HQ 0112060 - Protest No. 1801-91-000068; Vessel Repair; Entry No. C18- 0014538-0; S/S ULTRAMAR V-96B; Casualty; Seaworthiness - United States International Trade Commision Rulings

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HQ 112060

May 21, 1992

VES-13-18-CO:R:P:C 112060 GEV

CATEGORY: CARRIER

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

RE: Protest No. 1801-91-000068; Vessel Repair; Entry No. C18- 0014538-0; S/S ULTRAMAR V-96B; Casualty; Seaworthiness

Dear Sir:

This is in response to your memorandum dated December 16, 1991, forwarding a supplemental petition for review of ruling 111477 GEV. We note that a protest on this matter (containing the same claims as in the supplemental petition) was subsequently filed and forwarded to our office for review. Our ruling on this matter is set forth below.

FACTS:

The S/S ULTRAMAR is a U.S.-flag vessel owned by Bankers Trust Company, and operated by American Maritime Transport, Inc. (AMT). The subject vessel had foreign shipyard work performed in Palermo, Sicily, during the period of November 23-December 6, 1989. Subsequent to the completion of the work the vessel arrived in the United States at Tampa, Florida, on December 23, 1989. A vessel repair entry covering the work in question was apparently untimely filed on January 2, 1990 (we note that Box 25E on the CF 226 for the entry date is blank, however, the handwritten date of "1/2/90" appears in Box 18).

An application for relief, dated February 1, 1990, was filed requesting remission pursuant to 19 U.S.C. 1466(d)(1). It was stated that on November 3, 1989, while the S/S ULTRAMAR was anchored and discharging cargo to a lightering vessel in Chittagong, Bangladesh, the M/V ADEL, for reasons unknown, struck the S/S ULTRAMAR with her bow making a deep indentation in the port side in way of the hold and ballast tanks 1 and 2, extending approximately 80 feet in length. The application stated that, "After examination by the American Bureau of Shipping it was agreed that permanent repairs would be required before the vessel could return to oceangoing service. Because there were no adequate repair facilities in the area, temporary
repairs only were accomplished by the crew in Chittagong. The ABS surveyor recommended that the vessel proceed in ballast to Malta for the required permanent repairs prior to returning to the U.S. Pursuant to the recommendations of ABS, the vessel sailed to Palermo, Sicily (near Malta) where the required repairs were accomplished."

In support of the application the following was submitted: the vessel log of November 3, 1989 (Exhibit A(1)); the vessel log of November 4, 1989 (Exhibit A(2)): a fax from the Master dated November 3, 1989 (Exhibit B); a Note of Protest (Exhibit C); a U.S. Coast Guard (USCG) Report of Accident (Exhibit D); an American Bureau of Shipping (ABS) letter dated November 20, 1989; ABS Report no. CI 1252 (Exhibit F(1)); ABS Report no. PL6963 (Exhibit F(2)); a picture of the repairs in progress (Exhibit F(3)); an affidavit of the Master (Exhibit G); a report from The Salvage Association (Exhibit H); and shipyard invoices.

In ruling 111015 GV, dated July 27, 1990, Customs denied the application for relief. In denying this request we noted that in regard to the applicant's claim that the repair facilities in Chittagong were inadequate for performing permanent repairs and therefore the vessel had to proceed in ballast to Palermo, several ports closer to Chittagong capable of performing the subject repairs (most notably Singapore) were bypassed in favor of sailing a much greater distance to Palermo. A question existed as to degrees of seaworthiness. We held that in the subject case, the voyage of the S/S ULTRAMAR from Chittagong (where temporary repairs were obtained) across the Indian Ocean, through the Suez Canal, and then halfway across the Mediterranean Sea was sufficient to demonstrate the subject vessel's seaworthiness so as to deny remission under section

In a petition dated September 27, 1990, counsel for AMT reiterated their claim for remission based on a casualty. Further in support of this claim the following additional documentation was submitted: excerpts from G. Gilmore & C. Black, The Law of Admiralty (2d ed. 1975) (Exhibit 3); 80 C.J.S. Shipping 36 (Exhibit 4); 70 Am. Jur. 2d 26 (Exhibit 5); an Opinion of the Attorney General dated January 29, 1923 (Exhibit 6); T.D. 39443 (Exhibit 7); a letter from the Assistant Vice President, ABS (Exhibit 8); and an affidavit from the Vice President of AMT (Exhibit 9). In response to a request for additional information from the New Orleans VRLU, counsel also submitted a letter from the Vice President, American Maritime Transport, Inc.

It should be noted that after Customs receipt of the petition and supporting documentation, and at the request of the petitioner, a meeting was held at Customs Headquarters on June 25, 1991, with the petitioner (i.e., the President of AMT who was
the Vice President of Operations of AMT during the time of the repairs in question), petitioner's counsel, a witness for the petitioner (i.e., the vessel's Chief Engineer during the time in question), the Chief, Carrier Rulings Branch, and an attorney with the Carrier Rulings Branch.

In ruling 111477 GEV, dated July 16, 1991, Customs denied the petition. This denial was based upon a review of the record in its entirety, specifically the legal authorities cited therein which led us to agree with the position that seaworthiness is a relative term dependent upon a variety of factors including the condition of the vessel, the proposed voyage, seasonal changes, etc. We noted, however, that to support their argument that the subject vessel was seaworthy for its Chittagong-Palermo voyage but not for a trans-Atlantic crossing, the petitioner relied heavily on the ABS documentation cited above. While this documentation appeared indicative of the opinion of ABS on this matter, the record contained no "Certificate of Fitness to Proceed" referenced on both p. 1 of the ABS Vice President's letter (Exhibit 8) and p. 11 of the petition. Furthermore, other than the USCG Report of Accident, the record contained no USCG documentation of any kind. This would appeared to run contra to sections 2.01-15 and 31.10-25, of the USCG Regulations (46 CFR 2.01-15, 31.10-25).

During the aforementioned June 25, 1991, meeting at Customs Headquarters, the President of AMT stated that he telephonically contacted the USCG about the incident, informed them of the ABS survey, and requested a USCG inspection prior to the vessel's departure from Chittagong. He further stated that the USCG telephonically informed him that it could not get a USCG inspector to the vessel for five days but would accept the ABS survey as a substitute for its own inspection. The record contained no writing to substantiate these claims. Furthermore, upon contacting the USCG Marine Inspection Offices in New York and Honolulu (both of which oversee foreign repairs to U.S. vessels) we were informed that the USCG was not contacted by the petitioner regarding this matter until after permanent repairs were performed on the subject vessel in Palermo. Based both on the record as prepared by counsel for AMT, and our discussion with USCG officials, it was apparent that the USCG made no determination whatsoever as to the subject vessel's safety and seaworthiness prior to its proceeding from Chittagong to Palermo. Accordingly, Customs held that the petitioner failed to substantiate its claim for remission under 1466(d)(1) and the petition was therefore denied.

The entry was subsequently forwarded for liquidation which took place on September 6, 1991. By letter dated December 3, 1991, counsel, on behalf of AMT filed a supplemental petition.

Realizing that a supplemental petition is the incorrect vehicle by which to obtain relief (see Penrod Drilling Co. v. U.S., 727 F.Supp. 1463 (CIT 1989)), counsel properly filed a protest on December 5, 1991. In support of this protest the following evidence was submitted: a letter dated August 13, 1991, from the President of AMT, to the Officer-In-Charge, USCG Marine Inspection Office (OCMI), New York, N.Y., regarding this matter (Exhibit B); a letter dated August 20, 1991 (with enclosures) from the OCMI, New York, N.Y., in response to the aforementioned letter (Exhibit C); a letter dated September 16, 1991, from counsel for AMT to the OCMI, New York, N.Y., on this matter (Exhibit D); and a letter dated November 7, 1991, from the OCMI, New York, N.Y., in response to the aforementioned letter from counsel (Exhibit E).

ISSUE:

Whether evidence is presented sufficient to prove that the foreign repairs performed on the vessel for which relief is sought, were necessary for its safety and seaworthiness thus warranting remission pursuant to 19 U.S.C. 1466(d)(1).

LAW AND ANALYSIS:

Title 19, United States Code, section 1466, provides in part for payment of an ad valorem duty of 50 percent of 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 engage in such trade. Section 1466(d)(1) provides that the Secretary of the Treasury is authorized to remit or refund such duties if the owner or master of the vessel was compelled by stress of weather or other casualty to put into such foreign port to make repairs to secure the safety and seaworthiness of the vessel to enable her to reach her port of destination.

It is noted that section 4.14(c)(3)(i), Customs Regulations (19 CFR 4.14(c)(3)(i)), provides that "port of destination" means such port in the United States. This point is not in dispute, however, it is an embellishment upon section 1466(d)(1) which sets forth the following three-part test which must be met in order to qualify for remission:

1. The establishment of a casualty occurrence.

2. The establishment of unsafe and unseaworthy conditions.

3. The inability to reach the port of destination without obtaining foreign repairs.

In addition, if the above requirements are satisfied by evidence, the remission is restricted to the cost of the minimal repairs necessary to enable the vessel to reach her port of destination. Repair costs beyond that minimal amount are not subject to remission. In the case under consideration, the evidence supports the claim that the subject vessel suffered a marine casualty. However, the extent of that casualty (i.e., parts 2 and 3 of the three-part test set forth above) is the critical issue upon which this case turns.

All parties concerned are in agreement that the USCG is the controlling agency that determines questions of a vessel's fitness to proceed. The procedure by which the USCG renders such a determination is set forth in sections 2.01-15 and 31.10-25, USCG Regulations (46 CFR 2.10-15, 31.10-25). The former states that a vessel may not proceed from one port to another for repairs unless prior authorization is obtained from the USCG OCMI either through the issuance of a USCG "Permit to Proceed to Another Port for Repairs" (CG-948) or a CG-835 which would specify the restrictions on, and duration of, any voyage undertaken prior to obtaining permanent repairs. The latter states that with respect to tank vessels, "No extensive repairs to the hull or machinery which affect the safety of a vessel shall be made without the knowledge of the Officer-In-Charge, Marine Inspection."

Notwithstanding the clear wording of the above USCG Regulations, specifically 46 CFR 2.10-15 which does not distinguish between foreign or domestic locations, the OCMI, New York, N.Y., states that "A formal Permit to Proceed is not normally issued to a vessel transiting foreign waters because the Certificate of Inspection (COI) would have to be removed from the vessel which would cause problems in transiting foreign waters." (Exhibit E)

In addition, we have subsequently learned from the Chief, Merchant Vessel Inspection and Documentation Division, USCG Headquarters, in a letter dated April 14, 1992, that "Vessel operators often make casualty reports for U.S. flag vessels damaged overseas verbally to the proper Coast Guard Marine Inspection Office, followed by the required written report. The Coast Guard cannot always send a marine inspector to a damaged vessel overseas on short notice. In such cases, the Coast Guard may consider the classification society report and the report of the vessel's master to determine the required temporary repairs and voyage restrictions."

A review of the casualty records in the Marine Investigation Division at USCG Headquarters reveals that the collision in question took place on November 3, 1989, and was verbally reported by the operator of the ULTRAMAR to the OCMI in New York the following day. The required written notification, however,
was submitted to the OCMI in Honolulu. Notwithstanding the fact that at the time of the collision the ULTRAMAR was in an overseas location that is usually covered by the OCMI in Honolulu (where both the verbal and written notifications to the USCG should have been reported), then subsequently proceeded to a repair facility in an area covered by the OCMI in New York, it is the position of the USCG that the vessel operator violated no laws or regulations administered by that agency in reporting the vessel casualty and arranging for inspection. (Exhibit E and the aforementioned letter from the Chief, Merchant Vessel Inspection and Documentation Division, USCG Headquarters)

Accordingly, evidence is presented sufficient to prove that the subject foreign repairs were necessary for the vessel's safety and seaworthiness thereby warranting remission pursuant to 19 U.S.C. 1466(d)(1).

Parenthetically, we note that in regard to future cases such as the one now under consideration (i.e., where a vessel has been damaged foreign, proceeded between two foreign locations in a state of disrepair prior to its being repaired foreign, and subsequently sailing to its U.S. port of destination), notwithstanding any practice of verbally reporting foreign casualties to the USCG and that agency's subsequent verbal instructions, remission pursuant to 19 U.S.C. 1466(d)(1) will not be granted in the absence of documentary evidence that the casualty occurrence was timely reported to the USCG and that agency permitted the vessel to proceed between two foreign locations in a damaged condition. The mere submission of a USCG Report of Marine Accident, Injury or Death (CG-2692), without accompanying documentation from the appropriate USCG OCMI (New York or Honolulu) authorizing the vessel to proceed in a damaged condition, will not suffice for granting remission pursuant to 19 U.S.C. 1466(d)(1).

HOLDING:

The evidence presented is sufficient to prove that the foreign repairs performed on the subject vessel for which relief is sought were necessary for its safety and seaworthiness therefore remission pursuant to 19 U.S.C. 1466(d)(1) is granted.

Accordingly, the protest is granted.

Sincerely,

B. James Fritz

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