HQ 0113120 - Vessel Repair Entry No. C53-0028016-7; Parts; Casualty; M/V H.O.S. AGILE; V-2; 19 U.S.C. 1466 - United States International Trade Commision Rulings

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HQ 113120

August 4, 1994

VES-13-18-CO:R:IT:C 113120 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. C53-0028016-7; Parts; Casualty; M/V H.O.S. AGILE; V-2; 19 U.S.C. 1466

Dear Sir:

This is in response to your memorandum dated May 25, 1994, forwarding an application for relief from duties assessed pursuant to 19 U.S.C. 1466. Our findings in this matter are set forth below.

FACTS:

The M/V H.O.S. AGILE is a U.S.-flag vessel owned by Hornbeck Offshore Corporation of Galveston, Texas and operated by Bletsch Steamship Company of Houston, Texas. The subject vessel underwent foreign repairs in Cartagena, Spain and Crete, Greece in September and October of 1993. Subsequent to the completion of these repairs, the vessel arrived in the United States at Galveston, Texas on November 12, 1993. A vessel repair entry was filed on November 16, 1993.

An application for relief from vessel repair duties was filed on November 16, 1993. The applicant claims that the vessel incurred major engine problems while working on a job and that the Chief Engineer and vessel owners made the decision to repair/change out the engine to avoid any possible problems at sea. The applicant submitted the following documentation: invoices from the U.S. manufacturer of parts used for repairs; invoices evidencing overseas travel by, and labor of, a U.S. technician; invoices from the Greek manufacturer of parts used for repairs; and air waybills covering both U.S. and Greek parts.

ISSUE:

Whether evidence is presented sufficient to prove that the foreign repairs performed on the vessel for which relief is sought were necessitated by a casualty occurrence thus warranting remission pursuant to 19 U.S.C. 1466(d)(1).

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.

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 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 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.

In regard to the case under consideration, other than the bald statement of the applicant that the work in question constituted "emergency repairs," the record is devoid of any documentary evidence supporting such a claim (see 19 CFR 4.14(d)(1)(iii)). Accordingly, the applicant's request for remission pursuant to a casualty claim is denied.

Parenthetically, we note that the application is also devoid of the requisite certifications specified in 19 CFR 4.14(d)(1)(i) and (iv). Future applications from this applicant must contain the aforementioned certifications in order to receive Customs consideration.

Notwithstanding our above determination, we nonetheless note that documentation has been submitted covering parts and labor used in the repairs. It is Customs position that the dutiability of vessel parts installed on U.S.-flagged vessels is controlled by Treasury Decision (T.D.) 75-257. Accordingly, the costs of parts and materials covered by invoices from Stewart & Stevenson Services, Inc. of Houston, Texas which evidences U.S. purchase by the vessel owner and U.S.-manufacture are not dutiable. In addition, the cost of the labor to install the aforementioned parts and material is remissible pursuant to 19 U.S.C. 1466(d)(2). The cost of the Greek-manufactured parts in issue is dutiable.

HOLDING:

The evidence presented is insufficient to prove that the foreign repairs performed on the vessel for which relief is sought were necessitated by a casualty occurrence thus warranting remission pursuant to 19 U.S.C. 1466(d)(1).

However, upon review of the record in its entirety, we have determined to grant in part and deny in part the application for relief in this matter as specified in the Law and Analysis portion of this ruling.

Sincerely,

Arthur P. Schifflin

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