VES-13-04/14/18/23 CO:R:P:C 111131 JBW
Deputy Assistant Regional Commissioner
Commercial Operations
c/o Regional Commissioner
New Orleans, LA 70130-2341
RE: Protest No. 5301-90-000128; Vessel Repair; Casualty; One
Round Voyage; 19 U.S.C. 1466; 19 C.F.R. 4.14; ACADIAN
COMMANDER.
Dear Madam:
This letter is in response to your memorandum of June
18, 1990, which forwards for our review and ruling the above-
referenced protest from the assessment of vessel repair duties.
FACTS:
The record reflects that the subject vessel, the
ACADIAN COMMANDER, arrived at the port of Galveston, Texas, on
October 12, 1988. Vessel repair entry C53-0000130-8, Customs
Form 226, was filed on October 18, 1988, indicating extensive
repairs performed in England on the vessel.
The evidence submitted demonstrates that repairs were
made to the vessel's keel cooling system prior to its departure
from the United States. The work order placed by the vessel
owner called for draining the #3 ballast tanks and repairing the
"keel cooler," specifically the #4 keel cooler. The invoice of G
& M Welding and Machine Service (G & M Welding) indicates that
the #3 ballast tanks were drained to permit inspection of the
keel coolers by the crew and that the keel coolers were welded.
Upon arrival in England in May, 1987, the vessel
underwent further servicing of the keel coolers by Sea-Mar
Diesel, Ltd. (Sea-Mar). Sea-Mar invoice 3727 indicates that the
port and starboard ballast tanks were cleaned out to enable
repairs to be made to the #2 and #4 keel coolers. From the
engine room log, we deduce that these were the #3 ballast tanks.
Inspection by Sea-Mar revealed that water from the coolers could
be seen rising through the mud of the port tank. After the tank
was cleaned, Sea-Mar determined that the tank had deteriorated to
the point where it could no longer be welded. Holes in the tank
were patched and cemented over. The same procedure was applied
to the starboard tank and the #2 cooler where the leak was under
the rear cement tank. Sea-Mar invoice 3726, covering charges for
work performed two weeks later, described further repairs to the
keel coolers.
Between May 30, 1987, and November 13, 1987, the vessel
continued to experience problems with the keel cooling system.
On November 13, the vessel was dry-docked in Suffolk, England.
The invoice of William Overy & Son, which covers the dry-docking,
describes extensive shell plating and steel replacement. This
work covered rebuilding not only the #3 ballast tanks and the
cooling system, but also the #4 and #5 ballast tanks.
The Customs Service first addressed the dutiability of
the repairs in Headquarters Ruling Letter 110139, dated June 15,
1989. In that ruling, we denied that portion of the vessel
owner's application for remission relating to foreign repairs of
the keel cooling system. The basis for this holding was that
good and sufficient evidence was not submitted to establish that
the specific part for which remission was sought was repaired or
service prior to the vessel's departure from the United States
under the "one round voyage" rule. The vessel owner subsequently
filed a petition for review. Upon reconsideration, we determined
that the application of the one round voyage rule was proper, for
the "area which was the subject of failure and repair on the
foreign voyage was cleaned, inspected, and repaired in the U.S.
immediately preceding the voyage." Headquarters Ruling Letter
110389, dated October 17, 1989.
In transmitting this ruling to the protestant, your
office remitted the duty for repairs performed by Sea-Mar Diesel,
Ltd., reflected in invoices numbered 3726 and 3727. These
invoices covered work performed by Sea-Mar in May, 1987. The
remission, however, did not include duties assessed on work
performed on the keel cooling system in November, 1987. The
principal rationale for denying remission for duties on the
latter repairs was that the extent of these repairs exceeded
those areas that were subject to repair in the United States and
suggested that the cause for the repairs was not casualty, but
wear and tear. Moreover, even though the failure of the United
States repairs became evident within six months from the date of
repair in the United States, your office concluded the
seaworthiness of the vessel was not affected until after the six
month period had elapsed. The vessel owner protests the failure
to remit these duties.
ISSUE:
Whether the described protest of vessel repair duties
under 19 U.S.C. 1466 (1988) should be denied or allowed on the
basis of a claim of casualty under the "one round voyage" rule.
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 the remission or refund of such
duties if the owner or master furnishes good and sufficient
evidence that the vessel was compelled by stress of weather or
other casualty to put into the foreign port to make repairs to
secure the safety and seaworthiness of the vessel to enable it to
reach its port of destination. The Customs regulations issued
under the authority of this statute are found in 19 C.F.R. 4.14
(1990).
The "one round voyage" rule is abstracted in Treasury
Decision (T.D.) 71-83(38), 5 Cust. B. & Dec. 160, 167 (1971).
That Treasury Decision provides:
If satisfactory evidence is furnished clearly
showing any part of a vessel to have been
repaired and/or serviced just prior to the
commencement of a voyage from a United States
port, it is reasonable to assume that the
part is seaworthy for a round voyage,
foreign and return. Unless evidence
indicates some other reason necessitated the
repairs during the voyage, failure of that
part to function within six month after the
repair and/or servicing in the United States
may be considered a casualty within the
meaning of [19 U.S.C. 1466(d)]. However,
remission of duty under that statute in the
circumstances is limited to duty on the
essential, minimum foreign repairs to the
parts.
Section 4.14(c)(3)(i), Customs Regulations (19 C.F.R.
4.14(c)(3)(i)), provides, with regard to the "one round voyage"
rule, that:
For the purposes of this section, the term
"casualty" does not include any purchases or
repairs necessitated by ordinary wear and
tear, but does include a part's failure to
function if satisfactory evidence shows that
the specific part was repaired or serviced
immediately before starting the voyage from
the United States port and that the part
failed to function within six months of such
repair or servicing.
The evidence submitted demonstrates that the specific
parts repaired in the United States prior to sailing were the #3
ballast tanks and the #4 and other undesignated keel coolers.
These were the specific areas repaired by Sea-Mar in May, 1987,
and the costs associated with these repairs have been remitted.
The extent of the deterioration of the ballast tanks
and the keel cooling system, however, vastly exceeded the repairs
performed by G & M Welding in the United States and by Sea-Mar in
England. This deterioration necessitated the rebuild not only of
the areas previously repaired, but also areas not itemized in the
G & M Welding or the Sea-Mar invoices. Absent any evidence to
the contrary, we conclude that the repairs performed in November,
1987, to areas not itemized in the invoices of G & M Welding and
Sea-Mar were necessitated by ordinary wear and tear. The cost
of these repairs is therefore not remissible. Moreover, the
evidence demonstrates that, despite operational difficulties, the
vessel was able to function for almost six months from the date
of the first foreign repairs. The ultimate complete rebuilding
of the keel cooling system suggests that these repairs exceeded
the essential, minimal repairs necessary to restore the operation
of the vessel. The cost of rebuilding of the #3 ballast tanks
and the other parts of the keel coolers that had been repaired in
the United States are thus not remissible.
HOLDING:
The rebuilding of the subject vessel's keel cooling
system and #3, #4, and #5 ballast tanks, as described in the
invoice of William Overy & Sons, is not remissible. The protest
is therefore denied.
Sincerely,
Stuart P. Seidel
Director, Regulatory Procedures
and Penalties Division