPENDENT; Casualty; Great Lakes; Leaving U.S. Waters; 19 U.S.C. 1466(d)(1)

Dear Mr. Malia:

This is in response to your letter dated December 17, 1990, on behalf of your client, Kinsman Lines, Inc., requesting an advisory ruling on the dutiability of repairs to be performed on the S/S KINSMAN INDEPENDENT in Thunder Bay, Ontario, Canada. Our ruling on this matter is set forth below.

FACTS:

The S/S KINSMAN INDEPENDENT is a U.S.-flag Great Lakes bulk carrier owned by Minch Transit Company and operated by Kinsman Lines, Inc., pursuant to a bareboat charter agreement. The subject vessel's home port is Cleveland, Ohio.

On November 24, 1990, while proceeding in ballast from Buffalo, New York, to Thunder Bay, Ontario, Canada, where a cargo of grain was to be loaded, the subject vessel ran aground as a result of a navigational error. The grounding occurred in Siskiwit Bay just off Isle Royale, Michigan. With tug assistance, the vessel was finally freed and re-floated on November 25, 1990.

Upon re-floating the vessel, an underwater inspection of the vessel's hull could not be carried out on the scene because of high seas. Therefore it was determined that the vessel proceed to the closest harbor of refuge, Thunder Bay, to inspect its hull. While at anchor in Thunder Bay an underwater inspection revealed severe damage to the hull bottom including many long rips and tears. Based on this inspection the vessel was immediately dry-docked at Thunder Bay, the nearest capable facility, for further inspections and repairs.

It is stated that Thunder Bay, located between 50-60 miles from the point of grounding, is the only place on Lake Superior where the necessary repairs can be undertaken. The only other port available to the subject vessel on Lake Superior is Duluth, Minnesota, which is located approximately 150 miles from the point of grounding and which would have required the transit of a large, open portion of Lake Superior, which would have made the vessel vulnerable to potentially dangerous sea conditions. The transit from Isle Royale to Thunder Bay, in addition to being a much shorter passage, involves much more sheltered waters.

It is contended that the damage in question was caused by a casualty occurrence and therefore remission on the cost of the foreign repairs should be granted pursuant to 19 U.S.C. 1466(d)(1). In support of this claim the following documentation has been submitted: a letter from Kabro Marine Contractors, Inc. to Kinsman Lines, Inc. containing the divers' report and recommendations regarding the grounding of the subject vessel (Exhibit A); the U.S. Coast Guard's permit to proceed to Thunder Bay (Exhibit B); the Canadian Coast Guard's permit to proceed to Thunder Bay (Exhibit C); a letter dated December 11, 1990 from Port Arthur Shipbuilding Company setting forth the breakdown of repair costs and having attached a copy of the Field Survey Report (Exhibit C); a photocopy of the relevant page of the ship's log (Exhibit D); a letter dated December 6, 1990, from the American Bureau of Shipping to Kinsman Lines, Inc. relative to maintenance of the vessel's class (Exhibit F); a letter dated November 28, 1990, from The Salvage Association pertaining to a survey of the damage in question (Exhibit G); a typewritten transcript of the statement of the master of the vessel setting forth the facts surrounding the grounding of the vessel (Exhibit H); and ten photographs of the vessel while in dry dock revealing the extensive damage to the hull bottom.

ISSUE:

Whether evidence is presented sufficient to prove that the foreign repairs performed on the subject vessel were necessitated by a casualty occurrence, thus warranting remission pursuant to 19 U.S.C. 1466(d)(1).

LAW AND ANALYSIS:

Title 19, United States Code, 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. Pursuant to Presidential Proclamation 5923 of December 14, 1988, effective January 1, 1989, all such costs incurred in Canada are
dutiable at a rate of 45 percent ad valorem and shall decrease at 5 percent increments on January 1 of each successive year until January 1, 1998, when duty on Canadian work assessed pursuant to 19 U.S.C. 1466 will be eliminated.

Section 1466(d)(1) provides for remission of the above duties in those instances where good and sufficient evidence is furnished to show that foreign repairs were compelled by "stress of weather or other casualty" necessary to secure the safety and seaworthiness of the vessel to enable her to reach her port of destination.

The term "casualty", as it is used in the vessel repair statute (19 U.S.C. 1466) has been interpreted by the Customs Court as something which, like stress of weather, comes with unexpected force or violence, such as a fire, explosion, or collision (see Dollar Steamship Lines, Inc., v. United States, 5 Cust. Ct. 28-29, C.D. 362 (1940)). It should be noted that absent specific evidence to the contrary, we consider foreign repairs to have been necessitated by normal wear and tear, a result which does not permit remission (see C.S.D. 79-32).

The Customs Service has consistently held that the grounding of a vessel constitutes a "casualty" as that term is used in section 1466(d)(1), and that duties on repairs necessitated by a grounding are remissible if the repairs are performed to secure the safety and seaworthiness of the vessel (see C.S.D. 89-61, citing C.I.E.'s 1822/58, 1823/58 and 1160/60).

Upon reviewing the record in its entirety, there is no question the damage in this case was clearly the result of an adequately documented "casualty" within the meaning of section 1466(d)(1). We note, however, that in this case we are requested to grant remission for a vessel which has incurred damage in U.S. waters and has departed U.S. waters to obtain foreign repairs. We have previously denied such requests regarding any vessel exiting U.S. waters (and consequently bypassing U.S. yards) in view of the fact that such a vessel could not have been "...compelled...to put into such foreign port...to secure the safety and seaworthiness of the vessel..."

The circumstances of this case, however, are distinguishable from those discussed above. The closest port on Lake Superior, foreign or domestic, to the point of grounding that is capable of performing the necessary repairs is Thunder Bay. We note the master's statement that, "We were never in any danger of sinking." (see Exhibit H). However, it is the recommendation of Kabra Marine Contractors, the company that performed the underwater inspection prior to the dry-docking, that "To expose the ship to high seas in its present condition may render the structural integrity of the ship's hull unsafe." (see Exhibit A) In view of this, we are of the opinion that to
direct the vessel to proceed in its damaged condition to Duluth, Minnesota, the next available port on Lake Superior, approximately 100 more miles from the point of grounding than is Thunder Bay, and over potentially dangerous ocean-like conditions could unnecessarily imperil the vessel and her crew. Accordingly, the request for remission of the cost of Canadian repairs in this case is warranted.

HOLDING:

The evidence presented is sufficient to prove that foreign repairs performed on the subject vessel for which relief is sought were necessitated by a casualty occurrence. Accordingly, remission pursuant to 19 U.S.C. 1466(d)(1) should be granted.

It is noted, however, that this ruling is merely advisory in nature and does not eliminate the requirement to declare work done abroad at the subject vessel's first United States port of arrival, nor does it eliminate the requirement of filing the entry showing this work (see sections 4.14(b)(1)(2), Customs Regulations (19 CFR 4.14(b)(1)(2)). Furthermore, any final ruling on this matter is contingent on Customs review of the evidence submitted pursuant to section 4.14(d)(1), Customs Regulations (19 CFR 4.14(d)(1))).

Sincerely,

B. James Fritz

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