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HQ 112673

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October 7, 1993

VES-13-18 CO:R:IT:C 112673 BEW

CATEGORY: CARRIER

Regional Director, Commercial Operations
U.S. Customs Service
South Central Region
New Orleans, Louisiana 70130

RE: Protest No. 2002-92-101556; New Orleans, Louisiana, Vessel Repair Entry No. CO-20-0037412-7, dated January 21, 1991; M/V PRIDE OF TEXAS, Voyage 48; Casualty; 19 U.S.C. 1466(d)(1); 19 CFR 4.14

Dear Sir:

This is in response to your memorandum that forwards protest No. 2002-92-101556, filed on behalf of Intercargo Insurance Co., concerning vessel repair entry No. CO-20-0037412-7, relating to the M/V PRIDE OF TEXAS, Voyage 48.

FACTS:

The M/V PRIDE OF TEXAS is an United States-flag vessel owned by Hull 751-IRFC-1 Partnership. The record shows that the subject vessel arrived in the port of New Orleans, Louisiana, on January 21, 1992, after having undergone repairs in the ports of Maputo, Mozambique, and Cape Town, South Africa, during the period of November 12 through December 3, 1991, and December 24, 1991, through January 1, 1992, respectively. Neither an application for relief nor a petition for relief from duties was filed. The entry was liquidated on April 17, 1992. A formal demand for payment was issued to the surety company, the protestant, on November 4, 1992. A protest was timely filed by the surety company on November 13, 1992, alleging that the subject repairs were necessary due to "casualty", i.e., due to pilot error. On November 12, 1991, the vessel collided while approaching the dock at Maputo, Mozambique. On November 14, 1993, the American Bureau of Shipping (ABS) surveyed the vessel for damage to the forepeak tank. The ABS surveyor permitted the vessel to proceed on single passage to discharge at the port of Beira, Mozambique, and then to Durban, R.S.A. with the recommendation that "favourable weather routing is followed and the vessel's speed be adjusted to prevent further damage, and - 2 -
that the damage to the forepeak tank be further examined and dealt with to the satisfaction of the attending surveyor at Durban upon the vessel's arrival at that port." The protestant has submitted the following documents to sustain its claim.

American Bureau of Shipping Invoice No. SF3133 Manutencao Naval, E.E. Invoice No. 375689 Marcol Invoice No. DBN 0043
Globe Engineering Works (PTY) Limited Invoice No. S31227 Globe Engineering Works (PTY) Limited Invoice No. S31228 APV Rands 1,721.04
Peninsular Power Rands 15,609.04
American Bureau of Shipping Invoice No. SF3218 American Bureau of Shipping Invoice No. SF3213 Marcol Invoice No. DBN 0044

The protestant claims that the all of the subject invoices, except the APV and Peninsular Power invoices relate to the repairs necessary because of a casualty.

ISSUE:

Whether sufficient evidence is presented to establish that the subject repairs were necessitated by a "casualty" which is remissible under the vessel repair statute (19 U.S.C. 1466).

LAW AND ANALYSIS:

Title 19, United States Code, section 1466(a), provides in pertinent part for payment of duty in the amount of 50 percent ad valorem on 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 be employed in such trade.

Paragraph (1), subsection (d) of section 1466 provides that duty may be remitted if good and sufficient evidence is furnished establishing that the vessel was compelled by stress of weather or other casualty to put into a 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.

The statute thus sets forth a three-part test that must be met in order to qualify for remission under the subsection, this being:

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 that, 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 a casualty event, we must consider the repair to have been necessitated by normal wear and tear (ruling letter 106159, 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.

Customs Regulations require that certain supporting evidence be submitted with an application for relief from duties on repairs resulting from stress of weather. This evidence includes photocopies of the relevant parts of the vessel's logs, certification of any claimed casualty by the master or other responsible vessel officer with personal knowledge of the facts, and a certification by the master that the repairs were necessary for the safety and seaworthiness of the vessel to enable her to reach her port of destination in the United States (19 C.F.R.

The Salvage Association survey report No. 277.91 indicates that while the vessel was berthing in Maputo on November 12, 1991, with a pilot on board but without the assistance of tugboats, the starboard bow struck the quay at 8:25 hours causing extensive damage to the shell plating in the forepeak ballast tanks. The damage extended from the soft nose to frame 212 in the 2nd. strake below the forecastle sheer, just above the 37 feet draft mark, with the plating torn open over approximately 7 meters x 0.5 meters wide. The internals were torn away and heavily buckled. The report further indicates that because of extremely limited facilities in Mozambique, repairs would be deferred. It is clear from the evidence submitted with the protest that the vessel was damaged when she collided with the quay in Maputo, Mozambique. Subsequently, the vessel proceeded to the port of Capetown, South Africa, where the repairs were made.

The United States 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 sections 2.01-15 and 31.10-25, USCG Regulations (46 CFR 2.10-15, 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 Officer-In- Charge, Marine Inspection (OCMI) either through the issuance of a USCG "Permit to Proceed to Another Port for Repairs" (CG-948) or a CG-835 that 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 2.10-15 that does not distinguish between foreign or domestic locations, Customs has been informed by the OCMI, New York, New York, in a letter dated November 7, 1991, 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 that 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."

Our review of the evidence submitted with the protest reveals that the damage was caused by a casualty. The report shows that the damage to the vessel was caused on November 12, 1991, when the vessel collided with the quay in Maputo. With regard to the evidence that the vessel was in need of repairs to secure her safety and seaworthiness, the documents show that the repairs were not made until December 3, 1991, when the vessel arrived in the port of Capetown, Africa.

In cases such as the one under consideration, (i.e., where a vessel that has been damaged foreign, proceeds in a state of disrepair between two foreign locations prior to being repaired
foreign, and subsequently sails to its U.S. port of destination),
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 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).

The evidence submitted sustains the fact that a determination of the USCG regarding the subject vessel's safety and seaworthiness was made by ABS prior to the vessel leaving Maputo, and that USCG gave the vessel permission to proceed to Capetown for repairs.

In C.I.E. 429/61 we noted that:

... expenses which are incurred in conducting inspections made subsequent to the repairs, so as to ascertain whether the work had been properly performed, are dutiable as integral parts of the expenses of repairs although separatly [sic] itemized. Moreover, testing which is effected for the purpose of ascertaining whether repairs to certain machinery or parts of the vessel are required, or are performed in order to ascertain if the work is adequately completed, are also integral parts of the repairs and are accordingly dutiable.

Pursuant to the holdings in C.I.E. 429/61, and extending the concept to surveys as well as inspections, if a survey is conducted to ascertain the need for repairs, or to ascertain if the work is adequately completed, the costs are dutiable as part of the repairs which are accomplished. In cases where we find a remissible casualty, these costs are considered nondutiable costs as a part of the casualty. In the subject case, certain surveys were conducted as a part of the repairs relating to the casualty. With respect to the American Bureau of Shipping (ABS) Surveys, we find as follows:

ABS Invoice No. SF3133 relating to the damage listed in ABS Report No. DB13237 which occurred on November 12, 1991, relating to the collision at Maputo, all costs are remissible.

ABS Invoice No. SF3218 relating to ABS Report No. CT5630 which was performed December 24, 1991 through January 1, 1992, as a follow-up of Report No. DB13237, recommended by the ABS surveyor, relating to the subject casualty, all costs are remissible.

ABS Invoice No. ST3213 relates to ABS Report CT5629 - The documents submitted with the entry relate to a special continuous machinery and electrical equipment survey and the starboard main engine entableture, Customs has held that where periodic surveys are undertaken to meet the specific requirements of a classification society, insurance carrier, etc., the cost of the surveys is not dutiable even when dutiable repairs are effected as a result thereof; however, in the liquidation process Customs should go beyond the mere labels of "continuous" or "ongoing" before deciding whether the item is dutiable. If an inspection or survey is conducted as a part of an ongoing maintenance and repair program labelled "continuous" or "ongoing" the cost is dutiable. Also, if the survey is to ascertain the extent of damage sustained, or to ascertain if the work is adequately completed, the costs are dutiable as part of the repairs which are accomplished pursuant to holdings in C.I.E. 429/61, C.S.D. 79-2, and C.S.D. 79-277. The costs associated with ABS Invoice No. SF3213 are dutiable.

With regard to the remaining invoices we find as follows:

Manutencao Naval, E.E. Invoice No. 375689, all costs are associated with the casualty and are remissible.

Marcol Invoice No. DBN 0043, all costs are associated with the casualty and are remissible.

Globe Engineering Works (PTY) Limited Invoice No. S31227, all costs are associated with the casualty and are remissible.

Globe Engineering Works (PTY) Limited Invoice No. S31228, all costs are associated with the casualty and are remissible.

Marcol Invoice No. DBN 0044, all costs are associated with the casualty and are remissible.

With regard to the APV invoice (Rands 1,721.04) and the Peninsular Power invoice (Rands 15,609.04), we note that the protestant has indicated that these invoices are not a part of the protest. We have, however, reviewed these invoices and find that all items of cost are dutiable. - 7 -

HOLDING:

The evidence presented is sufficient to substantiate that the subject repairs were necessitated by a casualty. The costs relating to the subject invoices are remissible under 19 U.S.C. 1466, with the exception of the costs relating to the APV invoice, Peninsular Power invoice and ABS invoice No. SF3213, which costs are dutiable. The district director should grant in part and deny in part the subject protest. A copy of this decision should be attached to the Customs Form 19 and forwarded to the protestant as part of the notice of action on the protest.

Sincerely,

Arthur P. Schifflin

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