HQ 0112623 - Vessel Repair; Los Angeles Vessel Repair Entry No. 110- 0104292-5; dated April 3, 1992; M/V PRESIDENT MADISON, Voyage 186; Application; Casualty; Heavy Weather; Evidence; 19 U.S.C. 1466 - United States International Trade Commision Rulings

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HQ 112623

August 13, 1993

VES-13-18 CO:R:IT:C 112623 BEW

CATEGORY: CARRIER

Deputy Regional Director
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90831-0700

RE: Vessel Repair; Los Angeles Vessel Repair Entry No. 110- 0104292-5; dated April 3, 1992; M/V PRESIDENT MADISON, Voyage 186; Application; Casualty; Heavy Weather; Evidence; 19 U.S.C. 1466

Dear Sir:

This is in reference to your memorandum of March 3, 1993, which transmitted an application for relief from duties filed by American President Lines, Ltd., in relation to the above- referenced vessel repair entry, dated April 3, 1992. The entry and the application were timely filed. The vessel arrived at the port of Los Angeles on March 28, 1992.

FACTS:

The M/V PRESIDENT MADISON, is a U.S.-flag vessel owned by American President Lines, Ltd. The record shows that the shipyard work in question was performed on the subject vessel in Busan, Korea, and Kaohsiung, R.O.C., during the period of March 8 through March 18, 1992.

The applicant requests review for remission of duty on the following items:

Item # JCF# Vendor

001 MA186-102 American Bureau of
Shipbuilding Report No. BK
7373, dated March 8, 1992
002 MA186-103 American Bureau of
Shipbuilding Report No.BK
7374, dated March 8, 1992
003 MA186-104 DAE GWANG
007 MA186-108 TAI HO MARINE 008MA186-109TAI HO MARINE 009 MA186-110 TAI HO MARINE
0010 MA186-111 TAI HO MARINE
0011 MA186-112 TAI HO MARINE
0013 MA186-114 OMI ENGINEER

The applicant states that the vessel encountered severe weather conditions while enroute from Dutch Harbor, Alaska, to Yokohama resulting in heavy weather damage to the Hatch Comings. It claims that foreign repairs became necessary immediately to ensure the safety and seaworthiness of the vessel. The applicant has also submitted copies of relevant pages from the ship's log containing the sea conditions on March 1, 3, 8, and 11, 1992, and a Master's statement of fact dated March 8, 1992. A Marine Note of Protest was filed on March 6, 1992, when the vessel arrived at Yokohama, Japan. The Marine Note of Protest indicates that while the vessel was bound from Dutch Harbor to Yokohama, from 0200 hours on March 3, 1992 through 1600 hours on March 4, 1992, the vessel encountered Force 10 Winds, Force 7 seas, and Force 7 swells. The report indicates that 5 D-rings fractured, 8 Base Sockets fractured, 15 feet of railing destroyed, and 1 lashing platform were damaged. The file indicates that the vessel was inspected for heavy weather damage by the American Bureau of Shipping (ABS), report No. BK 7374, in Busan, Korea, on March 8, 1992.

The applicant claims that the invoices submitted relate to the repairs necessary because of the alleged casualty.

ISSUE:

Whether sufficient evidence is presented to establish that the subject repairs were necessitated by a "casualty" which is remissible under the vessel repair statute (19 U.S.C. 1466).

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.

Paragraph (1), subsection (d) of section 1466 provides that duty may be remitted if good and sufficient evidence is furnished establishing that the vessel was compelled by stress of weather or other casualty to put into a 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 Customs position that "port of destination" means a port in the United States.

The statute thus sets a three-part test that must be met in order to qualify for remission under the subsection, this being:

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.

The term "casualty" as it is used in the statute has been interpreted as something that, like stress of weather, comes with unexpected force or violence, such as fire, spontaneous explosion of such dimensions as to be immediately obvious to ship's personnel, 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 (ruling letter 106159, September 8, 1983).

In addition, if the above requirements are satisfied by evidence, the remission is restricted to the cost of the minimal repairs 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)). Repair costs beyond that minimal amount are not subject to remission.

Treasury Decision 78-180, sets out guidelines to be used when relief is requested on the basis that the vessel encountered high winds (T.D. 78-180, 12 Cust. B. & Dec. 382 (1978)). It was held that evidence of winds of force 9 on the Beaufort Scale, a numerical scale rating winds according to ascending velocity from zero (calm) to twelve (hurricane), verified as required in the regulations, and accompanied by a reasonable description of the conditions, raise a presumption that severe weather conditions caused the damage. (See also Rene de Kerchove, International Maritime Dictionary 52 (2nd Ed. 1961).

Customs Regulations require that certain supporting evidence be submitted with an application for relief from duties on repairs resulting from stress of weather. This evidence includes photocopies of the relevant parts of the vessel's logs, certification of any claimed casualty by the master or other responsible vessel officer with personal knowledge of the facts, and a certification by the master that the repairs were necessary for the safety and seaworthiness of the vessel to enable her to reach her port of destination in the United States (19 C.F.R.

It is clear from the evidence submitted with the application that on March 3, 1992, the vessel encountered severe weather conditions, namely, Force 10 winds, Force 7 seas and Force 7 swells. The vessel's log on March 3, 1992, shows that while enroute from Dutch Harbor to Yokohama, the vessel was pitching moderately to heavily to a "high w'ly swell and a very high WNW'ly sea. Occasional snow squalls." The vessel arrived in Yokohama, Japan, on March 6, 1992.

The United States Coast Guard (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 Officer-In- Charge, Marine Inspection (OCMI) either through the issuance of a USCG "Permit to Proceed to Another Port for Repairs" (CG-948) or a CG-835 that 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 that does not distinguish between foreign or domestic locations, Customs has been informed by the OCMI, New York, New York, in a letter dated November 7, 1991, 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 that would cause problems in transiting foreign waters."

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."

Our review of the evidence submitted with the application reveals that the damage was caused by a casualty. The report shows that the damage to the vessel was caused when the vessel encountered heavy weather conditions while enroute from Dutch Harbor, Alaska, to Yokohama, Japan, during the period of March 3 and 4, 1992. Subsequently, the vessel proceeded to Busan, Korea.

With regard to the evidence that the vessel was in need of repairs to secure her safety and seaworthiness, however, the documents show that the damage survey and repairs were not made until March 8, 1992, when the vessel arrived in the port of Busan from Yokohama.

In cases such as the one under consideration, (i.e., where a vessel that has been damaged foreign, proceeds in a state of disrepair between two foreign locations prior to being repaired foreign, and subsequently sails 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, directly or through the medium of a marine surveyor, 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).

The applicant has not met a burden of proof that is provided for by federal regulations.

Accordingly, in the absence of any determination of the USCG regarding the subject vessel's safety and seaworthiness, and absent the evidence that would be adduced by the required USCG determination on the issue of seaworthiness, the applicant has failed to substantiate its claim for remission under 1466(d)(1). With regard to item No. 1 - ABS survey Report No. BK 7373, covering the test of the No. 17 deep water ballast tank, Customs has held that where periodic surveys are undertaken to meet the specific requirements of a classification society, insurance carrier, etc., the cost of the surveys is not dutiable even when dutiable repairs are effected as a result thereof; however, in the liquidation process Customs should go beyond the mere labels of "continuous" or "ongoing" before deciding whether the item is dutiable. If an inspection or survey is conducted as a part of an ongoing maintenance and repair program labelled "continuous" or "ongoing" the cost is dutiable. Also, if the survey is to ascertain the extent of damage sustained, or to ascertain if the work is adequately completed, the costs are dutiable as part of the repairs which are accomplished pursuant to holdings in C.I.E. 429/61, C.S.D. 79-2, and C.S.D. 79-277. We find that the survey relating to Report No. BK 7373 is nondutiable. The application is granted as to the cost for item No. 1.

HOLDINGS:

The evidence presented is insufficient to substantiate that the subject repairs were necessitated by a casualty. The foreign work for which the applicant seeks remission is therefore dutiable under 19 U.S.C. 1466.

The cost associated with item No.1, ABS survey Report BK7373 covering the test of the No. 17 deep water ballast tank, is nondutiable.

Sincerely,

Acting Chief

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