United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1997 HQ Rulings > HQ 113753 - HQ 114005 > HQ 113797

Previous Ruling Next Ruling
HQ 113797

---

March 10, 1997

VES-13-18-RR:IT:EC 113797 GEV

CATEGORY: CARRIER

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

RE: Vessel Repair Entry No. C27-0147674-2; MOKIHANA; V-3; Repairs; Expenses of Repairs; Casualty; 19 U.S.C. ? 1466

Dear Sir:

This is in response to your memorandum dated December 19, 1996, forwarding a petition for review of your decision denying an application for relief from duties assessed pursuant to 19 U.S.C. ? 1466 on those expenses contained within the above-referenced vessel repair entry. Our findings are set forth below.

FACTS:

The MOKIHANA is a U.S.-flag vessel owned and operated by Matson Navigation Company ("Matson"). The vessel incurred expenditures in Nagoya and Yokohama, Japan, in May and June of 1996. The vessel subsequently arrived in the United States at San Pedro, California, on June 10, 1996. A vessel repair entry was timely filed on June 11, 1996.

Pursuant to an authorized extension of time, an application for relief, dated October 10, 1996, with supporting documentation, was timely filed. By letter dated October 29, 1996, your office denied the application for relief and notified the applicant of the right to file a petition for review of this decision. Pursuant to an authorized extension of time, a petition for review, dated December 18, 1996, was timely filed. The facts of the case as we understand them are as follows.

From May 7 - June 10, 1996, the subject vessel was on a regular voyage in a loop between San Pedro and Oakland, California; Honolulu, Hawaii; Guam; Busan, Korea; Hakata, Nagoya and Yokohama, Japan; and back to San Pedro. An initial fracture was found in the No. 1 Fuel Oil Wing Tank Port in Honolulu on or about May 15, 1996. A second fracture was
discovered en route to Nagoya from Hakata in the No. 3B Fuel Oil Wing Tank Starboard on or about May 29, 1996. The second fracture was discovered when oil was observed bubbling up from the side of the vessel abreast the tank. Following the appearance of the second fracture, the seaworthiness of the vessel was questioned dictating examination and possible repairs at Nagoya. The tank contents were transferred to prevent further leaking and the vessel commenced Shipboard Oil Pollution Emergency Procedures. Matson was required by Japanese environmental requirements to install an oil boom to prevent possible pollution of the Nagoya harbor and an underwater diver surveyed the crack. The Japanese Maritime Safety Agency investigated the incident. They concluded the investigation and allowed the vessel to proceed to Yokohama for further inspection and repair as may be required by the American Bureau of Shipping (ABS). Following further inspection by the ABS and a marine chemist in Yokohama, the ABS inspector recommended the repairs be completed in San Pedro and the vessel was allowed to proceed, but the ABS stipulated that the damaged areas required daily inspection by the vessel officers until completion of the repairs at the next U.S. port.

The above-referenced inspections revealed significant structural damage. The petitioner believes that the cracks in the No. 1 tank were probably caused by heavy weather on the prior voyage and that the No. 3 tank may have been damaged by a tug during dock mooring activities.

The petitioner states that the expenditures listed on the vessel repair entry relate to the environmental services obtained to prevent oil pollution in Nagoya harbor and the inspection work performed in Nagoya and Yokohama to determine whether the vessel was safe to proceed. These expenditures include the cost of an oil boom and an underwater diver in Nagoya, and an ABS inspection of the fuel tanks and marine chemist services in Yokohama. The petitioner claims that these costs should not be dutiable under the vessel repair statute since no actual repair work was ever performed in Japan as the vessel was determined to be safe for the trip to the United States. Alternatively, the petitioner claims that the aforementioned costs were attributed to a casualty and are therefore remissible.

In support of these claims, the petitioner has submitted invoices covering the costs in question (including documentation from the ABS), a statement from the Master, and a declaration from Matson's General Manager for Marine Operations.

ISSUE:

Whether the costs for which the petitioner seeks relief are dutiable under 19 U.S.C.

LAW AND ANALYSIS:

Title 19, United States Code, ? 1466 (19 U.S.C. ? 1466), 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..."

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.

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).

Upon reviewing the record in its entirety, it is readily apparent that the subject foreign expenditures reflected on the CF 226 cover only the booming of the vessel and underwater and on board inspection costs. These services do not constitute "repairs" for purposes of ? 1466 (see T.D. 43322 and C.D. 2514 discussing "repairs" as that term is used in the vessel repair statute). Per the recommendation of the ABS inspector, the necessary repairs were deferred until the vessel returned to the United States thereby rendering inapplicable the provisions of 19 U.S.C. ? 1466. Consequently, the aforementioned services also do not constitute dutiable "expenses of repairs" within the meaning of that statute. (See Texaco Marine Services, Inc. v. U.S., 44 F.3d 1539, 1544, wherein the court held "...we interpret expenses of repairs' as covering all expenses (not excepted in the statute) which, but for dutiable repair work, would not have been incurred.")

Accordingly, the costs for which the petitioner seeks relief are not within the scope of those expenditures on which duties are assessed pursuant to 19 U.S.C. ? 1466. Consequently, any discussion of casualty relief under 19 U.S.C. ? 1466(d)(1) is not germane to the resolution of this matter.

HOLDING:

The costs for which the petitioner seeks relief are not dutiable under 19 U.S.C. ? 1466.

Accordingly, the petition is granted in its entirety.

Sincerely,

Jerry Laderberg

Previous Ruling Next Ruling