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HQ 226646

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March 26, 1996

VES-13-20-RR:IT:EC 226646 GEV

CATEGORY: CARRIER

Chief, Liquidation Branch
U.S. Customs Service
Post Office Box 2450
San Francisco, California 94111

RE: Vessel Repair Entry No. C27-0132677-2; OMI COLUMBIA; V-LB001; Casualty;
Stress of Weather; Collision; 19 U.S.C. ? 1466(d)(1)

Dear Sir:

This is in response to your memorandum dated December 13, 1995, forwarding an application for relief from duties assessed pursuant to 19 U.S.C. ? 1466. Our findings are set forth below.

FACTS:

The OMI COLUMBIA is a U.S.-flag vessel owned by OMI Corp. of New York, N.Y. The applicant contends that on May 15, 1995, the vessel sustained damage due to contact with a lightering vessel during heavy weather while engaged in a lightering operation at Chittagong Anchorage in the Bay of Bengal. The subject damage was subsequently surveyed by the American Bureau of Shipping (ABS) at Karachi, Pakistan, on June 9, 1995, and in Fujairah, U.A.E., on July 10, 1995. Repairs were performed at Dubai Drydocks, Dubai, U.A.E., from July 14 - 28, 1996. The vessel arrived in the United States at Los Angeles, California, on September 8, 1994. A vessel repair entry was timely filed.

An application for relief, dated November 14, 1995, was timely filed requesting "...relief from duty due to...casualty..." In support of its claim, the applicant submitted copies of the following documentation: ABS Report No. KR2292-A1, dated June 15, 1995; ABS Report No. DU18043-B1, dated July 25, 1995; Dubai Drydocks invoice nos. I-13022 and I-13023; U.S. Coast Guard (USCG) form CG-2692 ("Report of Marine Accident, Injury or Death"); Blaustein and Associates invoice no. 95/005; Scana Skarpenord invoice no. 1514; Tameem Shipchandlers invoice no. 16395; and Goltens Dubai invoice no. 3732/E2599.

ISSUE:

Whether the evidence presented regarding foreign repairs to the subject vessel is sufficient to warrant remission pursuant to 19 U.S.C. ? 1466(d)(1).

LAW AND ANALYSIS:

Title 19, United States Code, ? 1466, provides in part for payment of an ad valorem duty of 50 percent of the cost of foreign repairs to vessels documented under the laws of the United States to engage in the foreign or coastwise trade, or vessels intended to engage in such trade.

The regulations governing the submission of evidence and the determination of dutiability of foreign shipyard operations under provides that while an application for relief need not be submitted in any particular format, it must make a claim for relief under either paragraph (a) (items that are not subject to duty) and/or paragraph (c) (circumstances allowing remission of duty otherwise due), or both.

In regard to the application under consideration, although relief is requested for the cost of repairs allegedly due to a "casualty," no specification is made as to which work items this claim pertains. This glaring deficiency is critical in Customs review of this matter given the fact that the shipyard invoices cover work (e.g., engine overhaul) which far exceeds that needed to repair the hull damage alleged to be casualty-related as reflected on the ABS survey reports and the Master's statement on the CG-2692. As a result of the applicant's failure to comply with the provisions of 19 CFR ? 4.14(d)(1), Customs is unable to determine the scope of the applicant's request and the claim under which the requested relief should be granted.

Notwithstanding the application deficiencies discussed above, we note that with respect to a claim for relief that is casualty-based, ? 1466(d)(1) provides that the Secretary of the Treasury is authorized to remit or refund such duties if the owner or master of the vessel was compelled by stress of weather or other casualty to put into such 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 position that "port of destination" means a port in the United States.

The statute sets forth the following three-part test which must be met in order to qualify for remission under the subsection:

1. The establishment of a casualty occurrence.

2. The establishment of unsafe and unseaworthy conditions.

3. 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. 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 (ruling letter 106159, dated September 8, 1983).

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. In the case under consideration, aside from the applicant's bald claims, the only evidence proffered to establish a casualty occurrence (i.e., part 1 of the three-part test set forth above) is the above-referenced copy of a CG-2629 containing, in Block 30, the following statement of the Master:

While undocking lightering vessel, wind shifted with squall and turned lightering vessel's beam to oncoming swell. Lightering vessel started rolling and struck OMI Columbia on port side
#3 Ballast Tank.

While it is readily apparent from the record that the vessel suffered damage, the record is devoid of further evidence corroborating the Masters's statement (e.g., a logbook entry mandated pursuant to 46 U.S.C. ? 11301(b)(12) stating the circumstances under which the casualty occurred). Although the evidence submitted unequivocally establishes the extent of the damage in question, the same cannot be said with respect to how such damage occurred. In addition, the evidence submitted is deficient with respect to the extent of the alleged casualty (i.e., parts 2 and 3 of the three-part test set forth above).

In regard to parts 2 and 3 of the three-part test set forth above, the USCG is the controlling agency that determines questions of a vessel's fitness to proceed. The procedure by which the USCG renders such a determination is set forth in ?? 2.01-15 and 31.10-25, USCG Regulations (46 CFR ?? 2.10-15, 31.10-25). The former states that a vessel may not proceed from one port to another for repairs unless prior authorization is obtained from the USCG Officer-In-Charge, Marine Inspection (OCMI) either through the issuance of a USCG "Permit to Proceed to Another Port for Repairs" (CG-948) or a CG-835 which would specify the restrictions on, and duration of, any voyage undertaken prior to obtaining permanent repairs. The latter states that with respect to tank vessels, "No extensive repairs to the hull or machinery which affect the safety of a vessel shall be made without the knowledge of the Officer-In-Charge, Marine Inspection."

Notwithstanding the clear wording of the above USCG Regulations, specifically 46 CFR locations, it is the practice of the USCG not to issue a formal permit-to-proceed to a vessel transiting foreign waters because its certificate of inspection would have to be removed resulting in problems in transiting foreign waters. (See Customs ruling 112060) Furthermore, the USCG acknowledges that vessel operators often make casualty reports for U.S.-flag vessels damaged overseas verbally to the proper USCG Marine Inspection Office, followed by the required written report. Since the USCG cannot always send a marine inspector to a damaged vessel overseas they oftentimes consider the classification society report and the report of the vessel's master to determine the required temporary repairs and voyage restrictions. Id.

Customs has previously addressed the sufficiency of evidence in casualty claims such as this where a vessel that has been damaged foreign proceeds in a state of disrepair between foreign locations (i.e., Chittagong, Karachi and Dubai) prior to its being repaired in a foreign port, and subsequently sails to its U.S. port of destination. (See Customs Rulings 112060, dated May 21, 1992; 112061, dated June 10, 1992; 112063, dated June 8, 1992; 112229, dated June 11, 1992, and 113501, dated October 24, 1995). It is Customs position, as stated in the aforementioned rulings, that notwithstanding any practice of verbally reporting foreign casualties to the USCG and that agency's subsequent verbal instructions, remission pursuant to 19 U.S.C. ? 1466(d)(1) will not be granted in the absence of documentary evidence that the casualty occurrence was timely reported to the USCG and that agency, directly or through the medium of a marine surveyor, permitted the vessel to proceed between foreign locations in a damaged condition. The mere submission of a CG-2692, without accompanying documentation from the appropriate USCG OCMI authorizing the vessel to proceed in a damaged condition and specifying what, if any, restrictions apply, will not suffice for granting remission pursuant to 19 U.S.C. ? 1466(d)(1).

As discussed above, the record in this case is devoid of the requisite USCG documentation for granting remission pursuant to ? 1466(d)(1). Further in this regard we note the applicant's statement that, "It was determined by U.S. Coast Guard and also ABS Class surveyor that vessel was not sea-worthy [sic] for return trip to United States without repairs." No such determination is reflected in the USCG or ABS documentation submitted.

In addition, the evidence that has been submitted is contradictory to the relief requested. For example, we note that Block 31 of the CG-2629 contains the following statement by the Master:

Side Shell stove in approx. 3 inches in way of Frames 80 & 81
Side Shell Longitudinal #1 & #2 deflected upward slightly
Web Frame Support buckled

Seawortyness [sic] NOT affected

Consequently, the applicant is requesting that Customs find the subject vessel unseaworthy to return to its U.S. port of destination yet at the same time it submits a statement from the Master that the vessel's seaworthiness has not been affected by the damage incurred. In addition, after the damage was incurred on May 15, 1995, the vessel was not surveyed by the ABS until June 9, 1995, in Karachi, Pakistan, and July 14, 1995, in Fujairah, U.A.E., and was not repaired until July 14, 1995, in Dubai, U.A.E. (almost two months after the damage was incurred). This chronology of events leads Customs to conclude that the vessel owner considered the condition of the vessel after the damage was incurred to be other than unsafe and unseaworthy.

In addition, ABS Report No. KR2292-A1 covering the hull damage survey at Karachi, Pakistan, specifically provides, "Owners requested that permanent repairs be deferred at this time." (Emphasis added) Not only does this statement shed further doubt on the claimed unseaworthiness of the vessel, it should be noted that Customs has long-held that the cost of deferred repairs allegedly due to a casualty occurrence may not be remitted where such deferral is for a considerable period after the alleged casualty occurrence and/or there is no adequate explanation for the delay . (See C.I.E.s 1262/60 and 538/62, respectively.)

Finally, we note the above-referenced ABS report also states that the fracture at cargo tank no. 4 between web frames 67 and 68 was temporarily repaired and "considered satisfactory at this time for continued operation." The report further stated that the vessel need be "permanently repaired...prior to crediting of Annual Survey - Hull, due in November 1995." We find this six month gap between the time the damage was incurred and the time when the ABS would require permanent repairs be made to their satisfaction further bolsters our position that the damage to the vessel rendered it other than unsafe and unseaworthy within the meaning of

Accordingly, the statutorily mandated three-part test for remission has not been met. The evidence presented is therefore insufficient to warrant remission pursuant to 19 U.S.C.

HOLDING:

The evidence presented regarding foreign repairs to the subject vessel is insufficient to warrant remission pursuant to 19 U.S.C. ? 1466(d)(1). The applicant's claim is therefore denied.

Sincerely,

William G. Rosoff

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