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HQ 113116

July 12, 1994

VES-13-18-CO:R:IT:C 113116 GOB

CATEGORY: CARRIER

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

RE: Vessel Repair Entry No. 110-6461439-6; 19 U.S.C. 1466; 19 U.S.C. 1466(d)(1); PRESIDENT JEFFERSON, V-299

Dear Sir:

This is in response to your memorandum dated May 19, 1994, which forwarded the petition submitted by American President Lines, Ltd. ("petitioner") with respect to the above-referenced vessel repair entry.

FACTS:

The record reflects the following. The PRESIDENT JEFFERSON ("vessel") is a U.S.-flag vessel owned and operated by the applicant. Certain foreign shipyard work was performed on the vessel on voyage 299. The vessel arrived at the port of Seattle, Washington on October 26, 1993 and filed a vessel repair entry.

In Ruling 113025 dated March 7, 1994 with respect to this vessel repair entry, we granted part of the application for relief and denied part of the application for relief.

Petitioner's Claims

The petitioner contends that a casualty occurred with respect to the aft stern tube seal. It also maintains that certain U.S.- manufactured parts purchased in the United States are not dutiable.

ISSUE:

Whether duty on certain items is subject to remission pursuant to 19 U.S.C. 1466(d)(1).

LAW AND ANALYSIS:

19 U.S.C. 1466 provides for the payment of duty at a rate of fifty percent ad valorem on the cost of foreign repairs to vessels documented under the laws of the United States to engage in foreign or coastwise trade, or vessels intended to be employed in such trade.

19 U.S.C. 1466(d)(1) provides in part that the Secretary of the Treasury is authorized to remit or refund such duties if the owner or master of the vessel furnishes good and sufficient evidence that the vessel was compelled by stress of weather or other casualty 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. 19 CFR 4.14(c)(3)(i) provides that "port of destination" means such port in the United States and "...only the duty on the cost of the minimal repairs needed for the safety and seaworthiness of the vessel is subject to remission or refund."

19 U.S.C. 1466 and 19 CFR 4.14 essentially set forth a three- part test, each of the elements of which must be established by good and sufficient evidence to qualify for remission:

1. a casualty occurrence;
2. an unsafe and unseaworthy condition;
3. the inability to reach the port of destination without foreign repairs.

In Ruling 113025 we found that a casualty occurrence had not been established.

The petitioner has now submitted additional information. It has submitted a letter dated September 20, 1993 from Global Diving & Salvage, Inc. ("Global") which states in part:

On Sept. 18, 1993 Global Diving and Salvage, Inc. performed an underwater stern inspection of the S/S "President Jefferson" at Terminal 5, Seattle, WA. Purpose of the dive was to determine if the rope guard was free of obstructions, and look for possible oil leak.
...
The following conditions were found to exist:

Rope Guard: No discrepancies noted. No oil was observed coming from the top inspection port at any time during the drive. All rope cutters were in place...All net & line were removed and given to the port engineer.

Waukesha Seal: The full circumference of the seal was observed and was found to be free of any foreign material.

In its petition, the petitioner states the following:

Voyage 299 started at Seattle on September 19, 1993 and the vessel sailed on September 20, 1993 in a seaworthy condition, no repairs required.

On September 27, 1993 en route Dutch Harbor to Yokohama an oil leak of one drop every 2 to 3 minutes was observed.

On October 5, 1993, the Master reported a significant stern seal oil leak (see Enclosure "C") and requested "repair soonest." At that time the USCG initiated a citation dated October 17, 1993 which prohibited the vessel from proceeding until the seal was satisfactorily repaired. See Enclosure

Global's inspection was accomplished on the day prior to the commencement of the subject voyage. Global's inspection and the fact that an oil leak occurred a short time thereafter are probative of the fact that a casualty occurred between the time of the inspection and the oil leak.

At the application stage the petitioner submitted documentation from the U.S. Coast Guard which stated:

Make permanent repairs to leaking aft stern tube seal prior to returning to next U.S. port.

Based upon the newly-submitted documentation, i.e., the letter from Global with respect to the inspection on September 18, 1993, we determine that a casualty occurred and that remission of the duty on the cost of the aft stern tube seal repairs pursuant to 19 U.S.C. 1466(d)(1) is appropriate. The cost of these repairs includes all parts used therein, including the cost of the seal kit.

HOLDING:

Duty on the cost of the aft stern tube seal repairs and related parts is remitted pursuant to 19 U.S.C. 1466(d)(1). The petition is granted.

Sincerely,

Arthur P. Schifflin
Chief

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