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HQ 111883


January 27, 1992

VES-13-18:CO:R:IT:C 111883 LLB

CATEGORY: CARRIER

Chief, Technical Branch
Commercial Operations Division
Pacific Region
One World Trade Center
Long Beach, California 90831

RE: Vessel repair; Casualty; Underwater object; Vessel BEACON TWO; Vessel repair entry number 203-0004131-4, Port of arrival, Bellingham, Washington

Dear Sir:

Reference is made to your memorandum of August 21, 1991, which forwards for our consideration the Application for Relief filed in regard to the above-captioned vessel repair entry.

FACTS:

The vessel BEACON TWO is documented as a vessel of the United States with a dual endorsement for coastwise trade and pleasure. While in the Strait of Georgia off British Columbia, Canada, the vessel struck an underwater object which caused on engine to become disabled and the other to run poorly. The vessel was taken to the nearest repair facility which was in Sidney, British Columbia. Upon maneuvering for docking at the repair facility, the vessel was scraped and damaged. Upon being hauled, it was discovered that the collision incident had allowed water to enter the fuel lines. The damage work reported includes charges to haul the vessel, repair the scraped hull sides and paint the vessel, remove and repair the propellers, remove and refit engine couplings, replace a damaged dodger panel and paint it to match the hull, and re-secure a quarter guard swim grid. Non-damage work included renewal of anti-fouling paint and zinc anodes, measuring wear to the cutlass bearing, and repainting the vessel's name and registration.
ISSUE:

Whether sufficient evidence is presented to substantiate that the vessel suffered a casualty occurrence which will permit refund or remission of vessel repair duties.

LAW AND ANALYSIS:

Title 19, United States Code, section 1466(a), 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 the foreign or coastwise trade, or vessels intended to be employed in such trade.

Title 19, United States Code, subsection 1466(d)(1), states that the Secretary of the Treasury is authorized to remit or refund such duties if the owner or master furnishes good and sufficient evidence that the vessel was compelled to put into a foreign port and make repairs 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 statute, has been interpreted as something which, like stress of weather, comes with unexpected force or violence, such as fire, explosion, or collision (Dollar Steamship Lines, Inc. v. United States, 5 Cust. Ct. 28-29, C.D. 362 (1940). In this sense, a "casualty" arises from an identifiable event of some sort. In the absence of evidence of such a casualty event, we must consider the repair to have been necessitated by normal wear and tear. See Customs Ruling Letter 106159 LLB (9-8-83).

In the case of United States v. George Hall Coal Co., 134 F. 1003 (1905), it was held that any of various types of expenses associated with foreign shipyard operations are classifiably free from the assessment of duty, regardless of the character of the overall shipyard work (repair vs. modification). The case found that the expense of drydocking a vessel is not a repair cost. Drydocking is not an isolated expense, and is commonly associated with numerous others. These may include, but are not limited to, sea water supply (for firefighting capability), fresh water supply, hose hook-up and disconnection, fire watch services, shore power hook-up, etc.

While painting operations are for the most part dutiable, painting which is ornamental in the sense that it is not performed for the preservation of the vessel and cannot, therefore, be considered a maintenance operation, is considered non-dutiable (C.D. 1430 (41 CCPA 57, C.A.D. 529)).

In the present matter we find that repainting the vessel's name and registration is a non-dutiable ornamental painting operation. We find that the repairs performed on the engine couplings and the propellers was related to the striking of an underwater object, a demonstrated casualty occurrence. The remaining operations previously detailed are in the nature of dutiable repairs and maintenance operations, with the exception of measuring were on the cutlass bearings. This is in the nature of an inspection not associated with any repair operation and is, therefore, non-dutiable.

HOLDING:

Following a thorough review of the evidence as well as an analysis of the applicable law and precedents, we have determined to allow the Application for Relief in part and to deny it in part, as specified in the Law and Analysis portion of this ruling.

Sincerely,

B. James Fritz

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