VES-13-18-RR:IT:EC 113802 GEV
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. 514-3005390-3; S/S THOMPSON LYKES; V-30; Casualty; Seaworthiness; Failure of
Machinery; C.S.D. 79-32; 19 U.S.C. 1466(d)(1)
Dear Sir:
This is in response to your memorandum dated December 20,
1996, 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 THOMPSON LYKES is a U.S.-flag vessel operated by
Lykes Brothers Steamship, Company, Inc. The vessel underwent
foreign shipyard work from October through December of 1995.
Subsequent to the completion of the work the vessel arrived in
the United States at the port of Elizabeth, N.J., on , January
16, 1996. A vessel repair entry was timely filed.
An application for relief, dated April 9, 1996, was received
by your office claiming, inter alia, remission due to a casualty.
By letter dated November 8, 1996, you denied the aforementioned
claim based on Headquarters ruling letter 113682, dated October
3, 1996. A petition for review of this decision, comprised of
two letters dated December 6, 1996, was timely filed.
The petitioner reiterates the claim that the damage in
question was incurred pursuant to a casualty. It is stated that
"[o]n October 14, 1995, while anchoring at the Naples Roadstead,
Naples, Italy, the subject vessel's main reduction gear
experienced an unexpected failure of the high pressure low speed
pinion and quill shaft coupling rendering the vessel unseaworthy
without propulsion."
- 2 -
In addition, the petitioner further states as follows:
The attending ABS classification surveyor and USCG
Marine
Inspection Office Europe Commanding Officer, Cmdr.
Daniel F.
Ryan II, recommended that the damaged parts be renewed
in order
for the vessel to complete her intended voyage.
Replacement parts
were eventually made available and installed to the
satisfaction of
parties concerned while at Haifa, Israel. Only then
would the
regulatory bodies allow the vessel to return to the
United States.
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
4.14(c)(3)(i))
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. (Customs ruling letter 106159, dated September 8, 1983; see
also C.S.D. 79-32 wherein Customs
- 3 -
held that a breakdown or failure of machinery may not be regarded
as a casualty within the meaning of 1466(d)(1) in that absence
of evidence that is was caused by some extrinsic force)
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 fails to support the claim that the subject vessel
suffered a marine casualty. Furthermore, the extent of the
claimed casualty (i.e., parts 2 and 3 of the three-part test set
forth above) is also in question.
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
2.10-15 which does not distinguish between foreign or domestic
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., Naples and Haifa) prior to its being repaired in
a foreign port 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. 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
- 4 -
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 casualty claim under consideration, we note
that at both the application and petition stages the record has
been, and remains, devoid of any of the above-referenced
documentation necessary to support such a claim.
Accordingly, we are of the opinion that the petitioner has
failed to satisfy the statutorily imposed three-part test for
remission.
HOLDING:
Evidence is presented insufficient 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 denied.
Sincerely,
Jerry Laderberg
Acting Chief
Entry and Carrier Rulings Branch