HQ 0113057 - Vessel Repair Entry No. C53-0028097-7; Casualty; Parts; M/V PAUL BUCK; V-145; 19 U.S.C. 1466 - United States International Trade Commision Rulings

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HQ 113057

July 26, 1994

VES-13-18-CO:R:IT:C 113057 GEV

CATEGORY: CARRIER

Regional Director
Commercial Operations Division
U.S. Customs Service
423 Canal Street
New Orleans, Louisiana 70130-2341

RE: Vessel Repair Entry No. C53-0028097-7; Casualty; Parts; M/V PAUL BUCK; V-145; 19 U.S.C. 1466

Dear Sir:

This is in response to your memorandum dated March 18, 1994, forwarding an application for relief from duties assessed pursuant to 19 U.S.C. 1466. Our findings on this matter are set forth below.

FACTS:

The M/V PAUL BUCK is a U.S.-flag vessel operated by Ocean Ships, Inc. of Houston, Texas. The subject vessel had foreign shipyard work performed in Falmouth, U.K., during August of 1993. Subsequent to the completion of the work the vessel arrived in the United States at Houston on September 4, 1993. A vessel repair entry covering the work in question was filed on the date of arrival.

An application for relief with supporting documentation was timely filed on November 3, 1994. The applicant bases its claims for relief in part on a casualty and on the fact that various vessel parts and materials were U.S.-manufactured and/or purchased.

ISSUES:

1. Whether evidence is presented sufficient to prove that the foreign repairs and related survey warrant remission pursuant to 19 U.S.C. 1466(d)(1).

2. Whether evidence is presented sufficient to prove that certain parts and materials are non-dutiable under 19 U.S.C. 1466.

LAW AND ANALYSIS:

Title 19, United States Code, 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 Customs position that "port of destination" means a port in the United States. (19 CFR 4.14(c)(3)(i))

The statute thus sets forth the following three-part test that must be met in order to qualify for remission under the subsection:

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 which, 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 casualty event, we must consider the repair to have been necessitated by normal wear and tear (ruling letter 106159, dated September 8, 1983).

In addition, if the above requirements are satisfied by evidence, 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.

The applicant states that the damage in question, claimed to be casualty-related, occurred at some time during the vessel's passage through thick pack ice while en route to Thule Air Force Base in Greenland and thereafter when it again passed through pack ice in transit to its next destination. The applicant has submitted the following documentation to support a casualty claim: (1) American Bureau of Shipping (ABS) Invoice #UK 351309 (Exhibit 1); (2) ABS Survey Report #LD 4706 (Exhibit 1(a)); A&P Appledore Damage Account Invoice covering the cost of repairing
the damage (Exhibit 16(b)); U.S. Coast Guard (USCG) Form 2692 - Report of Marine Accident (Exhibit 17); the Master's Statement of Facts (Exhibit 18); the Master's Statement (Exhibit 19); the vessel's logs from July 12 - July 31, 1994 (Exhibit 20); and Customs Headquarters Ruling Letter 111324. Upon reviewing the above evidence, we note that in Exhibit 18 the Master states that "...there was no specific moment or incident...which would indicate that damage had occurred." He also states that after mooring at Thule, an "...initial tour of the waterline in a small boat did not turn up anything unusual." However, he then goes on to state that the structural damage was later observed to be "...5-6 feet below the waterline and extending down 8-10 feet." (emphasis added) He further states that the damage was discovered through an internal and external inspection of the hull and ballast tanks "...upon arrival in port..." which he characterizes as "...normal procedure following special operations of this sort." In Exhibit 19, the Master also described this inspection procedure as a "routine examination." In addition, it is counsel's statement on p. 6 of the application that before the vessel left the United States routine ABS and USCG inspections revealed none of the contact damage subsequently discovered.

It is therefore apparent that the damage in question occurred to an underwater part of the vessel at some unknown time while it was en route to Thule and was not discovered until after its arrival at that port. Furthermore, it is apparent that the vessel proceeded in a damaged condition from Thule to Falmouth where it was repaired.

In C.I.E. 1202/59, Customs 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 damage in question occurred prior to the commencement of the voyage provided other necessary factors are established.

Accordingly, pursuant to C.I.E. 1202/59, the record supports the establishment of a casualty occurrence (i.e., striking ice) as discussed above. However, in regard to the remaining criteria requisite for obtaining remission under 19 U.S.C. 1466(d)(1) (i.e., unsafe and unseaworthy conditions in the vessel's damaged state, and its inability to reach its United States port of destination without obtaining foreign repairs), the only supporting evidence contained within the record is the statement of the Master in Exhibit 19.

Further in regard to the above-referenced criteria, we note 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 2.01-15 and 31.10- 25, USCG Regulations (46 CFR 2.01-15, 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, 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 2.01-15 which does not distinguish between foreign or domestic locations, the OCMI, New York, N.Y., in a letter dated November 7, 1991, has informed us 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."

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."

Customs has previously addressed the sufficiency of evidence in casualty claims such as this where a vessel that has been damaged foreign proceeds in a state of disrepair between two foreign locations prior to its being repaired in a foreign port, and subsequently sails to its U.S. port of destination. (See Customs Rulings 112060, dated May 21, 1992; 112061, dated June 10, 1992; 112063, dated June 8, 1992; and 112229, dated June 11, 1992; all of which are distinguished from Customs Ruling 111324 cited by counsel in that the latter did not address a vessel proceeding between two foreign ports in a damaged condition) It is Customs position as so stated in the aforementioned rulings that 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).

Accordingly, in view of the fact that the record contains no correspondence from the USCG regarding this casualty claim other than the aforementioned CG - 2692, we are of the opinion that the evidence presented is insufficient to prove that the costs of the foreign repairs and associated survey (Exhibits 1, 1a and 16(b)) were necessary for the vessel's safety and seaworthiness thereby warranting remission pursuant to 19 U.S.C. 1466(d)(1).

In addition to the casualty claim discussed above, we are asked to review the applicant's claim for relief regarding various vessel parts and materials. It is Customs position that the dutiability of vessel parts and materials installed on U.S.- flagged vessels is controlled by Treasury Decision (T.D.) 75-257. Accordingly, the costs of parts and materials covered by Items 2, 3, 5, 7, 8, 12 and 14 of the application which contain documentation evidencing U.S. purchase by the vessel owner and U.S.-manufacture are not dutiable. The costs of the remaining parts in issue, covered by Items 4, 6, 9, 10 and 11 of the application are dutiable.

HOLDINGS:

1. The evidence presented is insufficient to prove that the foreign repairs and related survey warrant remission pursuant to 19 U.S.C. 1466(d)(1).

2. The evidence presented is sufficient to prove that the parts and materials covered by Items 2, 3, 5, 7, 8, 12 and 14 of the application are not subject to duty under 19 U.S.C. 1466.

Sincerely,

Arthur P. Schifflin

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