Protest No. 2002-08-100179; Vessel Repair Entry No. C20-0063494-2; M/V ADVANTAGE; 19 U.S.C. § 1466(d)(1); Casualty

HQ H036396 January 26, 2009 VES-13-18-RR:BSTC:CCI H036396 CK CATEGORY: Carriers Chief, Vessel Repair Unit U.S. Customs and Border Protection 1515 Poydras St., Suite 1700 New Orleans, LA 70112 Re: Protest No. 2002-08-100179; Vessel Repair Entry No. C20-0063494-2; M/V ADVANTAGE; 19 U.S.C. § 1466(d)(1); Casualty Dear Sir: This is in response to your memorandums dated August 18 and September 9, 2008, forwarding for our review the above-referenced protest. Our ruling on this matter is set forth below. FACTS: The M/V ADVANTAGE is a U.S.-flagged vessel that incurred foreign repair expenditures. On February 23, 2006, the vessel arrived at the Port of Houston, Texas, where Vessel Repair Entry C20-0063494-2 was filed on March 2, 2006. An application for relief was timely filed and on February 29, 2008, a determination of duty was made in the amount of $592,509.70. The subject protest was received July 22, 2008, filed by Fortune Maritime, LLC, the owner, and Sealift Inc., the operators of the M/V ADVANTAGE. The invoices in contention in this protest are numbers 2, 3, 5, 6, and 9 that protestant alleges were incurred due to a nondutiable casualty sometime between December 2 and 4, 2005. The invoices are for work related to the vessel’s repairs and associated expenditures during its drydocking in Durban, South Africa. The vessel departed Djibouti, Djibouti on December 2, 2005 for Mombasa, Kenya where it arrived on December 9, 2005. An underwater inspection was undertaken in Mombasa after the Chief Engineer noted excessive vibration in the stern tube system during the voyage between Djibouti and Mombasa. After receiving the report from the underwater inspection, the vessel left Mombasa, Kenya on December 11, 2005 and proceeded to Dar es Salaam, Kenya where it stayed until December 21, 2005. The vessel was then towed to Durban, South Africa where it entered into drydocking on January 2, 2006 for the protested repairs and associated expenses. In addition to the shipyard invoices, protestant submitted the following documentation in support of its claim: (1) a U.S. Coast Guard Form 2692, “Report of Marine Accident, Injury, or Death,” dated December 14, 2005; (2) a report from The Salvage Association, dated April 10, 2006; (3) an affidavit from Port Engineer of Sealift, Inc. the operators of the M/V ADVANTAGE, dated June 2, 2006; (4) the vessel logs for the dates December 2, 2005 through January 2, 2006; (5) the engine logs from December 2, 2005 though January 4, 2006; and (6) a Railko Sterntube bearing report. ISSUE: Whether the vessel repair costs incurred by the protestant are dutiable under 19 U.S.C. § 1466? LAW AND ANALYSIS: Title 19, United States Code, § 1466(a), provides in pertinent part for the payment of an ad valorem duty of 50 percent of the cost of "...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...". Section 1466(d)(1) authorizes a remission of 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. The statute sets forth the following three-part test that 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; and The inability to reach the port of destination without obtaining foreign repairs. 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)). Duties on repair costs beyond that minimal amount are not subject to remission. 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 a repair to have been necessitated by normal wear and tear. HQ 106159 (September 8, 1983). In stating that a casualty is presumed under these circumstances thereby warranting the granting of remission, the protestant relies on a long line of rulings dating from C.I.E. 1202/59. (See, e.g., 116590, dated January 18, 2006; and 113374, dated March 27, 1995, citing and discussing 108514, dated November 17, 1986). With respect to these rulings, we note the following. In ruling 108514, the protestant cites to the following statement contained therein: [remission under] 19 U.S.C. 1466(d)(1) is therefore warranted for such damage in the absence of evidence showing that the vessel concerned was grounded, struck bottom, or her propeller contacted some floating object capable of causing damage prior to the commencement of the voyage. However, in C.I.E. 1202/59 and in ruling 106240 JM, dated July 20, 1983, which applied C.I.E. 1202/59 in the case of underwater damage, there was some evidence, or at least an inference could reasonably be made based upon the damage which had occurred, that the damage resulted from striking an unknown underwater object rather than from normal wear and tear… (emphasis added) Consequently, it is readily apparent that the presumption of a casualty occurrence, which is based on evidence or an inference of contact with an underwater object, is one that is rebuttable by a lack thereof. The damage in such cases is instead deemed attributed to normal wear and tear and is therefore dutiable. This determination, which is reflected in the remainder of the above-cited paragraph but not cited in the protest submission, provides as follows: …(see C.I.E. 1243/60, in which a leak in a vessel’s hull was held to be due to normal wear and tear and therefore remission of duty was denied). The lack of such evidence, or at least an inference based on damage sustained, was the very reason why relief was denied in ruling VES-13- 18-CO:R:CD:C 106369 PH, dated February 13, 1984, which applied C.I.E. 1201/59 in a case similar to this one where an oil leak occurred in the vessel’s stern tube after seal. (emphasis added) It should be noted that the facts in rulings 116590, 113374 and 108514, are clearly distinguishable from the facts currently under consideration. In the last two, fishing lines became entangled in the damaged areas thereby probative of a casualty occurrence. No such evidence exists in this case. In ruling 116590, which the protestant states is particularly instructive here, not only did the protestant in that case attempt to refute the possible cause of the damage in question as wear and tear by submitting evidence that the vessel had undergone American Bureau of Shipping (ABS) and U.S. Coast Guard (USCG) inspections four months prior to the breakdown in question, The Salvage Association report submitted in that case provided compelling evidence of contact with an underwater object (e.g., “…one propeller blade bent…torn down…shell bottom plating was torn, fractured and buckled…internals distorted.”). The protestant in this case has made no such attempt nor provided any such evidence. To the contrary, the report of The Salvage Association submitted for this protest provides a plethora of evidence indicating that the damage in question was due to wear and tear. See the report at p. 1 (“…excessive wear down of the stern tube bush…”), p. 3 (“…stern tube bushes were worn and abraded down…”, “…surfaces for the stern tube bushes were worn down, scored pitted and corroded” and “…seal liner was found worn, grooved…”, “…outer seal liner circumference was heavily worn, grooved, scored…flange face gouged all round,…all lower segments worn away, cracked and distorted”, “inner seal liner circumference was heavily grooved…seal rings were heavily worn.”), p. 6 (“…main bearing Nos. 8 and 9 severely and unevenly worn.”); and p. 7 (“…stern tube bush weardown was found to be excessive.”). In addition to the report of The Salvage Association, the findings reflected in the remainder of the documentation submitted by the protestant are also indicative of damage due to wear and tear. In this regard, see U.S. Coast Guard Form 2692, “Report of Marine Accident, Injury, or Death” (in Block No. 21, the Box for “Machinery or Equipment Failure” is checked). We further note that it has long been the position of this agency that in addressing the sufficiency of evidence in casualty claims such as this where a vessel proceeds in a state of disrepair between foreign location (i.e., Mombasa – Dar es Salaam) prior to its being repaired in a foreign port and subsequently sails to its U.S. port of destination, 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). (HQ 115188, dated February 20, 2001) No such accompanying documentation was submitted in this case. We also note the findings of the Railko Sterntube Bearing report (p. 4 contains the notation “original seal badly damaged due to 15 mm weardown”). Accordingly, the evidence submitted shows that the damage in question was not attributed to a casualty occurrence but rather was due to wear and tear. The protestant’s claim is therefore denied and the above-referenced work items associated therewith are dutiable. HOLDING: After a thorough review of the record, the protest is denied as no evidence of a “casualty” has been presented and no relief from duties is warranted. 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 recalculation of duties 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 and Immigration Branch