VES-13-18-RR:BSTC:CCI W116688 CK
Patricia Kreider-Burke
Supervisory Entry Officer
U.S. Customs and Border Protection
1515 Poydras Street, Suite 1700
New Orleans, LA 70112
RE: MV GREEN COVE; Protest and AFR Number 2002-05-100635; Vessel Repair Entry Number C20-0058248-9; 19 U.S.C. 1466
Dear Ms. Kreider-Burke:
This is in response to your memorandum of June 15, 2006, forwarding for our review the protest filed on behalf of Central Gulf Lines with respect to Vessel Repair Entry C20-0058248-9. Our ruling on this matter is set forth below.
FACTS:
On May 12, 2004 the MV GREEN COVE arrived in Pt. Hueneme, CA concluding voyage 30. The vessel repair entry and an application for relief were timely filed. Relief was granted in part and denied in part. A timely protest was filed seeking relief due to a casualty.
ISSUE:
Whether the items for which the protestant seeks relief, are dutiable under
19 U.S.C. §1466.
LAW AND ANALYSIS:
Title 19, United States Code, §1466(a) (19 U.S.C. §1466(a)) states in pertinent part:
The equipments, or any part thereof ... 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.
Title 19, United States Code, §1466(d)(1) provides that duties may be remitted if the owner or master of the vessel was compelled by stress of weather or other casualty to put into a 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 and Border Protection’s (CBP’s) position that “port of destination,” means a port in the United States. (See, 19 C.F.R. §4.14(h)(2)(i))
The statute sets forth the following three-part test that must be met in order to qualify for remission under the subsection:
The establishment of a casualty occurrence.
The establishment of unsafe and unseaworthy conditions.
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. 23, 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 (23 Cust. B. & Dec. No. 43, 4,5 (1989); See also C.S.D. 79-32 wherein CBP held that a breakdown or failure of machinery may not be regarded as a casualty within the meaning of §1466(d)(1)). 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.
The MV GREEN COVE departed Yokohama, Japan on April 3, 2004 enroute to Port Hueneme, CA. Enroute the turbocharger on the main engine of the vessel exploded and the vessel sustained fire damage as a consequence of the blow-up of the exhaust gas turbocharger casing. As a result of the explosion the vessel was left drifting and required a tow back to Yokohama.
Attached is a Salvage Association report, which states in part:
We note that the owners have alleged that the damage forming the subject of this case resulted from ‘the explosion and resulting fire in the forward turbocharger.’ The precise cause for the failure of the turbocharger cannot be categorically determined. However, based on a review of the available documentation it appears likely that the explosion resulted from incorrect combustion in way of No. 7 cylinder. Again, the apparent cause of the incorrect combustion cannot be precisely ascertained, however, it is considered likely to have resulted from either defective or incorrectly installed fuel injector which permitted excess, un-burnt fuel to enter the turbocharger which ignited and lead to the explosion.
A report from a Technical Superintendent at LMS Shipmanagment, Inc. was also submitted. That report states that the No. 7 cylinder fuel injector that was installed with the engine had only been operating for 2,050 hours, within the 3,000 hour required replacement period. The report concludes in part, “Based upon my marine engineering experience, and reviewing The Salvage Association report above, the only conclusion that can be reached is that a No. 7 fuel injector failed prematurely. The injector could not have been improperly installed because the resulting operating engine performance and associated problems would have been obvious within minutes of the installation of the injector.”
The vessel log contains information that on April 3 and 4, the Master assessed the damage to the engine, determined the main engine was inoperable, but that the hull was sound. The log shows the Master tried contacting the U.S. Coast Guard numerous times by phone without success. Attached to this protest is an incomplete copy of a “Report of Marine Accident, Injury or Death (CG-2692).
The claim that the ship was subject to an explosion and fire is not in dispute. However, the cause of that damage is the determinative fact for this “casualty” claim. The record reflects a predominant belief that the No. 7 cylinder fuel injector failed. However, while numerous theories have been invoked as to the cause of the failure of No. 7 fuel injector, it is not clear what caused the failure and resulting explosion and fire, rather there is only speculation as to premature failure. Since there is no means for CBP to grant relief for a defective or prematurely failing part (see C.S.D. 79-32, supra), these causes do not come within a defined “casualty.” Thus, this claim cannot pass the first prong of the “casualty” claim.
Protestant seeks in the alternative, relief from duties on the towing expenses incurred when the ship was towed back to Yokohama, Japan for repairs. CBP at one time held that towing was not a dutiable expense under 19 U.S.C. 1466 in C.S.D. 89-61, dated January 26, 1989. While that position was true in 1989, the “but for” test in Texaco Marine Services, Inc. v. United States, 44 F.3d 1539 (Fed. Cir. 1994) changed the criteria for determining dutiability, and the CAFC stated it was unnecessary to revoke previous CBP Headquarters rulings based on the court’s recognition of the “but for” test in Texaco. See, Sea-Land, Inc. and American President Lines, Ltd. v. United States, 239 F.3d 1366 (CAFC 2001), cert. denied, 533 U.S. 931(2001). The court in that case stated, in pertinent part, as follows:
It was this court in Texaco that modified the treatment of vessel repair expenses under §1466(a). We “clarified” the judicial interpretation of 19 U.S.C. §1466(a) in Texaco, explaining that, based on the plain language of the statute, ‘expenses of repairs’ in §1466(a) meant those expenses that would not have been incurred “but for” the ship’s repair. Texaco, 44 F.3d at 1546. With this explicit interpretation of §1466(a), Texaco wiped the slate of decisions under §1466(a) clean, requiring the dutiability of all vessel repair expenses to be determined by the “but for” test. Customs is required to follow and apply the “but for” test.
Id. at 1372-73.
Hence, CBP is not required to revoke previous Headquarters rulings pursuant to 19 U.S.C. §1625(c) that are in contradiction to the “but for” test before applying the “but for” test in the assessment of duty on foreign vessel repair expenses. Additionally, we have held post Texaco, in HQ 116418, dated May 10, 2005, that towing expenses were subject to the “but for” test and could be prorated. In this case the towing expenses are expenses of the dutiable repairs performed in Yokohama, Japan.
HOLDING:
The expenses of the repairs at issue are dutiable, and no remission may be granted under 19 U.S.C. 1466(d)(1) for a “casualty.” The towing expenses are dutiable as per the Texaco “but for” test.
In accordance with the Protest/Petition Processing Handbook (CIS HB, January [2002, pp. 18 and 21), you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the
Office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods
of public distribution.
Sincerely,
Glen E. Vereb
Chief
Cargo Security, Carriers, & Immigration Branch