HQ 0111554 - Vessel Repair; Casualty; Explosion; Modification; PRIDE OF TEXAS, Voyage 41; Entry No. VR-C20-0012282-3; 19 U.S.C. 1466; 19 C.F.R. 4.14. - United States International Trade Commision Rulings

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HQ 111554

October 11, 1991

VES-13-18 CO:R:IT:C 111554 JBW

CATEGORY: CARRIER

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

RE: Vessel Repair; Casualty; Explosion; Modification; PRIDE OF TEXAS, Voyage 41; Entry No. VR-C20-0012282-3; 19 U.S.C. 1466; 19 C.F.R. 4.14.

Dear Sir:

This letter is in reference to your memorandum dated February 21, 1991, which forwards for our review the application for relief filed in conjunction with the above-referenced vessel repair entry.

FACTS:

The record reflects that the subject vessel, the PRIDE OF TEXAS, arrived at the port of Lake Charles, Louisiana, on September 22, 1990. Vessel repair entry number VR-C20-0012282-3, marked incomplete, was filed indicating repairs in Alexandria, Egypt, and Lisbon, Portugal.

The subject vessel last departed the United States on April 18, 1990, bound for Alexandria, Egypt. The vessel arrived in Alexandria on May 9, 1990, for discharge of its cargo. On May 18, 1990, the vessel proceeded to Lisbon, Portugal, for "routine shipyard work." The vessel arrived in Lisbon on May 25, 1990, and departed Lisbon on June 6, 1990. After leaving Lisbon, the vessel developed engine failure that required it to return to Lisbon. Specifically, the master's log and the engineer's log both indicate that the vessel experienced an "explosion" of the crank case of the starboard main engine. From the reports of the engineer and surveyors, the number 1 piston assembly failed. The piston skirt failed, which in turn caused a misalignment of the piston. This misalignment of the piston caused damage to the internals of the engine when the piston separated from the piston crown and skirt. The applicant contends that the damage is related to undetected damage from an earlier engine failure. See Headquarters Ruling Letter 111169, dated October 12, 1990 (pending in this office as a petition for review). The applicant also seeks relief for work claimed to be a modification to the vessel.

ISSUES:

(1) Whether the evidence submitted demonstrates that damage to the starboard main engine resulted from a casualty and is therefore subject to remission under 19 U.S.C. 1466(d)(1).

(2) Whether certain work performed in the Lisnave Shipyard resulted in modifications to the vessel and is therefore not subject to duty under 19 U.S.C. 1466.

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. The statute provides for the 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" and were necessary to secure the safety and seaworthiness of the vessel to enable her to reach her port of destination. 19 U.S.C. 1466(d)(1).

The Customs Service has interpreted the term casualty, as it is used in the vessel repair statute, to denote an occurrence that, like stress of weather, comes with unexpected force or violence, such as fire, explosion, or collision. See Dollar Steamship Lines, Inc. v. United States, 5 Cust. Ct. 23, 29, C.D. 362 (1940). An explosion, however, does not result in an automatic determination of casualty. The Customs Service assumes that such an occurrence is a casualty unless the cause of the occurrence is attributable to normal wear and tear or to improper maintenance. C.S.D. 79-283, 13 Cust. B. & Dec. 44, 45 (1979); T.D. 55670(2), 97 Treas. Dec. 524 (1962).

The damage in this case resulted from improper maintenance. The applicant states that the present engine failure can be linked to unchecked residual damage resulting from the February, 1990, breakdown. This statement implies that the February, 1990, repairs were improperly performed; the engine failure therefore cannot be characterized as resulting from a casualty. The cost associated with the damage to the starboard main engine are therefore not subject to remission.

The applicant also seeks relief for a "speed log modification." In its application of the vessel repair statute, the Customs Service has held that modifications, alterations, or additions to the hull and fittings of a vessel are not subject to vessel repair duties. Over the course of years, the identification of work constituting modifications on the one hand and repairs on the other has evolved from judicial and administrative precedent. In considering whether an operation has resulted in a modification that is not subject to duty, the following elements may be considered:

1. Whether there is a permanent incorporation into the hull or superstructure of a vessel (see United States v. Admiral Oriental Line, 18 C.C.P.A. 137 (1930)), either in a structural sense or as demonstrated by the means of attachment so as to be indicative of the intent to be permanently incorporated. This element should not be given undue weight in view of the fact that vessel components must be welded or otherwise "permanently attached" to the ship as a result of constant pitching and rolling. In addition, some items, the cost of which is clearly dutiable, interact with other vessel components resulting in the need, possibly for that purpose alone, for a fixed and stable juxtaposition of vessel parts. It follows that a "permanent attachment" takes place that does not necessarily involve a modification to the hull and fittings.

2. Whether in all likelihood an item under consideration would remain aboard a vessel during an extended lay-up.

3. Whether, if not a first time installation, an item under consideration constitutes a new design feature and does not merely replace a part, fitting, or structure that is performing a similar function.

4. Whether an item under consideration provides an improvement or enhancement in operation or efficiency of the vessel.

For purposes of section 1466, dutiable equipment has been defined to include:
portable articles necessary or appropriate for the navigation, operation, or maintenance of a vessel, but not permanently incorporated in or permanently attached to its hull or propelling machinery, and not constituting consumable supplies.

T.D. 34150, 26 Treas. Dec. 183, 184 (1914)(quoted with approval in Admiral Oriental).

The Customs Service has held that the decision in each case as to whether an installation constitutes a nondutiable addition to the hull and fittings of the vessel depends to a great extent on the detail and accuracy of the drawings and invoice descriptions of the actual work performed. Even if an article is considered to be part of the hull and fittings of a vessel, the repair of that article, or the replacement of a worn part of the hull and fittings, is subject to vessel repair duties.

The applicant seeks relief for the replacement of the existing transducer in the speed log. The applicant does not offer an explanation as to why this operation is being performed or whether the new transducer constitutes a new design feature. It simply states that the existing transducer was replaced by a new one. This operation does not constitute a modification.

HOLDINGS:

(1) The cost associated with the damage to the starboard main engine are not subject to remission under 19 U.S.C.

(2) The replacement of the existing transducer in the speed log does not constitute a modification, and the cost of the replacement is subject to duty.

Sincerely,

B. James Fritz
Chief

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