HQ 0111533 - Petition for Review; Vessel Repair; C53-0012153-6; PRIDE OF TEXAS V-40; Casualty; U.S Parts; U.S. Technician - United States International Trade Commision Rulings

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HQ 111533

January 6, 1991

VES-13-18-CO:R:IT:C 111533 BEW

CATEGORY: CARRIER

Deputy Assistant Regional Commissioner
Commercial Operations c/o Regional Commissioner
New Orleans, Louisiana 70130-2341

RE: Petition for Review; Vessel Repair; C53-0012153-6; PRIDE OF TEXAS V-40; Casualty; U.S Parts; U.S. Technician

Dear Sir:

This is in reference to a memorandum from your office which transmitted a petition for relief from duties assessed pursuant to 19 U.S.C. 1466.

FACTS:

The PRIDE OF TEXAS is a U.S.-flag vessel owned by Seahawk Management, Inc., of Houston, Texas. The subject vessel had the work in question performed in Cape Town, South Africa, during February 26 - March 9, 1990. Subsequent to the completion of the work the vessel arrived in the United States in Houston, Texas, on March 23, 1990. A vessel repair entry was filed on March 24, 1990.

An application dated May 21, 1990, with supporting documentation was timely filed. The application sought remission of duties due to casualty on the basis that an accident occurred during the operation of the subject vessel. In support of this claim it was alleged that at 10:25 p.m. on February 20, 1990, while the vessel was en route from Nicalo, Mozambique, to the U.S. Gulf, the main engine alarm sounded and the starboard main engine shut down and declutched. The starboard main engine was rendered inoperable as a result of the damage. The vessel thereafter proceeded to Cape Town for repairs. A survey of the vessel determined that the damage was the result of a broken exhaust valve stem dropping into the piston chamber during the operation of the engine.

In a decision dated October 12, 1990, we ruled on the claim relating to the casualty as follows:

... although the repairs in question were necessitated by the breaking of the exhaust valve stem which created further damage thereby rendering the vessel unseaworthy, the applicant is apparently equating a finding of unseaworthiness with a casualty occurrence. The two are not necessarily related. A finding that a vessel is unseaworthy provides no evidence of exactly how it came to be in such a state.

... it is apparent that the damage in question was caused by a breakdown or failure of machinery (i.e., exhaust valve stem) which may not be regarded as a casualty for purposes of remission pursuant to section 1466(d)(1) in the absence of a showing that it was caused by some outside force (see C.S.D. 79-32, cited above), a burden of proof the applicant did not meet.

With regard to the allegation relating to spare parts, we ruled as follows:

..., we note that the Customs and Trade Act of 1990, section 484(2), Pub. L. No. 101-382 (to be codified at 19 U.S.C. 1466(h)(2)), amended the vessel repair statute to except from duty spare repair parts or materials that have entered the United States duty-paid and are used aboard a cargo vessel engaged in foreign or coastwise trade. This amendment is inapplicable to the case under consideration in view of the fact that the applicant claims the spare parts are U.S.- manufactured and part of the subject vessel's original inventory and/or that of a sister ship.

A petition was timely filed on the above decision reiterating that the damage in question was not the result of ordinary wear and tear, but was the result of an accident which constitutes a remissible casualty pursuant to section 1466(d)(1). The petitioner contends that the starboard main engine had been properly maintained and that the examining authorities found that the damage was not due to the result of ordinary wear and tear.

The petitioner alleges that an unforeseeable, violent "event" that caused the casualty was the exhaust valve falling into the piston chamber during the operation of the vessel, and that this is not a case of the starboard main engine breaking down.

ISSUES:

1. Whether evidence is presented sufficient to prove that the spare parts foreign repairs performed on the subject vessel for which relief is sought were necessitated by a casualty occurrence, thus warranting remission pursuant to 19 U.S.C.

2. Whether evidence is presented sufficient to prove that the foreign repairs performed on the subject vessel for which relief is sought were U.S.-manufactured parts taken from the vessel's original inventory or part of the original inventory of a sister ship, and U.S. resident labor thus warranting remission pursuant to 19 U.S.C. 1466(d)(2).

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. 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).

Counsel cites 110200 GV which is distinguishable from the case under consideration in view of the fact that it addresses crew negligence. No such allegation is contained in this petition.

As previously stated it is apparent that the damage in question was caused by a breakdown or failure of machinery (i.e., exhaust valve stem), however, after a complete review of the evidence submitted, we find no evidence showing that malfunction of the exhaust valve stem, which was the proximate cause of the damage to the starboard main engine, was caused by some outside force (see C.S.D. 79-32, cited above), a burden of proof the applicant has not met.

Accordingly, the petition is denied as to casualty.

We now come to the allegation relating to spare parts. 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.

The petitioner has submitted invoices and documentation from Cooper Industries Energy Service Group (formerly Enterprise Engine Division of Transamerican Delaval, Inc.) confirming that the subject parts were manufactured in the United States and that the technical representative who supervised the foreign repairs is a citizen of the United States . Accordingly, the petition is granted as to the spare parts and the labor cost for the technical representative.

HOLDING:

1. The evidence presented is insufficient to substantiate that the repairs to the starboard main engine were necessitated by a remissible casualty. The petition is denied as to the casualty.

2. The evidence presented is sufficient to substantiate that the subject parts were manufactured in the United States, and that the technical representative who supervised the installation of subject parts is a US resident, thus warranting remission pursuant to 19 U.S.C. 1466(h). The petition is granted as to the spare parts and labor cost for the technical represent.

Sincerely,

Stuart P. Seidel

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