HQ 113581 - Vessel repair; Application for Relief; Casualty claim; Survey and repairs prior to sailing; Vessel BRISTOL BAY TRADER; Vessel repair entry number 603-1019842-3 - United States International Trade Commision Rulings

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HQ 113581

February 8, 1996

VES-13-18-RR:IT:EC 113581 LLB

CATEGORY: CARRIER

Chief, Liquidation Section II
U.S. Customs Service
Post Office Box 2450
San Francisco, California 94126

RE: Vessel repair; Application for Relief; Casualty claim; Survey and repairs prior to sailing; Vessel BRISTOL BAY TRADER; Vessel repair entry number 603-1019842-3

Dear Sir:

Reference is made to your memorandum of September 14, 1995, which forwards for our review and appropriate action the Application for Relief filed by counsel on behalf of Northland Services, Inc., in connection with the above-captioned vessel repair entry. Our finding are contained in the ruling which follows.

FACTS:

The BRISTOL BAY TRADER is an unmanned barge which, prior to April of 1995, had been named ALASKA ENTERPRISE. In October of 1986, while under different ownership, the vessel commenced a voyage under tow from Seattle, Washington, to Busan, Korea, via the port of Dutch Harbor, Alaska. Ten days prior to the commencement of the voyage, the vessel was placed on drydock and underwent a condition and valuation survey conducted by the Salvage Association in Seattle. Necessary deficiencies were attended to, the hull was repainted, and the vessel was pronounced fit for its service. No deficiencies were noted with regard to the hull plating.

It is stated that foul weather was encountered during the trans-pacific crossing in October of 1986. In February of 1987, it is noted that the Master of the towing vessel E.B. MACNAUGHTON noted that the subject barge, while under tow and in ballast, listed to the port side. The vessel was subsequently hauled at the port of Kaoshiung where a survey conducted by The Salvage Association revealed the presence of underwater damage consistent with heavy weather. Water was found in the center tanks, and it was discovered that the tank bottom was missing. ISSUE:

Whether the evidence is sufficient to prove that the vessel suffered from a casualty occurrence, so as to permit the remission of assessed duty pursuant to subsection (d)(1) of the vessel repair statute.

LAW AND ANALYSIS:

Title 19, United States Code, ? 1466 (a) (19 U.S.C. ? 1466 (a)), provides in pertinent part for the payment of an ad valorem duty of 50 percent of the cost of "...equipments, or any part thereof, including boats, purchased for, or the repair parts or materials to be used, or the expenses of repairs made in a foreign country upon a vessel documented under the laws of the United States...."

The vessel repair statute provides for the remission of duties in those instances where good and sufficient evidence is furnished to show that foreign repairs were compelled by "stress of weather or other casualty" and were 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). The term casualty, as it is used in the statute, has been interpreted as something that, like stress of weather, comes with unexpected force or violence, such as fire, explosion, or collision. Dollar Steamship Lines, Inc. v. United States, 5 Cust. Ct. 23, 28-29, C.D. 362 (1940). In the absence of evidence of such a casualty causing event, we must consider the repair to have been necessitated by normal wear and tear. C.S.D. 89-95, 23 Cust. B. & Dec., No. 43, 4, 5 (1989).

Experience demonstrates that damage to underwater parts of vessels is usually not easily detectable or susceptible of definite proof respecting the date and place of occurrence. Therefore, relief under ? 1466 is granted in the absence of proof that the vessel concerned was grounded, struck bottom or her propeller contacted some floating object capable of causing damage, prior to commencement of her voyage. C.I.E. 1202/59.

In this case we are presented with evidence that the vessel underwent an inspection while drydocked, immediately prior to the commencement of the voyage in question. In light of the fact that extensive damage to underwater portions of the vessel was discovered in a damage survey while again in drydock only four months later, Customs precedent decisions assist us in determining that the repairs which followed were necessitated by a casualty event.

We also note the presence in the repair invoices of vessel modification elements with regard to items 13, and 16 through 25. As an adjunct to the casualty-related repairs, the affected areas were enhanced by the addition of newly fitted tripping brackets for reinforcement. 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. Over the course of years, the identification of work constituting modifications on the one hand and repairs on the other has evolved from judicial and administrative precedent. In considering whether an operation has resulted in a modification that is not subject to duty, the following elements may be considered:

1. Whether there is a permanent incorporation into the hull or superstructure of a vessel (see United States v. Admiral Oriental Line, 18 C.C.P.A. 137 (1930)), either in a structural sense or as demonstrated by the means of attachment so as to be indicative of the intent to be permanently incorporated.

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

3. Whether, if not a first time installation, an item under consideration 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 under consideration provides an improvement or enhancement in operation or efficiency of the vessel.

We find the tripping brackets under consideration to meet the criteria for modification elements.

Since remission is granted under the terms of the vessel repair statute itself as well as judicial and administrative precedent, there is no need to address the claim that since the vessel was sold in bankruptcy while abroad pursuant to Court order stated as, "free and clear of all liens, encumbrances or interests...", no authority exists to collect vessel repair duty.

HOLDING:

Following a thorough examination of the evidence presented as well as an analysis of the law and applicable precedents, we have determined that the operations performed aborad on the vessel in question were necessitated by a weather-related casualty, or are in the nature of modifications to the vessel. Accordingly, duties assessed on the cost of the foreign repairs is remitted pursuant to subsection (d)(1) of the vessel repair statute (19 U.S.C. 1466 (d)(1)), and judicial and administrative precedent. The Application for Relief is granted.

Sincerely,

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