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HQ 113315

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March 13, 1995

VES-13-18-CO:R:IT:C 113315 GEV

CATEGORY: CARRIER

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

RE: Vessel Repair Entry No. 110-6461504-7; PRESIDENT JEFFERSON; V-303; 19 U.S.C. ? 1466

Dear Sir:

This is in response to your memorandum dated January 10, 1995, forwarding a petition for review of Headquarters ruling no. 113221. Our ruling on this matter is set forth below.

FACTS:

The PRESIDENT JEFFERSON is a U.S.-flag vessel owned and operated by American President Lines. The vessel underwent foreign shipyard work in Japan and Taiwan during February of 1994. Upon completion of the work the vessel arrived in the United States at Seattle, Washington of March 8, 1994. A vessel repair entry was filed on March 15, 1994.

An application for relief, dated July 1, 1994, was filed with supporting documentation. Pursuant to Headquarters ruling no. 113221, dated November 2, 1994, Customs granted in part and denied in part the aforementioned application. A petition for review of Headquarters ruling no. 113221, dated December 28, 1994, was timely filed. The petitioner claims relief for the following items: (1) insurance; (2) propeller removal; (3) stern tube assembly; and (4) a survey.

ISSUE:

Whether the foreign costs for which the petitioner seeks relief are dutiable pursuant to 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.

In regard to Item 2703-002 covering the cost of insurance during the shipyard repair period, such costs listed on vessel repair entries filed prior to December 29, 1994, are considered non-dutiable drydock charges pursuant to United States v. George Hall Coal Co., 142 F. 1039 (2d Cir. 1906). Accordingly, the cost of insurance under this item is non-dutiable. Parenthetically, we note that such costs listed on vessel repair entries filed on or after December 29, 1994, will be deemed dutiable pursuant to the decision of the U.S. Court of Appeals for the Federal Circuit in Texaco Marine Services, Inc. and Texaco Refining and Marketing, Inc. v. United States, Docket No. 93-1354.

Items 2704-001 and 2704-002 cover propeller removal and stern tube assembly, respectively. At the application stage, relief with respect to these two items was sought based on a warranty claim. This claim was denied. Now the petitioner alternatively alleges that remission should be granted due to a casualty claim.

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.

Upon reviewing the record of the case under consideration in its entirety, we note that the only evidence cited by the petitioner in support of its casualty claim is Enclosure 1 of the application for relief (the ABS Yokohama survey) wherein it is stated, "Oil seal assembly is to be renewed at this time." This statement, without more, is insufficient to establish the requisite criterion for a casualty within the meaning of 19 U.S.C. ? 1466(d)(1) as discussed above.

Accordingly, Items 2704-001, 2704-002 and Item #11 on the CF 226 (the services of a manufacturer's representative to oversee the stern gland seal repairs covered by invoice 2704) are dutiable.

HOLDING:

The foreign costs for which the petitioner seeks relief are dutiable in part as discussed in the Law and Analysis portion of this ruling.

Accordingly, the petition is granted in part and denied in part.

Sincerely,

Arthur P. Schifflin

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