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HQ 116008





July 28, 2003

VES-13-18-RR:IT:EC 116008 GG

CATEGORY: CARRIER

Mr. Glenn N. Seale,
Chief, Vessel Repair Unit
Bureau of Customs and Border Protection
423 Canal Street
New Orleans, LA 70130

RE: Vessel Repair; Application for Further Review; Insufficient Evidence of Casualty; U.S. Barge SPECIAL T; Voyage 1; Protest No. 2002-03-100419; Vessel Repair Entry C20-0058695-1; 19 U.S.C. § 1466(d)

Dear Mr. Seale:

This letter is in response to your memorandum dated June 16, 2003, which forwarded for our consideration an application for further review of the protest referenced above. Our decision follows.

FACTS:

The protestant is Global International Marine, Inc., of Houma, Louisiana. Its barge, the SPECIAL T, was en route to Peru when it had to make an emergency stop in Panama for a “minor temporary repair.” The repair consisted of divers sealing an underwater crack in the bow with epoxy. The SPECIAL T was then able to finish the voyage before returning to the United States to make the necessary final repairs. The barge arrived in Morgan City, Louisiana, on January 3, 2003. A vessel repair entry, dated January 8, 2003, was filed on January 13, 2003. The record provides copies of the shipyard invoice, a credit memo, and work orders. The Vessel Repair Unit (VRU) made a determination on May 2, 2003 that duty in the amount of $4,915.00 was due. The protestant timely protested the duty assessment, claiming that the repair in question was an emergency repair. An alternate claim is also made that the duty amount was too high because the actual cost of the temporary repair was only $1,500.00.

ISSUE:

Whether the duty on the alleged casualty-related foreign repair is remissable pursuant to 19 U.S.C. § 1466(d)(1). If not, whether the amount assessed was too high.

LAW AND ANALYSIS:

Section 466, Tariff Act of 1930, as amended (19 U.S.C. § 1466) provides in part for payment of duty in the amount of 50 percent ad valorem on the cost or expenses of foreign repairs to vessels documented under the laws of the United States to engage in foreign or coastwise trade, or vessels intended to engage in such trade.

Paragraph (1), subsection (d) of § 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.

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, explosion 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, we must consider the repair to have been necessitated by normal wear and tear (ruling letter 105159, September 8, 1983).

However, it is further noted that the damage occurred to underwater parts of the vessel. In C.I.E. 1202/59, we held that damage to underwater parts of vessels is usually not easily detectable or susceptible of definite proof respecting date and place of occurrence. We held that relief under 19 U.S.C. 1466(d)(1) is therefore warranted for such damage in the absence of evidence showing that the vessel concerned was grounded, struck bottom, or her propeller contacted some floating object capable of causing damage prior to the commencement of the voyage. However, in C.I.E. 1202/59 and in ruling 106240 JM, dated July 20, 1983, which applied C.I.E. 1202/59 in a case of underwater damage, there was some evidence,
or at least an inference could reasonably be made based upon the damage which had occurred, that the damage resulted from striking an unknown underwater object rather than from normal wear and tear (see C.I.E. 1243/60, in which a leak in a vessel’s hull was held to be due to normal wear and tear and therefore remission of duty was denied). The lack of evidence, or at least an inference based on the damage sustained, was the very reason relief was denied in ruling 106369 PH, dated February 13, 1984, which applied C.I.E. 1202/59 in a similar case where an oil leak occurred in the vessel’s stern tube after seal. In the case under consideration, the protestant has not submitted evidence identifying any particular event in connection with the crack in the bow that would qualify as a casualty. Nor has documentation been submitted that would verify the occurrence of a particular casualty, once identified. Absent such evidence, a claim for the remission of duties on account of a casualty cannot be sustained. See also HQ 112140 GEV, dated April 7, 1992.

The protestant also claims that the actual cost of the temporary repair was only $1,500.00, which would make the duty assessment of $4,915.00 excessive. A review of the shipyard invoice reveals that $1,500.00 of the total invoiced amount of $9,830.00 was attributed to “[d]ivers along with all necessary diving gears, equipment and underwater epoxy.” The remaining itemized charges were as follows:

Description Amount ($)

Assist the barge to the mooring bay . . . . . . . . 850.00 Welder/helper to re-weld broken stanchions . . 400.00 Rental of welding machine . . . . . . . . . . . . . . . 120.00 Operators to install onboard existing sheds and porta potties . . . . . . . . . . . . . . . . . . . . . 500.00 Welder/operators removing and securing auxiliary towing cable from the water . . . . . 1,250.00 Materials furnished to secure cable . . . . . . . . 200.00 Use of launch to assist in removing cable . . . 1,250.00 Rental of chain, falls and other tools . . . . . . . 160.00 Rental of pump water the tank [sic] . . . . . . . . 1,350.00 Launch alongside while pumping . . . . . . . . . . 2,250.00

In Texaco Marine Services, Inc., and Texaco Refining and Marketing, Inc. v. United States, 815 F.Supp. 1484 (1993), the U.S. Court of International Trade (CIT) considered whether costs for post-repair cleaning and protective coverings incurred pursuant to dutiable repairs constituted “expenses of repairs” as that term is used in 19 U.S.C. § 1466. In holding that these costs were dutiable as “expenses of repairs”, the CIT adopted the “but for” test proffered by Customs; that is, such operations were an integral part of the dutiable repair process and would not have been necessary “but for” the need to conduct dutiable repairs. On appeal, the Court of Appeals for the Federal Circuit (CAFC) issued a watershed decision which not only affirmed the opinion of the CIT regarding the specific expenses at issue, but also provided clear guidance with respect to the interpretation of 19 U.S.C. § 1466, and thus the Customs administration of the statute. In upholding the “but for” test adopted by the CIT, the CAFC stated:

. . . the language of “expenses of repairs” is broad and unqualified. As such, we interpret “expenses of repairs” as covering all expenses (not specifically excepted in the statute) which, but for dutiable repair work, would not have been incurred. Conversely, “expenses of repairs” does not cover expenses that would have been incurred even without the occurrence of dutiable repair work. As will be more clearly illustrated below . . . the “but for” interpretation accords with what is commonly understood to be an expense of repair. 44 F.3d 1539, 1544.

Absent a showing that the charges in question are incident to a non-repair item, they are dutiable under the vessel repair statute in accordance with the Texaco decision. The protestant has not made such a showing. Consequently, vessel repair duties were correctly assessed on the total invoiced amount.

HOLDING:

The protestant has failed to present evidence sufficient to prove that the foreign repairs performed to the bow were necessitated by a casualty occurrence, which would have warranted remission pursuant to 19 U.S.C. § 1466(d)(1). Furthermore, the protestant has not demonstrated that certain of the invoiced charges were incident to a non-repair item. Consequently, all of the invoiced charges are dutiable pursuant to 19 U.S.C. § 1466. We recommend that the protest be DENIED.

Sincerely,

Glen E. Vereb
Chief
Entry Procedures an Carriers Branch

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