VES-13-18-CO:R:IT:C 111533 BEW
Deputy Assistant Regional Commissioner
Commercial Operations
c/o Regional Commissioner
New Orleans, Louisiana 70130-2341
RE: Petition for Review; Vessel Repair; C53-0012153-6; PRIDE OF
TEXAS V-40; Casualty; U.S Parts; U.S. Technician
Dear Sir:
This is in reference to a memorandum from your office which
transmitted a petition for relief from duties assessed pursuant
to 19 U.S.C. 1466.
FACTS:
The PRIDE OF TEXAS is a U.S.-flag vessel owned by Seahawk
Management, Inc., of Houston, Texas. The subject vessel had the
work in question performed in Cape Town, South Africa, during
February 26 - March 9, 1990. Subsequent to the completion of the
work the vessel arrived in the United States in Houston, Texas,
on March 23, 1990. A vessel repair entry was filed on March 24,
1990.
An application dated May 21, 1990, with supporting
documentation was timely filed. The application sought remission
of duties due to casualty on the basis that an accident occurred
during the operation of the subject vessel. In support of this
claim it was alleged that at 10:25 p.m. on February 20, 1990,
while the vessel was en route from Nicalo, Mozambique, to the
U.S. Gulf, the main engine alarm sounded and the starboard main
engine shut down and declutched. The starboard main engine was
rendered inoperable as a result of the damage. The vessel
thereafter proceeded to Cape Town for repairs. A survey of the
vessel determined that the damage was the result of a broken
exhaust valve stem dropping into the piston chamber during the
operation of the engine.
In a decision dated October 12, 1990, we ruled on the claim
relating to the casualty as follows:
... although the repairs in question were
necessitated by the breaking of the exhaust
valve stem which created further damage
thereby rendering the vessel unseaworthy, the
applicant is apparently equating a finding of
unseaworthiness with a casualty occurrence.
The two are not necessarily related. A
finding that a vessel is unseaworthy provides
no evidence of exactly how it came to be in
such a state.
... it is apparent that the damage in
question was caused by a breakdown or
failure of machinery (i.e., exhaust valve
stem) which may not be regarded as a casualty
for purposes of remission pursuant to
section 1466(d)(1) in the absence of a
showing that it was caused by some outside
force (see C.S.D. 79-32, cited above), a
burden of proof the applicant did not meet.
With regard to the allegation relating to spare parts, we
ruled as follows:
..., we note that the Customs and Trade Act
of 1990, section 484(2), Pub. L. No. 101-382
(to be codified at 19 U.S.C. 1466(h)(2)),
amended the vessel repair statute to except
from duty spare repair parts or materials
that have entered the United States duty-paid
and are used aboard a cargo vessel engaged in
foreign or coastwise trade. This amendment
is inapplicable to the case under
consideration in view of the fact that the
applicant claims the spare parts are U.S.-
manufactured and part of the subject
vessel's original inventory and/or that of a
sister ship.
A petition was timely filed on the above decision
reiterating that the damage in question was not the result of
ordinary wear and tear, but was the result of an accident which
constitutes a remissible casualty pursuant to section 1466(d)(1).
The petitioner contends that the starboard main engine had been
properly maintained and that the examining authorities found that
the damage was not due to the result of ordinary wear and tear.
The petitioner alleges that an unforeseeable, violent
"event" that caused the casualty was the exhaust valve falling
into the piston chamber during the operation of the vessel, and
that this is not a case of the starboard main engine breaking
down.
ISSUES:
1. Whether evidence is presented sufficient to prove that
the spare parts foreign repairs performed on the subject vessel
for which relief is sought were necessitated by a casualty
occurrence, thus warranting remission pursuant to 19 U.S.C.
1466(d)(1).
2. Whether evidence is presented sufficient to prove that
the foreign repairs performed on the subject vessel for which
relief is sought were U.S.-manufactured parts taken from the
vessel's original inventory or part of the original inventory of
a sister ship, and U.S. resident labor thus warranting remission
pursuant to 19 U.S.C. 1466(d)(2).
LAW AND ANALYSIS:
Title 19, United States Code, section 1466, 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 foreign or
coastwise trade, or vessels intended to engage in such trade.
Section 1466(d)(1) provides for remission of the above duties in
those instances where good and sufficient evidence is furnished
to show that foreign repairs were compelled by "stress of weather
or other casualty" necessary 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 vessel repair
statute (19 U.S.C. 1466) has been interpreted by the Customs
Court as something which, like stress of weather, comes with
unexpected force or violence, such as a fire, explosion, or
collision (see Dollar Steamship Lines, Inc., v. United States, 5
Cust. Ct. 28-29, C.D. 362 (1940)). It should be noted that
absent specific evidence to the contrary, we consider foreign
repairs to have been necessitated by normal wear and tear, a
result which does not permit remission (see C.S.D. 79-32).
Counsel cites 110200 GV which is distinguishable from the
case under consideration in view of the fact that it addresses
crew negligence. No such allegation is contained in this
petition.
As previously stated it is apparent that the damage in
question was caused by a breakdown or failure of machinery (i.e.,
exhaust valve stem), however, after a complete review of the
evidence submitted, we find no evidence showing that malfunction
of the exhaust valve stem, which was the proximate cause of the
damage to the starboard main engine, was caused by some outside
force (see C.S.D. 79-32, cited above), a burden of proof the
applicant has not met.
Accordingly, the petition is denied as to casualty.
We now come to the allegation relating to spare parts. The
climate with regard to parts shipped abroad from the United
States for foreign installation was transformed on August 20,
1990, when the President signed Public Law 101-382 which added a
new subsection (h) to section 1466. While this provision applies
by its terms only to foreign-made imported parts, there is ample
reason to extend its effect to U.S.-made materials as well. To
fail to do so would act to discourage the use of U.S.-made
materials in effecting foreign repairs since continued linkage of
remission provisions of subsection (d)(2) with the assessment
provisions of subsection (a) of section 1466 would obligate
operators to pay duty on such materials unless they were
installed by crew or resident labor. If an article is claimed to
be of U.S. manufacture, there must be proof of its origin in the
form of a bill of sale or domestic invoice. If an article is
claimed to have been previously entered for consumption, duty
paid by the vessel operator, there must be proof of this fact in
the form of a reference to the consumption entry number for that
previous importation, as well as to the U.S. port of importation.
If imported articles are purchased from third parties in the
United States, a domestic bill of sale to the vessel operator
must be presented.
The petitioner has submitted invoices and documentation from
Cooper Industries Energy Service Group (formerly Enterprise
Engine Division of Transamerican Delaval, Inc.) confirming that
the subject parts were manufactured in the United States and that
the technical representative who supervised the foreign repairs
is a citizen of the United States . Accordingly, the petition is
granted as to the spare parts and the labor cost for the
technical representative.
HOLDING:
1. The evidence presented is insufficient to substantiate
that the repairs to the starboard main engine were
necessitated by a remissible casualty. The petition is
denied as to the casualty.
2. The evidence presented is sufficient to substantiate
that the subject parts were manufactured in the United
States, and that the technical representative who supervised
the installation of subject parts is a US resident, thus
warranting remission pursuant to 19 U.S.C. 1466(h). The
petition is granted as to the spare parts and labor cost for
the technical represent.
Sincerely,
Stuart P. Seidel
Director, International
Trade Compliance Division