HQ 113480 - Vessel Repair Entry No. C13-0026244-6; M/V GREEN BAY; V-47/49; Casualty; U.S. Parts; 19 U.S.C. ? 1466 - United States International Trade Commision Rulings

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HQ 113480

July 14, 1995

VES-13-18-R:IT:C 113480 GEV

CATEGORY: CARRIER

Chief, Residual Liquidation and Protest Branch Commercial Operations
U.S. Customs Service
6 World Trade Center
New York, N.Y. 10048-002980

RE: Vessel Repair Entry No. C13-0026244-6; M/V GREEN BAY; V-47/49; Casualty; U.S. Parts; 19 U.S.C. ? 1466

Dear Sir:

This is in response to your memorandum dated June 9, 1995, forwarding an application for relief from duties assessed pursuant to 19 U.S.C. ? 1466. You request our review of the applicant's claims with respect to bow damage repairs and various parts contained within the above-referenced entry. Our findings are set forth below.

FACTS:

The M/V GREEN BAY is a U.S.-flag vessel owned and operated by Central Gulf Lines, Inc. On July 12, 1993, the vessel was involved in a collision with the foreign-flag vessel LIAN HU SHAN in Nagoya, Japan, which resulted in damage to the subject vessel's bulbous bow, forecastle deck plate, bulwark and various forward frames. Subsequent to an underwater inspection at Nagoya, the vessel proceeded to Yokohama, Japan, for repairs which took place during the period of July 13-19, 1993. The vessel arrived in the United States at Baltimore, Maryland, from Bremerhaven, Germany, on December 12, 1993. A vessel repair entry was timely filed.

By application dated February 10, 1994, remission pursuant to 19 U.S.C. ? 1466(d)(1) was requested for the cost of repairs due to the aforementioned collision. In addition, the applicant requests relief for the cost of U.S.-manufactured parts sold by U.S. vendors. In support of its claims, the applicant has submitted the following documentation: invoices; the vessel's schedule; excerpts from the vessel's deck log; the vessel's telex message documenting the collision; pictures of the damage sustained; a statement from the attending agent; ABS survey reports; and a U.S. Coast Guard Form 2692.

ISSUES:

1. Whether evidence is presented sufficient to prove that certain foreign repairs performed on the vessel for which relief is sought were necessary for its safety and seaworthiness thus warranting remission pursuant to 19 U.S.C. ? 1466(d)(1).

2. Whether evidence is presented sufficient to prove that various vessel parts for which the applicant seeks relief are not subject to duty 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. (see 19 CFR ? 4.14(c)(3)(i))

The statute sets forth the following three-part test which 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, the remission is restricted to the cost of the minimal repairs necessary to "...secure the safety and seaworthiness of the vessel to enable her to reach her port of destination." (19 U.S.C. ? 1466(d)(1)). Repair costs beyond that minimal amount are not subject to remission. In the case under consideration, the evidence - 3 -
supports the claim that the subject vessel suffered a marine casualty (i.e., a collision with another vessel). However, the extent of that casualty (i.e., parts 2 and 3 of the three-part test set forth above) is the critical issue under consideration.

The U.S. Coast Guard (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 OCMI 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 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)). It is Customs position as 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 - 4 -
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 accompanying the CG-2692 submitted as discussed above, the evidence presented is insufficient to warrant 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. It is Customs position that vessel parts and materials which are of U.S. manufacture and purchased by the vessel owner in the United States are not subject to duty under 19 U.S.C. ? 1466, when installed on the vessel in a foreign country. (see Treasury Decision (T.D.) 75-257). Accordingly, upon reviewing the documentation submitted we are in accord with your position that for those item nos. listed on pp. 1-3 of the application for relief covering parts for which relief is requested, only the following are non-dutiable: 2 (Nalfleet Inc.); 17 (Apollo, Lee and Marine); 20 (Hydratech), and 31(Electric Motors, Inc.)

HOLDINGS:

1. Evidence is presented insufficient to prove that certain foreign repairs performed on the subject vessel for which relief is sought were necessary for its safety and seaworthiness therefore remission pursuant to 19 U.S.C. ? 1466(d)(1) is denied.

2. Evidence is presented sufficient to prove that the parts covered by those item nos. discussed in the Law and Analysis portion of this ruling are not subject to duty under 19 U.S.C. Sincerely,

Arthur P. Schifflin

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