VES-13-18-RR:IT:EC 113677 GOB
Port Director of Customs
Attn.: Chief, Residual Liquidation and Protest Branch
U.S. Customs Service
6 World Trade Center
New York, NY. 10048-0945
RE: Vessel Repair Entry No. 514-3005425-7; S.S. THOMPSON LYKES,
V-31;
19 U.S.C. 1466; 19 U.S.C. 1466(d)(1) and (d)(2); Casualty;
Repairs performed in Israel
Dear Sir:
This is in response to your memorandum dated September 11,
1996, which forwarded the application for relief filed by Lykes
Bros. Steamship Co., Inc. (the "applicant") with respect to the
above-referenced vessel repair entry.
FACTS:
The record reflects the following. The S.S. THOMPSON LYKES
is a U.S.-flag vessel operated by the applicant. The vessel
underwent foreign shipyard work from February through April 1996.
The vessel arrived at the port of Port Elizabeth, New Jersey on
April 28, 1996. The above-referenced vessel repair entry was
timely filed.
The applicant has submitted a "Master's affidavit and
application for relief" dated April 28, 1996. That document
states in pertinent part as follows:
...during the course of this voyage, unforeseeable foreign
repairs/purchases were occasioned.
1. In Naples, Italy on 27 February, 1996 the Main Engine
Reduction Gear, low pressure turbine, high speed quill shaft
was found to be fractured, disabling the Main Engine...A
Westinghouse service engineer attended the vessel and new
parts were made in the U.S.A. and shipped to Naples for
installation...
2. In Haifa, Israel the port boiler developed a water well
tube leak...
3. The vessel's photocopier, which was last serviced just
prior to sailing from New York on 01 February, failed in
operation...
The applicant has also made a submission dated August 23,
1996.
ISSUE:
Whether the costs at issue are dutiable pursuant to 19
U.S.C. 1466.
LAW AND ANALYSIS:
19 U.S.C. 1466 provides for the payment of duty at a rate of
fifty 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 be employed
in such trade.
19 U.S.C. 1466(d)(1)
The applicant seeks relief based on casualty repairs.
19 U.S.C. 1466(d)(1) provides in part that the Secretary of
the Treasury is authorized to remit or refund such duties if the
owner or master of the vessel furnishes good and sufficient
evidence that the vessel was compelled by stress of weather or
other casualty to put into a foreign port and make repairs to
secure the safety and seaworthiness of the vessel to enable her
to reach her port of destination. 19 CFR 4.14(c)(3)(i) provides
that "port of destination" means such port in the United States
and "...only the duty on the cost of the minimal repairs needed
for the safety and seaworthiness of the vessel is subject to
remission or refund."
19 U.S.C. 1466 and 19 CFR 4.14 essentially set forth a
three-part test, each of the elements of which must be
established by good and sufficient evidence to qualify for
remission:
1. a casualty occurrence;
2. an unsafe and unseaworthy condition;
3. the inability to reach the port of destination
without foreign repairs.
We have stated as follows in numerous decisions:
The term "casualty", as it is used in the vessel repair statute (19 U.S.C. 1466) has been interpreted as something
which, like stress of weather, comes with unexpected force
or violence, such as fire, or spontaneous explosion of such dimensions as to be immediately obvious to ship's
personnel, or collision (see Dollar Steamship Lines, Inc. v.
United States, 5 Cust. Ct. 28-29, C.D. 362 (1940)). In the
absence of such a casualty event, we must consider the
repair to have been necessitated by normal wear and tear
(Ruling 106159, September 8, 1983).
In Dollar Steamship Lines, the court stated in pertinent
part:
We are of the opinion that a casualty similar to "stress of
weather" should be of necessity a happening that comes with
the violence of the turbulent forces of nature.
Black's Law Dictionary (fifth ed., 1979) defines casualty as
follows:
A serious or fatal accident. A person or thing injured,
lost or destroyed. A disastrous occurrence due to sudden,
unexpected or unusual cause. Accident; misfortune or
mishap; that which comes by chance or without design. A
loss from such an event or cause; as by fire, shipwreck,
lightning, etc.
After a consideration of the record, we find that the
applicant has not presented good and sufficient evidence that the
vessel was compelled by stress of weather or other casualty to
make the subject repairs in order to secure the safety and
seaworthiness of the vessel to enable her to reach her port of
destination. Stated otherwise, the applicant has not
satisfactorily established any of the parts of the three-part
test, supra. All three parts must be established by good and
sufficient evidence.
Accordingly, 19 U.S.C. 1466(d)(1) does not provide a basis
for relief with respect to any item.
With respect to the first requirement of the three-part test
(the occurrence of a casualty), the existence of an emergency
condition does not establish a casualty. With respect to the
second and third requirements of the three-part test,
documentation which is frequently submitted is an official report
of the U.S. Coast Guard, certifying that the vessel is not able
to reach its port of destination without certain repair work. As
noted above, 19 CFR 4.14(c)(3)(i) provides that "port of
destination" means such port in the United States and "...only
the duty on the cost of the minimal repairs needed for the safety
and seaworthiness of the vessel is subject to remission or
refund."
Repairs Performed in Israel
On December 21, 1988, the President of the United States
issued Proclamation 5924 under the authority of section 4(a) of
the United States-Israel Free Trade Area Implementation Act of
1985. This Proclamation provides that vessel repair duties shall
not be assessed on the cost of parts, equipment or materials for,
or repairs to U.S. vessels if the subject expenditures are
products of Israel or the work was performed in Israel. Customs
interprets this to mean that the articles must be made in and
installed on vessels in Israel. Articles imported from elsewhere
do not qualify for the automatic duty exemption.
Proclamation 5924 states, in relevant part:
The duty provided for in section 466 of the Tariff Act of
1930 should not be imposed on equipments, or any part
thereof, including boats, the foregoing which are products
of Israel, or the expenses of repairs made in Israel upon
U.S.-documented vessels...
The evidence of record indicates that the following repairs
were performed in Israel, and are therefore nondutiable pursuant
to Proclamation 5924: items 7, 10, 11, and 14.
19 U.S.C. 1466(d)(2)
19 U.S.C. 1466(d)(2) provides for the remission or refund of
duties:
If the owner or master of such vessel furnishes good and
sufficient evidence
that-
...
(2) such equipments or parts thereof or repair parts or
materials, were manufactured or produced in the United
States, and the labor necessary to install such equipments
or to make such repairs was performed by residents of the United
States, or by members of the regular crew of such vessel.
(Emphasis supplied.)
In order to receive remission under 19 U.S.C. 1466(d)(2),
U.S. manufacture or production must be established, in addition
to the establishment that the labor was performed by U.S.
residents or members of the regular crew of the vessel.
The applicant has not established that the costs of any of
the items at issue are remissible pursuant to 19 U.S.C.
1466(d)(2).
HOLDING:
The application is granted with respect to items 7, 10, 11,
and 14.
The application is denied with respect to all other items.
Sincerely,
Chief,
Entry and Carrier Rulings Branch