HQ 0112140 - Vessel Repair Entry No. 718-0000393-2; Protest No. 2904-92- 100014; M/V LIBERTY SPIRIT V-009-A; Casualty; Fishing Net - United States International Trade Commision Rulings

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HQ 112140

April 7, 1992

VES-13-18-CO:R:IT:C 112140 GEV

CATEGORY: CARRIER

Chief, Technical Branch
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90731

RE: Vessel Repair Entry No. 718-0000393-2; Protest No. 2904-92- 100014; M/V LIBERTY SPIRIT V-009-A; Casualty; Fishing Net

Dear Sir:

This is in response to your memorandum dated March 10, 1992, forwarding a protest on the above-referenced vessel repair entry. Our ruling on this is set forth below.

FACTS:

The M/V LIBERTY SPIRIT is a U.S.-flag vessel owned by Liberty Shipping Group of Lake Success, New York. The subject vessel underwent foreign repairs at several different shipyards in The Netherlands during the period of February 7-13, 1990. Subsequent to the completion of the repairs the vessel arrived in the United States at Portland, Oregon, on March 12, 1990. A vessel repair entry was filed on March 19, 1990.

An application for relief was timely filed on April 20, 1990. By letter dated October 25, 1990, the applicant was notified of our decision on the application contained in Headquarters Ruling 111038 KVS, dated October 2, 1990, which denied relief on the grounds that the applicant had submitted insufficient information to support its claims that the repairs to the stern tube oil seals were necessitated by a casualty and that the installation of navigation equipment was a non-dutiable modification.

A petition for review of Customs ruling on the application was timely filed on October 31, 1990. By Headquarters Ruling 111401 KVS, dated September 24, 1991, the petition was granted in part and denied in part. The entry was subsequently forwarded for liquidation which took place on November 22, 1991. The ensuing protest was filed on January 23, 1992.

At issue is the dutiability of the repair work covered by Verolme Botlek Shipyard invoice no. 200123. This work covers the cost of replacing damaged stern tube oil seals. The protestant contends that the damage was caused while the vessel was en route from New Orleans to Rotterdam (in a laden condition) by stress of weather coupled with the entanglement of fishing net around the propeller shaft. It is claimed that these combined factors created so much pressure inside the seals that they exploded causing excessive oil leakage and allowing the ingress of sea water into the lube oil system. The protestant requests remission of the cost of these repairs pursuant to 19 U.S.C.

In conjunction with the dutiability of the above repair work during consideration of the petition Customs discovered a cost discrepancy between the amount which appears on the shipyard invoice (91,899 DFL) and a much lower amount (49,500 DFL) which the vessel owner claims to be the price agreed upon with the shipyard. Customs ruling on the petition held the evidence insufficient to justify using the lower amount therefore the repairs were liquidated at 91,899 DFL. The protestant reiterates his claim that the cost of the repairs was 49,500 DFL.

The record includes the following documentary evidence in support of the protestant's claim: (1) the shipyard invoice describing the work done including the removal of the entangled fishing net; (2) photographs of the damage in question including the fish net entangled around the propeller shaft; (3) a copy of a payment check from the protestant to the former vessel agent in the amount of $26,202.95 (49,500 DFL); (4) a copy of a letter from the protestant to the former vessel agent attached to the aforementioned check; (5) a copy of a fax from the shipyard to the protestant predating the invoice but confirming the lump sum agreement of 49,500 DFL; (6) an American Bureau of Shipping (ABS) invoice and accompanying survey report of the damage in question; and (7) copies of the vessel's logs from January 30, 1990 to February 13, 1990.

ISSUE:

Whether evidence is presented sufficient to prove that the repairs to the subject vessel involving the stern tube oil seals were necessitated by a casualty 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.

The term "casualty", as it is used in the vessel repair statute (19 U.S.C.1466) has been interpreted as something which, like stress of weather, comes with unexpected force or violence, such as fire, or spontaneous explosion of such dimensions as to be immediately obvious to ship's personnel, or collision (see Dollar Steamship Lines, Inc., v. United States, 5 Cust. Ct. 28- 29, C.D. 362 (1940)). In the absence of evidence of such a casualty event, we must consider the repair to have been necessitated by normal wear and tear (ruling 106159, September 8, 1983).

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, as stated above, 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.

Turning to the protest under consideration, the record supports the protestant's claim that the vessel did in fact encounter heavy weather during the course of its voyage from New Orleans to Rotterdam, a finding set forth in our decision on the petition (ruling 111401, cited above). This decision further held that, "...A.B.S. report no. RO 34991 indicates that the stern tube seal leaking was 'first noted on January 19, 1990,' eleven days before the onset of heavy weather." It was determined that there was an insufficient nexus between stress of weather and the repairs described on Verolme Botlek Shipyard invoice no. 200123 to constitute a casualty therefore remission pursuant to 19 U.S.C. 1466(d)(1) was denied.

However, upon further review of the record in its entirety, it is apparent that the request for remission was not based solely on stress of weather but also on the fact that a fishing net became entangled around the propeller shaft, a fact evidenced by the shipyard invoice and photographs. In this regard it should be noted that Customs has previously addressed the issue of repairs to stern tube after seals due to fishing line fouling the propeller shaft which caused oil leakage. (ruling 108514 GV, dated November 17, 1986)

In ruling 108514 we noted that the documentation submitted which evidenced the entanglement described above satisfied the first criterion in establishing a casualty occurrence (i.e., that the apparatus was damaged to a specifically stated extent) but did not appear to satisfy the second two criteria for a casualty occurrence (i.e., that the damage occurred in a specifically described fashion, and at a named place on a certain date). However, it was further noted that the damage occurred to underwater parts of the vessel. In C.I.E. 1202/59, we held that damage to underwater parts of vessels is usually not easily detectable or susceptible of definite proof respecting date and place of occurrence. We held that relief under 19 U.S.C. 1466(d)(1) is therefore warranted for such damage in the absence of evidence showing that the vessel concerned was grounded, struck bottom, or her propeller contacted some floating object capable of causing damage prior to the commencement of the voyage. However, in C.I.E. 1202/59 and in ruling 106240 JM, dated July 20, 1983, which applied C.I.E. 1202/59 in a case of underwater damage, there was some evidence, or at least an inference could reasonably be made based upon the damage which had occurred, that the damage resulted from striking an unknown underwater object rather than from normal wear and tear (see C.I.E. 1243/60, in which a leak in a vessel's hull was held to be due to normal wear and tear and therefore remission of duty was denied). The lack of evidence, or at least an inference based on the damage sustained, was the very reason relief was denied in ruling 106369 PH, dated February 13, 1984, which applied C.I.E. 1202/59 in a similar case where an oil leak occurred in the vessel's stern tube after seal.

In the case under consideration, the record establishes that the damage to the stern tube seals was caused by the vessel striking an underwater object which was unknown at the time rather than from normal wear and tear. The heavy weather, rather than being the sole cause of the damage, appears to have exacerbated an existing condition caused by the fouling of the fishing net. (see also rulings 109202 LLB, dated April 14, 1988; 109625 GV, dated August 15, 1988; and 110027 LLB/110130 KMF/ 110138 KMF; all of which determined that the entanglement of a mooring line around a vessel's port tailshaft and strut constituted a casualty occurrence)

Accordingly, the record supports not only the establishment of a casualty occurrence as discussed above, but also unsafe and unseaworthy conditions in the vessel's damaged state, and its inability to reach its port of destination without obtaining foreign repairs. Therefore, remission of the duty assessed on the repairs listed on Verolme Botlek Shipyard invoice no. 200123 is granted pursuant to 19 U.S.C. 1466(d)(1). Our grant of remission renders moot any discussion as to the aforementioned invoice discrepancy.

HOLDING:

Evidence is presented sufficient to prove that the repairs to the subject vessel involving the stern tube oil seals were necessitated by a casualty thus warranting remission pursuant to 19 U.S.C. 1466(d)(1).

Accordingly, the protest is granted.

Sincerely,

B. James Fritz

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