19 U.S.C. § 1466; Protest 2002-14-100009; Vessel Repair Entry C20-0040674-7; M/V THUNDER; Vessel Repair Entry C20-0040675-4; Barge LIGHTNING

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H252979 July 30, 2014 VES-3-18-OT-RR:BSTC:CCR H252979 WRB CATEGORY: Carriers 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 2002-14-100009; Vessel Repair Entry C20-0040674-7; M/V THUNDER; Vessel Repair Entry C20-0040675-4; Barge LIGHTNING Dear Sir: This is in response to your memorandum of April 11, 2014, forwarding for our further review of the protest filed by Foss International, Inc., (hereinafter “protestant”) with respect to Vessel Repair Entries C20-0040674-7 and C20-0040675-4. Our decision is set forth below. FACTS The M/V THUNDER and barge LIGHTNING (the “vessels”) are U.S.-flag vessels. The vessels arrived at the Port of Lake Charles, Louisiana, on April 16, 2013, having incurred foreign shipyard costs. Vessel repair entries C20-0040674-7 for Tug THUNDER and C20-0040675 for barge LIGHTNING were filed on April 24, 2013, which your office reviewed, issuing duty determinations on August 16, 2013. A protest and application for further review covering both entries was timely filed February 12, 2014. Protestant claims that it is entitled to relief from vessel repair duties on the basis of a casualty occurrence. The Master characterized the circumstances leading to the vessel’s damages, saying: 09 January 2013 While the ITB THUNDER/LIGHTNING was en route from Santo Tomas, Guatemala, to Freetown, Sierra Leone, on the evening of 9 January 2013 I was on watch with crew member, [ ]. At approximately 2230 hours we heard a loud bang, I and [ ] went outside on the bridge wings of the THUNDER to see what caused the sound. We did not see any evidence of the cause of the sound. At that time I also observed the Chief Engineer, [ ], and the Bosan [sic], [ ], apparently looking for the cause of the sound. We did not see any evidence of the source of the sound. I went off watch at 2330 hours. 10 January 2013 Less the [sic] two hours later at approximately 0055 hours on 10 January I heard another loud bang and moments later the Tug, THUNDER, fell off the teeth of the notch system and started banging in the notch system. At that time I realized the vessels’ notch system was the source of the previous loud bangs. I called the bridge and ordered the speed of the vessels lowered to 5 to 6 knots. I ordered the general alarm to be sounded and instructed the crew to kill the power to the Barge, LIGHTNING. After I determined that all the crew was safe and no water was coming into the vessel, I backed the Tug, THUNDER, out of the notch system and waited for daylight to assess the situation. At the time of the separation the wind was at 40 KTS with ocean swells at 10-14 feet. The conditions prevented the Tug, THUNDER, from safely approaching the Barge, LIGHTNING. At daybreak on 10 January, when the Barge, LIGHTNING, was visible, we observed that the connecting tongue of the notch system was broken off. The separation also tore off the KVH satellite antenna which damaged the vessel’s communication systems. The crew attempted to get lines from the Tug, THUNDER, to the Barge, LIGHTNING, but they could only get one line on the barge and thus we could not keep it from parting. At 1900 hours the Rescue Tug, Orca VI, departed from Willemstad, Curacao, to aid the vessels and tow the LIGHINING [sic] to safe harbor. 11 January 2013 At 0115 hours on 11 January the Barge, LIGHTNING, went aground on a sand bar on Ave de Barlovento. After the Rescue Tug, Orca VI, arrived it was able to push the Barge, LIGHTNING, off the sand bar. By 0542 hours on 11 January the Rescue Tug, Orca VI, had the Barge, LIGHNING [sic], under tow to Willemstad, Curacao. The Tug, THUNDER, followed the LIGHTNING to Willemstad for necessary repairs. 12 January 2013 At 0930 hours on 12 January the Tug, THUNDER arrived at the shipyard, N.V. Curacaose Dok Maatschappij, Willemstad, Curacao; and, at 1115 hours the barge, LIGHTNING arrived at the shipyard, N.V. Curacaose Dok Maatschappij, Willemstad, Curacao. 12 Jan - 10 February 2013 At Curacao dry dock a Damage Survey was performed by Cunningham Lindsey Dutch Caribbean nv [sic] and American Bureau of Shipping, and, an internal inspection of all the spaces associated with the damage was carried out. After the necessary damage repairs on the vessels were completed the ITB THUNDER/LIGHTNING departed the shipyard on 10 February 2013. As a United States-flagged vessel, the U. S. Coast Guard was notified of the incident January 11, 2013 upon receipt of a U.S. Coast Guard form CG-2692, Report of Marine Accident, Injury or Death, from the owner, Foss International, Inc. The CG-2692 characterized the incident as, “ITB THUNDER/LIGHTNING was seperated [sic] when the connecting tongue between the two units was snapped.” The CG-2692 listed the casualty elements as Grounding, Machinery or Equipment Failure, and Seperation [sic] Of Tug and Barge from ITB Mode. Damage to the barge LIGHTNING was described as, “Possible Bottom Damage Upon Coming To Rest Atop Sand Bar.” An investigation was conducted to determine the cause of the damage. A Report of Survey was rendered covering both THUNDER and LIGHTNING while the vessels were at the Curacao Drydock Company. The survey was undertaken in order to survey reported damages to both vessels, to attempt to determine the cause of the loss, and to confirm repairs carried out at Curacao Drydock Company. At the outset, the survey observed that “[t]he damages resulted from an unintentional disconnection of the ITB.” The Report of Survey did not reproduce the full list of damages. For the sake of brevity, the damages sustained by the two vessels were characterized as: THUNDER 1. Bow - plating holed (FP), indented, and internals buckled - contact with LIGHTNING’s connecting teeth. Temporary repairs effected. 2. Stbd side iwo E/R stores - plating holed, indented, internals buckled, pipeline buckled - contact with LIGHTNING. Temporary repairs effected (insert) over main damaged areas. Pipeline repair effected. 3. Port side scuffed, minor indentations - contact with LIGHTNING. Repairs deferred. 4. Transom - plating set in, internals buckled, notably at quarters iwo steering flat & void space below - contact with LIGHTNING. Temporary repair effected. Linear horizontal rubber tendering at deck edge & W/L variously crushed/split/missing - contact with LIGHTNING. Repairs deferred. 5. Satellite antenna pole fractured at upper bridge - contact with LIGHTNING. Permanent repairs effected. 6. Radar out of order - contact with LIGHTNING. Permanent repairs effected. 7. Electrical power umbilical between tug & barge - parted at disconnection. Temporary repairs effected. LIGHTNING 1. Stbd side a) Inset plating + internals, 55m from stern - contact from ORCA VI. Permanent repairs deferred. b) Inset plating + internals, 40m from stern - contact from ORCA VI. Permanent repairs deferred. c) Inset plating + buckled internals + holed plating (iwo generator room & #8S void space), from stern to 25m for'd of stern - contact from THUNDER Temporary repairs effected. d) 2 x chine insets within area c). Permanent repairs deferred. 2. Stbd transom a) Plating and internals in stepped transom var'ly buckled & holed - contact from THUNDER Temporary repairs effected. b) Side rails on stepped transom var'ly distorted - contact from THUNDER Temporary repairs effected. 3. Port side Inset plating + buckled internals 40m from stern - contact from ORCA VI. Permanent repairs deferred 4. Port transom a) Plating and internals in stepped transom var'ly lightly buckled - contact from THUNDER. Repairs deferred. b) Side rails on stepped transom var'ly distorted - contact from THUNDER. Temporary repairs effected. 5. Notch forward a) Tongue fractured - tensile fracture Replaced. b) All teeth var'ly hammered, (esp upper) and shims detaching - contact from THUNDER after fracture. Temporary repairs effected. c) Upper tooth distorted - contact from THUNDER after fracture. Temporary repairs effected. d) Notch plate (with teeth) upper part set into hull plating, internals fractured/buckled - contact from THUNDER after fracture. Temporary repairs effected. 6. Notch stbd teeth Upper guide and teeth var'ly battered - contact from THUNDER after fracture. Temporary repairs effected. 7. Notch port teeth Upper guide and teeth var'ly battered - contact from THUNDER after fracture Temporary repairs effected. 8. Bottom plating var'ly set up lightly/mod’ly in aft part of v/l - grounding damages from contact with sand bar. The Report of Survey also examined the causes of damages suffered by THUNDER and LIGHTNING. It stated: Damages were caused during: 1. Disconnection and exit of THUNDER Impossible to achieve this in a seaway without sustaining damages. 2. Attempts by THUNDER to tow LIGHTNING. In hindsight it could be maintained that the Captain should not have attempted this. However, we believed that his actions were based on considerations of impending grounding/loss - and the undersigned would probably have taken similar actions. 3. Grounding on the sand bar. 4. ORCA VI hook-up operations. The Report of Survey also detailed the underlying causes of the disconnection of THUNDER from LIGHTING, saying: Proximate cause THUNDER & LIGHTNING parted due to a tensile fracture of the barge tongue. The tongue parted to P&S of the pin cutout - this would appear to be in accordance with the 2 x reported bangs. Underlying cause Not definitively established, but could be due to any, some, or all of the following: Fatigue: We were initially informed by the Master that the tongue was replaced at last drydocking in Singapore in August 2012. We were subsequently informed that the original tongue was still in use. We would have thought that this item would have been replaced at predetermined intervals. Flexing in a seaway: Any movement between the tug and barge will result in severe stresses being applied to the tongue. This of course should not be allowed to occur at all in an ITB. Unfair mating with pin: If the pin-tongue intersection is a little unfair, excessive stress could be applied to the tongue. Improper maintenance: Indications of apparent welding were noted at the aft internal corners of the tongue cutout. The tongue failed at one such position. Welding of the tongue, for any reason, is not an option. THUNDER and LIGHTNING departed the shipyard February 10, 2013, upon completion of the damage repairs. ISSUE Whether the costs for which the protestant seeks relief are dutiable, non-dutiable, or remissible under 19 U.S.C. § 1466? 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 previously discussed in that they do not establish a casualty occurrence, the very first requirement of the test. The facts clearly establish that this incident was caused by the failure of the barge tongue. Our position with regard to unseaworthy conditions caused by metal fatigue was laid out in HQ H116625 (Apr. 26, 2006). In H116625, we examined the failure of a vessel’s main engine bearings due to fatigue. The engine manufacturer’s attendance and service report stated the, “…likely cause of the bearing failures on units 5 and 6 is fatigue failure, the engine has well in excess of 100,000 hours and all bearings appear to be the original set fitted.” We remarked, citing Dollar, “[t]he 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. 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.” (Citations omitted). In that matter, we determined that failure of a part due to fatigue did not constitute a casualty occurrence. Rather, the evidence indicated that the replacement of the failed parts was necessitated by normal wear and tear. The evidence as provided by the protestant clearly indicates that the barge tongue parted due to a tensile fracture. The U.S. Coast Guard form CG-2692 states that the two vessels separated when the connecting tongue snapped. The Report of Survey further stated, “[t]he tongue parted to P&S [port and starboard] of the pin cutout - this would appear to be in accordance with the 2 x reported bangs.” The underlying cause of the tongue failure was the subject of speculation in the Report of Survey, which identified four potential causes: fatigue; flexing in a seaway; unfair mating with pin; and, improper maintenance. With regard to fatigue as a potential cause, the report states that, “… the original tongue was still in use,” the vessel having been built in 1991. Similarly, the discussion of improper maintenance of the tongue in the Report of Survey remarks, “[i]ndications of apparent welding were noted at the aft internal corners of the tongue cutout. The tongue failed at one such position. Welding of the tongue, for any reason, is not an option.” These facts are highly suggestive that the underlying cause of the tongue’s failure was attributable to poor maintenance or metal fatigue related to its failure to be replaced during its long period in service. Insofar as the proximate cause of the damage to the vessel was the failure of the barge’s tongue due to, inter alia, fatigue and improper maintenance, we do not reach the Protestant’s arguments that the damage was allegedly caused by stress of weather, grounding, and contact damage due to towing. Any such damage would not have occurred but for the failure of the barge’s tongue. Accordingly, costs for which the protestant seeks relief are dutiable. HOLDING The costs for which the protestant seeks relief are dutiable under 19 U.S.C. § 1466 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. 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, Lisa L. Burley Chief/Supervisory Attorney-Advisor Cargo Security, Carriers and Restricted Merchandise Branch Office of International Trade, Regulations and Rulings U.S. Customs and Border Protection