19 U.S.C. §1466; Vessel Repair Entry NF4-4330111-6; Protest 2002-09-100029; Casualty Claim

HQ H067615 August 10, 2009 VES-3-18-RR:BSTC:CCI H067615 GOB CATEGORY: Carriers Supervisory Import Specialist c/o Vessel Repair Unit U.S. Customs and Border Protection 1515 Poydras Street, Suite 1700 New Orleans, LA 70112 RE: 19 U.S.C. §1466; Vessel Repair Entry NF4-4330111-6; Protest 2002-09-100029; Casualty Claim Dear Sir: This ruling is in response to your memorandum of June 22, 2009, forwarding for our review the protest filed on behalf of Interocean American Shipping (“protestant”) with respect to Vessel Repair Entry NF4-4330111-6. Our ruling follows. FACTS: The M/V LIBERTY (the “vessel”), a U.S.-flag vessel, incurred foreign shipyard costs. The vessel arrived in the port of Baltimore, Maryland on January 11, 2009. A vessel repair entry was timely filed. Your office issued a letter of duty determination on October 3, 2008 with respect to the application for relief, seeking remission for an alleged casualty on a trans-Atlantic voyage, as well as relief for other costs. A protest was subsequently filed seeking relief from duty on numerous expenditures. ISSUE: The issue presented is whether the costs for which the protestant seeks relief are dutiable under 19 U.S.C. § 1466. LAW AND ANALYSIS: Initially, we note that the information in the file indicates that the protest was timely filed under the statutory and regulatory provisions for protests. 19 U.S.C. 1514(c)(3) and 19 CFR 174.12(e). Title 19, United States Code, section 1466 (19 U.S.C. §1466) provides for the payment of duty at a rate of fifty percent ad valorem on the cost of equipment for and 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. Section 1466(d)(1)) provides that the Secretary 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. Section 4.14(h)(2)(i), Customs and Border Protection (“CBP”) Regulations (19 CFR § 4.14(h)(2)(i)) provides that "port of destination" means such port in the United States. Section 1466(d)(1) and 19 CFR § 4.14(h)(2)(i) 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; and 3. the inability to reach the port of destination in the U.S. without foreign repair. Title 19, United States Code, section 1466(h)(3) provides as follows: The duty imposed by subsection (a) of this section shall not apply to- . . . (3) the cost of spare parts necessarily installed before the first entry into the United States, but only if duty is paid under appropriate commodity classifications of the Harmonized Tariff Schedules of the United States upon first entry into the United States of each such spare part purchased in, or imported from, a foreign country[.] You have requested our review with respect to the items discussed below. The primary issue presented for our review is the protestant’s casualty claim under 19 U.S.C. § 1466(d)(1). In this regard, the protestant provides the following information. In a memorandum of November 26, 2008 from the master of the vessel to the protestant’s fleet superintendent concerning the events of December 9, 2007, the master states in pertinent part as follows: Within minutes of the fire indication in zone six, generator room, main power and propulsion was lost causing the emergency diesel generator to come online seconds later. Upon arriving in the wheelhouse the discovery of an active fire located on the center main generator unit was made. . . . Under extremely difficult circumstances fire teams entered the blackened space wearing Self Contained Breathing Apparatuses (SCBA’s) and full turnout gear to discover the center Ship’s Service Diesel Generator (SSDG) fully engulfed in flame[s] on the turbo charger side of the engine. . . . At the time of the incident: (i) The starboard SSDG was partially disassembled for, and undergoing, routine scheduled maintenance by the ships crew; a two day process. In this state (opened for maintenance) the generator was more exposed than it ordinarily would have been to flame impingement and contamination from fire associated debris such as ash, soot, air born insulation fibers, piled paint, etc.; and (ii) the port SSDG was in the process of systematic overhaul between ports; as a result this generator was to be utilized for emergency purposes only because of the combination of new and used internal components. . . . The eventual determination of the fire was linked to a lube oil gauge on the main supply line rupturing and allowing lube oil to spray onto the turbo charger. With the oil pooled and sufficiently heated to ignition temperature the fire started and was fanned by the turbo charger process until the engine choked with smoke. The gauge failure could not have been preempted, as prior to failure there were no telltale signs in and around the gauge or the gauge well. In a statement of April 11, 2008, the protestant’s fleet superintendent states in pertinent part as follows: The casualty which necessitated the diversion of the ship to the shipyard in Bremerhaven came as a result of a fire which occurred in the generator room while the vessel was on an eastbound transatlantic voyage on 9 Dec 2007. The cause of the fire was that a LO Pressure gauge vibrated off its mount and allowed hot oil to spray on the overhead of the space and catch fire as it dripped down onto the hot exhaust manifold of the generator. The Report of Marine Accident, Injury or Death (U.S. Coast Guard Form 2692), completed by the master and dated December 9, 2007, identifies fire; machinery or equipment failure; and “failure of center auxiliary diesel generator” as the “casualty” elements. The narrative portion of this document provides in pertinent part as follows: While in operation and under normal load/circumstances the center auxiliary diesel generator did fail; causing the systematic loss of main power and propulsion. As a result of the catastrophic failure a fire did ensue within the confines of the generator. The fire then, feed [sic] by residual fuel, spread along the exhaust manifold, through the turbo charger and into the lower extremities of the exhaust trunk. . . . With main power restored and roving watches the vessel is currently proceeding, 1500 LT–ZD+2, on the intended route to Bremerhaven, Germany with 200% intact generator capacity. In its protest, the protestant states that “[w]ith only one generator able to deliver reliable power, the vessel was required to have a tug escort at all times once they got into restricted and coastal waters.” It has provided bills for the tug escort. The vessel’s log for December 9, 2007 contains the following statement from the master: As a result of two of the three independent generators operating, decision made to safely, with all due regard & prudence, resume voyage to original destination – Bremerhaven, Germany. A Lloyd’s Register Interim Certificate, dated December 13, 2007, contains the following narrative: Auxiliary engine room suffered fire. Only one generator able to deliver reliable power. Tug escort to be provided when navigating in restricted and coastal waters on the direct way to repair port Bremerhaven. On arrival damage to be specially examined [and] dealt with as necessary. A sheet in between vendor invoices in tab 9 of the application for relief file contains the following narrative: The ship has suffered a fire in the Generator Room, resulting in flame and heat damage to main cable ways and various control ckts. As a result of this, various automation issues, motor controller problems and fault alarms are being seen on the main console. . . . Additionally, the switchboard (#1 Generator) has become unstable and experienced high voltages and low voltage/brownouts. This may be an AVR issue however with all the automation wire damages the C.E. is having trouble isolating the problem. The protestant states that “[t]he vessel was ordered by the Coast Guard and Lloyd’s Register to proceed to Bremerhaven.” However, the protestant has not provided documentary evidence in support of this statement. 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 that of a fire, or a collision, or an explosion.” See Dollar Steamship Lines, Inc. v. United States, 5 Cust. Ct. 23, 29 (1940). We also take notice of the following definitions of “casualty.” A serious or fatal accident . . . 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. Black’s Law Dictionary (5th ed., 1979). A serious or fatal accident. Black’s Law Dictionary (8th ed., 2004). Section 4.14(h)(2)(i), CBP Regulations (19 CFR 4.14(h)(2)(i)) provides in pertinent part that “… a ‘casualty’ does not include any purchase or repair made necessary by ordinary wear or tear …” After a consideration of the evidence of record, we make the following determinations concerning the protestant’s casualty claim and the three required elements of a casualty claim under 19 U.S.C. § 1466(d)(1). We find that the protestant has provided good and sufficient evidence that the incident which occurred is a “casualty” within the meaning of 19 U.S.C. § 1466(d)(1). We believe that the events described in the documentation of record support the conclusion that a “casualty” occurred on the vessel on December 9, 2007. We further find that the record is contradictory and inconclusive as to whether the incident of December 7, 2007 created an unsafe and unseaworthy condition for the vessel within the meaning of 19 U.S.C. § 1466(d)(1). In the vessel’s log for December 9, 2007, the master states that two of the three independent generators were operating and that the “decision [was] made to safely, with all due regard & prudence, resume voyage to original destination – Bremerhaven, Germany.” We note additionally that the protestant has not provided documentary evidence in support of its statement that “[t]he vessel was ordered by the Coast Guard and Lloyd’s Register to proceed to Bremerhaven.” We further note that, while the protestant states that there was “… only one generator able to deliver reliable power …”, the Report of Marine Accident, Injury or Death (CG Form 2692) states that “[w]ith main power restored … the vessel is currently proceeding … on the intended route to Bremerhaven, Germany with 200% intact generator capacity.” Additionally, while it is stated in the Lloyd’s Register Interim Certificate of December 13, 2007 that “[o]nly one generator [is] able to deliver reliable power,” the master, in the vessel’s log, states that “two of the three independent generators [were] operating.” Based on the documentation of record, we conclude that the protestant has not provided good and sufficient evidence in satisfaction of the second statutory and regulatory requirement that the vessel was in an unsafe and unseaworthy condition after the incident. Finally, based upon the documentation of record, we are not fully convinced that the vessel was unable to reach its port of destination in the U.S. without foreign repairs. We find that the protestant has not provided good and sufficient evidence in satisfaction of this third requirement for relief under 19 U.S.C. § 1466(d)(1) and 19 CFR § 4.14(h)(2)(i). Based upon these findings, we determine that the protestant has not provided good and sufficient evidence in support of its casualty claim under 19 U.S.C. § 1466(d)(1). Therefore, remission is denied with respect to this claim. You have also requested our review of the items found in tabs 19 and 21 of the application for relief file. Tab 19. The articles included in items 1 through 28 are dutiable as they fall within the scope of the protestant’s casualty claim. We find that the articles included within items 29 through 40 are eligible for treatment under 19 U.S.C. § 1466(h)(3), as claimed by the protestant. Tab 21. The protestant states that “[t]hese were items for a survey of the life boat system” and that “[t]here were several defaults noted where the vessel was admonished that items were ‘to be replaced.’ However they were not replaced as a part of this emergency visit to Bremerhaven.” One of the pertinent invoices provides in part as follows: “This is to certify that the above equipment has been inspected and serviced by qualified NORSAFE personnel as specified below and is declared fit for use as required by SOLAS REGULATIONS.” [Emphasis by underlining added.] This invoice also identified numerous deficiencies such as: “Rescueboat davit winch is damaged beyond repair. Rescueboat davit hydraulic system need[s] service as soon as possible.” Based upon the statement on the invoice that the equipment was serviced, we find that this item is dutiable. HOLDINGS: The costs for which the protestant seeks relief are dutiable under 19 U.S.C. § 1466 and, with respect to certain items in Tab 19, are eligible for treatment under 19 U.S.C. § 1466(h)(3), as discussed in the Law and Analysis section of this ruling. With respect to the items addressed in this ruling, you are instructed to deny the protest with respect to the casualty claim and Tab 21. You are instructed to grant the protest with respect to eligibility under 19 U.S.C. § 1466(h)(3) for articles in items 29 through 40 of Tab 19. In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2007), 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 final duty determination 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