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HQ 113822





March 5, 1997

VES-13-18-RR:IT:EC 113822 GEV

CATEGORY: CARRIER

Chief, Residual Liquidation and Protest Branch U.S. Customs Service
6 World Trade Center
New York, New York 10048-0945

RE: Vessel Repair Entry No. 514-3005520-5; S/S ARGONAUT; V-150; Casualty; Fire;
Stevedore Negligence; Seaworthiness; 19 U.S.C. ?

Dear Sir:

This is in response to your memorandum dated January 14, 1997, forwarding a petition for review of your decision denying an application for relief from duties assessed pursuant to 19 U.S.C. ? 1466. Our findings are set forth below.

FACTS:

The S/S ARGONAUT is a U.S.-flag vessel owned and operated by Farrell Lines, Inc., of New York, N.Y. The vessel underwent foreign shipyard work during October of 1996. Subsequent to the completion of the work the vessel arrived in the United States at the port of Elizabeth, N.J., on November 1, 1996. A vessel repair entry was timely filed.

An application for relief, dated December 13, 1996, with supporting documentation, was received by your office claiming remission due to a casualty. By letter dated December 27, 1996, you denied the aforementioned claim due to insufficient evidence. A petition for review of your decision, dated January 7, 1997, was timely filed. Enclosed with the petition was a letter, dated January 3, 1997, from the U.S. Coast Guard (USCG), Officer in Charge, Marine Inspection (OCMI), The Netherlands, addressing this matter.

The incident giving rise to the petitioner's claim occurred on September 25, 1996, while the subject vessel was docked alongside the pier at the port of Alexandria, Egypt. During the course of cargo operations, a shoreside gantry crane was discharging a 20' container loaded with ethyl acetate located in Bay 3 forward cell one. The unit was lifted off the vessel's tank top to
the height of the vessel's main deck when it was suddenly released from the container crane's spreader at a height of approximately 55'. The container dropped, turning upside down in the process, and released some of its contents before striking and puncturing the vessel's tank top over a fuel tank which was full of bunker C fuel oil.

The combination of ethyl acetate, fuel oil, and sparks generated by the container impact on the steel tank top, ignited a fire which spread throughout the Bays 3 and 4 of the no. 2 cargo hold, causing damage to the vessel's structure and remaining containers in the cargo hold. Upon the extinguishment of the fire, container operations resumed.

On September 26 and 27, 1996, representatives from the vessel owner and the American Bureau of Shipping (ABS) surveyed the damage. On October 1, 1996, the ABS in Alexandria issued the vessel a provisional Loadline Certificate and a Safety Construction Certificate good only for a ten day duration with a proviso that the repairs to the vessel had to be carried out in a foreign shipyard to the satisfaction of the local attending ABS surveyor. The vessel sailed Alexandria on October 2, 1996, to Haifa, Israel; Izmir, Turkey; and then to Malta Shipyard arriving on October 8, 1996, to commence repairs. Upon completion of the repairs, the vessel departed Malta Shipyard on October 18, 1996, en route to Naples and the remainder of its foreign voyage before arriving in New York on November 1, 1996.

ISSUE:

Whether evidence is presented sufficient to prove that foreign costs for which the petitioner seeks relief were necessitated by a casualty occurrence thus warranting remission pursuant to 19 U.S.C. ? 1466(d)(1).

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 ?

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).

With respect to the negligence of stevedores (i.e., the operators of the shoreside gantry crane which dropped the container filled with ethyl acetate), Customs has long-held such acts to be casualties within the meaning of ? 1466(d)(1). (See C.I.E.s 1259/58 and 1161/62)

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 clearly supports the claim that the subject vessel suffered a marine casualty. However, the extent of that casualty (i.e., parts 2 and 3 of the three-part test set forth above) is the critical issue upon which this case turns.

In regard to parts 2 and 3 of the above test, the 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 ?? 2.10-15, 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 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 locations, it is the practice of the USCG not to issue a formal permit-to-proceed to a vessel transiting foreign waters because its certificate of inspection would have to be removed resulting in problems in transiting foreign waters. (See Customs ruling 112060) Furthermore, the USCG acknowledges that vessel operators often make casualty reports for U.S.-flag vessels damaged overseas verbally to the proper USCG Marine Inspection Office, followed by the required written report. Since the USCG cannot always send a marine inspector to a damaged vessel overseas they oftentimes consider the classification society report and the report of the vessel's master to determine the required temporary repairs and voyage restrictions. Id.

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 foreign locations (e.g., Alexandria, Haifa and Izmir) prior to its being repaired in a foreign port (e..g., Malta) 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; 112229, dated June 11, 1992, and 113501, dated October 24, 1995). 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. 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 foreign locations in a damaged condition. The mere submission of a CG-2692 (Report of Marine Accident, Injury or Death), without accompanying documentation from the appropriate USCG OCMI authorizing the vessel to proceed in a damaged condition and specifying what, if any, restrictions apply, will not suffice for granting remission pursuant to 19 U.S.C. ? 1466(d)(1).

In regard to the letter from the OCMI, The Netherlands, submitted by the petitioner, we note that it provides, in pertinent part, as follows:

"Due to the nature of the damage it was necessary to make permanent repairs relatively soon. I listened to your proposal to make temporary repairs and continue the voyage for no more than 10 days, in order to off load cargo. Your proposal included adequate measures to ensure the safety of the vessel and crew and the voyage would be limited to the Mediterranean Sea. There was an ABS surveyor on board, who had already removed the vessel's Loadline Certificate and Safety
Construction Certificate, which prevented the vessel from sailing.
After the surveyor was satisfied with the temporary repairs, he re- issued those documents on a conditional/provisional basis for 10 days in order to complete permanent repairs."

"There is no question that the vessel would not have been allowed to proceed out of the Mediterranean Sea without effecting permanent repairs."

Upon reviewing the above letter as well as the entire record, we are of the opinion that the petitioner has submitted documentation sufficient to satisfy the statutorily imposed three-part test for remission.

HOLDING:

Evidence is presented sufficient to prove that the foreign costs for which the petitioner seeks relief were necessitated by a casualty occurrence thus warranting remission pursuant to 19 U.S.C. ? 1466(d)(1).

Accordingly, the petition is granted.

Sincerely,

Jerry Laderberg

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