OT-RR:BSTC:CCR H326838 HKC
Donna L. Borden
Supervisory Liquidation Specialist
C/o Vessel Repair Unit
U.S. Customs and Border Protection
423 Canal Street
Suite 246
New Orleans, LA 70130
RE: 19 U.S.C. § 1466; Protest 2002-22-100827; Vessel Repair Entry NK-7-0800093-1; M/V LIBERTY EAGLE
Dear Madam:
This is in response to your email dated August 12, 2022, forwarding for our further review the protest filed by the Liberty Maritime Corporation with respect to Vessel Repair Entry NK-7-0800093-1. Our decision is set forth below.
FACTS
The following facts were extracted from the protest filed by the Liberty Maritime Corporation (“Liberty Maritime”) on July 19, 2022. The M/V LIBERTY EAGLE (“the vessel”) is a U.S.-flag vessel. Shortly after departing Moroni, Union of the Comoros, on April 29, 2021, the vessel reported high temperatures in its propeller shaft stern tube bearings. The vessel proceeded at reduced speed to Durban, South Africa, where it was determined that the vessel could not safely proceed on her intended voyage to Houston, Texas. The American Bureau of Shipping (ABS) was contacted, which conducted a survey of the vessel revealing melted white metal on the propeller shaft and melted shaft bearings. ABS recommended completing all repairs prior to departure. Repairs consisting of withdrawal of the propeller and tailshaft, as well as renewal of the stern tube bearings and seals occurred at the Dormac Marine & Engineering shipyard in Durban. Upon completion of the repairs, the vessel continued on her intended voyage to Houston.
On August 10, 2021, the Liberty Maritime filed an application for relief on the basis of 19 U.S.C. § 1466(d)(1). On February 4, 2022 CBP denied this application for relief on the basis that insufficient evidence was furnished to show the foreign repairs were compelled by “stress of weather or other casualty” under 19 U.S.C. § 1466(d)(1). On July 19, 2022 Liberty Maritime filed a timely protest of CBP’s letter denying its application for relief.
In its protest, Liberty Maritime alleges the damage to the vessel necessitating foreign repairs was caused by “an unexpected and sudden rush of water” which “caused the stern tube bearing to abruptly fail”. Liberty Maritime further states that “[b]ased on the observations made by (ABS) Surveyors at the time of repair, it was clear that the catastrophic failure of the stern tube bearing was not a direct result of ordinary wear and tear, but the sudden and rapid deterioration of the bearing caused by unexpected ingress of water into the stern tube.” Liberty Maritime also provided maintenance service reports dating from April 2012, January 2014, and May 2019 showing the stern tube bearings were in acceptable condition during these periods.
ISSUE
Whether the costs for which the protestant seeks relief are remissible under 19 U.S.C. § 1466(d)(1)?
LAW AND ANALYSIS
Title 19 United States Code section 1466(a) provides for the payment of duty on the cost of foreign repairs to vessels documented under the laws of the United States to engage in foreign or coastwise trade, saying, in pertinent part:
The equipments, or any part thereof, including boats, purchased for, or the repair parts or materials to be used, or the expenses of repairs made in a foreign country upon a vessel documented under the laws of the United States to engage in the foreign or coasting trade, or a vessel intended to be employed in such trade, shall, on the first arrival of such vessel in any port of the United States, be liable to entry and the payment of an ad valorem duty of 50 per centum on the cost thereof in such foreign country.
However, 19 U.S.C. § 1466(d)(1), provides:
If the owner or master of such vessel furnishes good and sufficient evidence that—
(1) such vessel, while in the regular course of her voyage, was compelled, by stress of weather or other casualty, to put into such foreign port and purchase such equipments, or make such repairs, to secure the safety and seaworthiness of the vessel to enable her to reach her port of destination; …
then the Secretary of the Treasury is authorized to remit or refund such duties, and such vessel shall not be liable to forfeiture, and no license or enrollment and license, or renewal of either, shall hereafter be issued to any such vessel until the collector to whom application is made for the same shall be satisfied, from the oath of the owner or master, that all such equipments or parts thereof or materials and repairs made within the year immediately preceding such application have been duly accounted for under the provisions of this section, and the duties accruing thereon duly paid; and if such owner or master shall refuse to take such oath, or take it falsely, the vessel shall be seized and forfeited.
The statute thus sets a three-part test which must be met in order to qualify for remission under the subsection, these being:
1. The establishment of a casualty occurrence;
2. The establishment of unsafe and unseaworthy conditions; and
3. The inability to reach the port of destination without obtaining foreign repairs.
Pursuant to 19 C.F.R. § 4.14(h)(2)(i):
Requests for relief from duty under 19 U.S.C. 1466 (d) consist of claims that a foreign shipyard operation or expenditure involves any of the following: (i) Stress of weather or other casualty. Relief will be granted if good and sufficient evidence supports a finding that the vessel, while in the regular course of its voyage, was forced by stress of weather or other casualty, while outside the United States, to purchase such equipment or make those repairs as are necessary to secure the safety and seaworthiness of the vessel in order to enable it to reach its port of destination in the United States. For the purposes of this paragraph, a ‘casualty’ does not include any purchase or repair made necessary by ordinary wear and tear, but does include the failure of a part to function if it is proven that the specific part was repaired, serviced, or replaced in the United States immediately before the start of the voyage in question, and then failed within six months of that date.
It is Customs position that “port of destination” means a port in the United States.
Protestant asserts that the facts as discussed above constitute a marine casualty as a basis for relief from vessel repair duties pursuant to 19 U.S.C. § 1466(d)(1) and 19 C.F.R. § 4.14(h)(2)(i). Jurisprudence has provided significant guidance regarding the phrase “or other casualty.” In Dollar S.S. Lines v. United States, the United States Customs Court stated, “We are clearly of the opinion that the court below was correct in its holding that ‘other casualty,’ as used in said section, meant an accidental destruction by some cause of like character and operation as fire such as lightning, floods, cyclones, storms, or other.” The Dollar Court further reasoned:
In the case at bar the word “casualty” is to be considered together with the phrase “stress of weather.” The phrase “or other casualty” is supplemental to and qualifies the phrase “stress of weather” broadening the term to include other similar casualties. In order to determine the particular class of casualty under which exemption from duty may be granted by the Secretary of the Treasury, we must consider the meaning of the term “stress of weather.” The word “stress” is defined in Funk and Wagnalls New Standard Dictionary, page 2396, as follows:
2. Force exerted to or beyond the point of strain; tension; as, to subject a faculty to the utmost stress. 3. Influence exerted forcibly; pressure; violence; compulsion; as stress of weather.
We have, therefore, under the term “stress of weather” the forcible influence or violence of the weather exerted upon vessels unexpectedly in such a manner that the safety and seaworthiness thereof is so endangered that the purchase of equipment or the making of repairs becomes necessary in order to enable such vessel to reach her port of destination. A casualty similar to “stress of weather” would include such as is violently exerted; that which comes with unexpected force or violence, such as that of a fire, or a collision, or an explosion.
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.
In International Navigation Co. v. United States, the Customs Court, citing Dollar, examined the legislative history of section 466, Tariff Act of 1922, the predecessor of 19 U.S.C. § 1466. Noting that Congress had chosen not to include language to allow remission of duties to repair damages suffered or to replace equipment damaged or worn out during a voyage, the Court stated, “It is evident that under the provision as enacted it was not intended that duties should be remitted in all cases where repairs were made because of damages suffered or equipment damaged or worn out during the course of a voyage, even though such repairs were necessary to maintain the vessel in a seaworthy condition. It was only where the damage occurred by reason of some serious or extraor-dinary [sic] event, described as ‘stress of weather or other casualty,’ that remission was permitted.”
The Customs Court further expounded on the Congressional intent underlying § 1466 in Suwannee Steamship Company v. United States. In that case, the Court further expanded upon the Congressional choice of language in § 1466, noting that the decision not to include the language, “…or to repair damages suffered or to replace equipment damaged or worn out during the voyage,” reflected a desire to protect American shipyards. The Suwannee Steamship Court contrasted the intent of the rejected House amendment with that of the final language adopted by the Senate, saying:
The rationale for this revision of section 466 was stated succinctly in the Report of the House Committee on Ways and Means:
“Your committee believes that the limitations of this section [section 466 of the Tariff Act of 1922] are too strict and result in an unnecessary burden on American shipping.
The section as construed does not permit the remission for refunding of duties in the case of equipment purchased or repairs made in the ordinary course of the voyage to replace worn-out equipment or to repair minor damages or ordinary wear and tear.” H. Rep. No. 7, 71st Cong., 1st Sess. 171 (1929).
Clearly, the House amendment would have greatly increased the situations in which duties were to be remitted. Under the amendment, only a general overhaul or reconditioning would have been excluded from the remission allowance. See id.
The members of the Senate Finance Committee rejected this House amendment, and, in the bill reported to the full Senate, substituted the wording that presently appears in section 466.
Both the hearings of the Senate Committee, and the committee's final report on section 466, evidence the concern of the committee members that the House amendment would have provided insufficient protection for American shipyards, the class for whose benefit the section was originally formulated. See Senate Hearings on H.R. 2667, 71st Cong., 1st Sess., Vol. XVII at 537-46 (1929) [hereinafter cited as Hearings]; S. Rep. No. 37, 71st Cong., 1st Sess. 72 (1929).
In furthering this goal of protecting American shipyards, the Senate version of section 466 did two things. First, it limited remission to relatively serious repairs: those necessary “to secure the safety and seaworthiness of the vessel to enable her to reach her port of destination.” And second, it strictly defined both the nature and the timing of the cause of the damage necessitating the repairs. This was accomplished by authorizing remission only for those repairs caused “by stress of weather or other casualty,” provided that the stress of weather or other casualty occurred while the vessel was “in the regular course of her voyage.”
In its implementation of 19 U.S.C. § 1466, CBP has consistently applied the holdings in Dollar, International Navigation, and Suwannee Steamship. See HQ 106159 (Sep. 8, 1983); HQ 115911 (May 9, 2003); HQ W116688 (Feb. 9, 2007); and HQ 112144 (Jun. 10, 1992).
The facts at hand do not meet the three-part test to qualify for remission under 19 U.S.C. § 1466 previously discussed, in that they do not establish a casualty occurrence, the first requirement of the test. Liberty Maritime asserts in its protest that damage to the vessel’s stern propeller shaft bearing was due to “an unexpected and sudden rush of water,” but has not offered good and substantial evidence to support this claim. Notably, Liberty Maritime’s original Application for Relief did not allege damage due to “an unexpected and sudden onrush of water”. There is no other evidence elsewhere in the record to support Liberty Maritime’s assertion of an “unexpected and sudden onrush of water” casualty occurrence.
Although Liberty Maritime offers evidence that the propeller shaft bearings were in serviceable condition as of their last maintenance inspection in May 2019, almost two years elapsed between this inspection and the damage to the vessel’s stern propeller shaft bearing in April 2021. While 19 C.F.R. § 4.14(h)(2)(i) states a casualty “does include the failure of a part to function if it is proven that the specific part was repaired, serviced, or replaced in the United States immediately before the start of the voyage in question, and then failed within six months of that date”, the 23 months that have elapsed in the present matter significantly exceed the six-month period laid out in regulation. This supports a finding that the damage was a result of ordinary wear and tear rather than a casualty occurrence.
HOLDING
The costs for which the protestant seeks relief are not remissible under 19 U.S.C. § 1466(d)(1) as discussed in the Law and Analysis section of this ruling. You are instructed to deny the protest with respect to the costs discussed in this ruling.
Sincerely,
W. Richmond Beevers
Chief, Cargo Security, Carriers and Restricted Merchandise Branch
Office of International Trade, Regulations and Rulings
U.S. Customs and Border Protection