HQ 113191 - Vessel Repair Entry No. C28-0189424-0 ; 19 U.S.C. 1466(d)(1) and (h); STRONG VIRGINIAN, V-1; Casualty; Modification; T.D. 75-257 - United States International Trade Commision Rulings

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HQ 113191

December 29, 1994

VES-13-18-CO:R:IT:C 113191 GOB

CATEGORY: CARRIER

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

RE: Vessel Repair Entry No. C28-0189424-0 ; 19 U.S.C. 1466(d)(1) and (h); STRONG VIRGINIAN, V-1; Casualty; Modification; T.D. 75-257

Dear Sir:

This is in response to your memorandum dated December 15, 1994, which forwarded the application for relief submitted on behalf of Strong Virginian Navigation Company ("applicant") in connection with the above-referenced vessel repair entry.

FACTS:

The record reflects that the STRONG VIRGINIAN (the "vessel") arrived at the port of San Francisco on July 7, 1994 and subsequently filed the subject vessel repair entry.

You requested our determination with respect to items involving the following issues: modification; 19 U.S.C. 1466(d)(1) - (casualty); 19 U.S.C. 1466(h); and parts purchased in the U.S.

ISSUES:

Whether the subject items are dutiable pursuant to 19 U.S.C. 1466. If dutiable, whether duty is subject to remission or refund under 19 U.S.C. 1466.

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.

Modification Issue

You have requested our determination with respect to items 23, 24, and 25 on page four of the spreadsheet.

In its application of the vessel repair statute, the Customs Service has held that modifications, alterations, or additions to the hull and fittings of a vessel are not subject to vessel repair duties. The identification of work constituting modifications vis-a-vis work constituting repairs has evolved from judicial and administrative precedent. In considering whether an operation has resulted in a nondutiable modification, the following factors have been considered:

1. Whether there is a permanent incorporation into the hull or superstructure of a vessel, either in a structural sense or as demonstrated by means of attachment so as to be indicative of a permanent incorporation. See United States v. Admiral Oriental Line, 18 C.C.P.A. 137 (1930). However, we note that a permanent incorporation or attachment does not necessarily involve a modification; it may involve a dutiable repair.

2. Whether in all likelihood an item would remain aboard a vessel during an extended lay-up.

3. Whether an item constitutes a new design feature and does not merely replace a part, fitting, or structure that is performing a similar function.

4. Whether an item provides an improvement or enhancement in operation or efficiency of the vessel.

After a consideration of the evidence of record with respect to items 23 through 25, it is our determination that the costs on these invoices are not costs of dutiable repairs. Accordingly, the application is granted with respect to these items.

Casualty Issue

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.

We find that the applicant has not met the requirements of 19 U.S.C. 1466(d)(1) for remission. The applicant has not submitted good and sufficient evidence that stress of weather or other casualty was the cause of the vessel's problems. Accordingly, the applicant's claim for relief pursuant to 19 U.S.C. 1466(d)(1) is denied with respect to all pertinent items.

The mere statement that certain parts of the vessel "suffered a casualty due to overheating" or the mere assertion of a "reduction gear casualty" or an "auxiliary engine casualty" are clearly insufficient to establish by good and sufficient evidence the occurrence of a casualty within the meaning of 19 U.S.C. 1466(d)(1).

We note that rough weather, in and of itself, is not sufficient to establish that the repairs were necessitated by stress of weather or other casualty. For such a finding there must be documentation sufficiently establishing a link between the stress of weather or other casualty and the repairs. The applicant has not submitted such documentation.

With respect to a casualty, we have stated as follows in numerous decisions:

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

In Dollar Steamship Lines, the court stated in pertinent part:

We are of the opinion that a casualty similar to "stress of weather" should be of necessity a happening that comes with the violence of the turbulent forces of nature.

Black's Law Dictionary (Fifth Edition, 1979) defines casualty as follows:

A serious or fatal acci dent. A person or thing injured, lost or destroyed. A disastrous occurrence due to sudden, unexpected or unusual cause. Accident; misfortune or mishap; that which comes by chance or without design. A loss from such an event or cause; as by fire, shipwreck, lightning, etc.

Further, the applicant has not submitted good and sufficient evidence that the repairs were necessary to enable the vessel to reach its port of destination in the United States. Frequently, this documentation takes the form of a U.S. Coast Guard statement that the repairs are necessary for the vessel to reach its port of destination in the United States.

19 U.S.C. 1466(h)

With respect to certain items, the applicant makes a claim for relief pursuant to 19 U.S.C. 1466(h).

The subject vessel repair entry was filed on July 12, 1994. 19 U.S.C. 1466(h) was not in effect at that time. Thus, the provisions of 19 U.S.C. 1466(h) do not apply to this entry. Accordingly, the application for relief is denied with respect to items for which relief was requested pursuant to 19 U.S.C. 1466(h).

With respect to certain items on the spreadsheet, the applicant states "Imported & Duty Paid." The applicant appears to be making a claim for relief pursuant to 19 U.S.C. 1466(h) with respect to these items. As stated supra, 19 U.S.C. 1466(h) is not available for this entry. Accordingly, the application is denied with respect to these items.

T.D. 75-257

The applicant seeks relief with respect to certain items based upon "U.S. Manufacture and Purchase" (item 75 on spreadsheet) and "U.S. Purchase" (item 97 on spreadsheet).

Pursuant to T.D. 75-257:

...the cost of materials of United States origin which are purchased by the vessel owner in the United States is not subject to duty under 19 U.S.C. 1466, when installed on the vessel in a foreign country.

The applicant has not established that the requirements of T.D. 75-257 have been met. For example: (a) a Dixie Bearings, Inc. invoice to Van Ommeren Shipping, Inc. with respect to item 97 states: "Bearings, Inc. and subsidiaries supports American made products" and (b) a Unitor Ships Service Inc. invoice to Van Ommeren Shipping (USA) Inc. with respect to item 75 states: "All items listed on the above invoices are for materials manufactured in the United States of America." These statements are not sufficient to establish duty-free treatment pursuant to T.D. 75-257 in that they do not establish that the purchase was made by the vessel owner or operator. Further, the invoice described in (a) supra, does not establish that the subject merchandise was of U.S. origin.

HOLDINGS:

As detailed supra, the application is granted with respect to the modification claim (items 23, 24, and 25 on the spreadsheet) and the application is denied with respect to the other items considered herein.

Sincerely,

Arthur P. Schifflin
Chief

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