19 U.S.C. § 1466; Vessel Repair Entry C20-0082441-0; Protest 2002-14-100010; M/T OVERSEAS LUXMAR

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H255096 August 18, 2014 VES-3-18-OT-RR:BSTC:CCR H255096 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; Vessel Repair Entry C20-0082441-0; Protest 2002-14-100010; M/T OVERSEAS LUXMAR Dear Sir: This is in response to your memorandum of June 26, 2014, forwarding for our further review the protest filed by Luxmar Tanker, LLC., (hereinafter “protestant”) with respect to Vessel Repair Entry C20-0082441-0. Our decision is set forth below. FACTS The M/T OVERSEAS LUXMAR (the “vessel”) is a U.S.-flag vessel. The vessel arrived at the port of Houston, Texas, on May 2, 2012, having incurred foreign shipyard costs. A vessel repair entry, CBP Form 226 was filed on October 23, 2012, and a duty determination was made on August 23, 2013. A protest was filed February 13, 2014, and is now before us. We note that the information in the file indicates that the protest was timely filed under the statutory and regulatory provisions for protests, having been filed within 180 days of the date of duty determination. 19 U.S.C. § 1514(c)(3) and 19 C.F.R. § 174.12(e). This filing meets the criteria for further review as provided in 19 C.F.R. § 174.24 in that the decision against which the protest was filed is alleged to be inconsistent with a ruling of the Commissioner of Customs or his designee. The protestant claims that it is entitled to relief from vessel repair duties on the basis of a casualty occurrence. The M/T OVERSEAS LUXMAR is a 45,999 deadweight ton chemical / product tanker propelled by a single, 6-cylinder diesel engine. The vessel is classed by the American Bureau of Shipping (ABS). The following description of the circumstances of the vessel’s damage was abstracted from the general description of the incident provided by the Master. The vessel departed the port of Ashkelon, Israel, on March 27, 2012, bound for Houston, Texas. On March 29, 2012, at 0650 hours local time, while underway in the Mediterranean Sea, the vessel experienced a main engine slowdown associated with a failure of the high pressure fuel pump for the #3 main engine (ME) cylinder. The vessel performed a controlled shutdown to replace the high pressure fuel pump and the U.S. Coast Guard was notified of the loss of propulsion. On March 29, 2012, at 1745 hours local time, the vessel experienced another main engine slowdown. This event was associated with the high pressure fuel pump for the # 1 ME cylinder. The vessel performed another controlled shutdown. Multiple attempts to repair the # 1 fuel pump were unsuccessful. The vessel resumed her voyage on 5 cylinders March 30, 3012. One hour after resuming her voyage on March 30, 3012, the high pressure fuel pump for the #4 ME cylinder failed and the cylinder had to be isolated as onboard spares had been exhausted, limiting the vessel to propulsion on four ME cylinders. The vessel was instructed to divert to an anchorage at Kali Limenes, Greece, near Crete Island, for repairs, where it anchored later that morning. The vessel’s Technical Superintendent, diesel repair technicians and a class surveyor attended the vessel. As a United States-flagged vessel, the U. S. Coast Guard was notified of the incident April 1, 2012, upon receipt of a U.S. Coast Guard form CG-2692, Report of Marine Accident, Injury or Death, from the operator, OSG Ship Management Inc. The CG-2692, signed by the vessel’s Master, listed “MACHINERY OR EQUIPMENT FAILURE” as the sole casualty element” The CG-2692 described the incident as follows: 29 March 2012 at 0650, vessel experienced a main engine slowdown. Cause identified as failure of high pressure fuel pump #3 Vessel stopped and repaired fuel pump. 1330 Vessel resumed voyage. 1730 Vessel experienced another main engine slowdown. This due to failure of HP fuel pump #1. Vessel stopped and attempted repairs. 30 March 2012 at 0500, after attempts to repair pump were unsuccessful, vessel resumed voyage on reduced power. Upon starting engine, #4 HP pump also not working. Vessel diverted to Kali Limenes anchorage on 4 of 6 cylinders for repairs. 1100 Vessel anchored at Kali Limenes. Vessel technical superintendent, Diesel technicians, and ABS Surveyor attended vessel. 31 March 2012, at 1100, after repairs on #1 and #4 Fuel Pumps, and inspection by ABS Surveyor, Vessel departed Kali Limenes to resume voyage. Cause of HP fuel pump failure was the accumulation in HP pumps of heavy deposits in fuel lines freed by extensive running on MGO [Marine Gas Oil].” (emphasis added). Regarding the cause of the incident, the Master further stated, “[b]ased on the findings, it was concluded at the time that the cause of the fuel pump failures was attributed to the accumulation of heavy deposits in the fuel lines freed by extensive running on MGO due to inoperability of the auxiliary boiler.” After completion of repairs to the # l and # 4 high pressure fuel pumps and inspection by the ABS class surveyor, the vessel departed Kali Limenes anchorage March 31, 2012. On April 1, the vessel stopped in Kalamata, Greece, to disembark the service engineers and take on supplies for repair to the auxiliary boiler, and departed Kalamata with all cylinders operating. On April 2, 2012, the suction valves of the fuel pumps for the No. 2 and No. 5 cylinders became stuck, which left the vessel drifting while repairs were effected. Following repairs, the vessel got underway again, and two hours and forty minutes later, the suction valves in No. 6 cylinder fuel pump stuck. Once more, the vessel stopped and drifted while repairs carried out. After the vessel got underway, the decision was made to divert the vessel to Algeciras, Spain, to determine the cause and make permanent repairs. Enroute to Algeciras, the suction valves in the No. 4, No. 6, and No. 2 fuel pumps became stuck at various times, leaving the vessel drifting while repairs were made. After the fuel pump for No. 1 main engine cylinder seized, the vessel continued on to Algeciras utilizing only five cylinders, where it arrived April 6, 2012 and was layberthed for repairs. At Algeciras, the U. S. Coast Guard was notified of the incident on April 9, 2012, by filing of another U.S. Coast Guard Form CG-2692, Report of Marine Accident, Injury or Death, from the operator, OSG Ship Management Inc. The CG-2692, signed by the vessel’s Master, listed “MACHINERY OR EQUIPMENT FAILURE” as the sole casualty element” The CG-2692 described the incident as follows: At 0220LT on 6 April 2012, the # l main engine cylinder high pressure fuel pump seized in the barrel, resulting in a main engine slowdown. The pump had previously been renewed in Kali Limenes, the account of which was the subject of previous 2692 dated 29 March 2012. Due to location of the vessel, it was determined that it was best for vessel to proceed under reduced power to Algeciras for repairs rather than conduct repairs at sea in areas of heavy traffic. There were no additional incidents during the balance of the voyage and upon berthing at layberth, a full investigation was initiated into failure of High Pressure Fuel Pumps. Preliminary findings indicate that impurities in the bunker fuel were causing high pressure fuel pumps to sieze [sic] and the following corrective action is being undertaken to prevent recurrence. 1) The fuel system is being completely flushed with existing HFO bunkers isolated in one tank. Empty tanks have been fully inspected. 2) New bunkers are being procured. 3) A full set of fuel samples have been taken for analysis. 4) All fuel pumps on main engine are being overhauled and will be tested to the satisfaction of Class surveyor prior to proceeding on voyage. (emphasis added). An investigation was conducted to determine the cause of the damage. The vessel was attended at Algeciras by a representative of MAN Diesel & Turbo Espana, S.A.U., who remarked in a preliminary report: “…the engine has suffered several times sticking on all fuel pump suction valves during the last sailing days in the Mediterranean sea, looks like due incompatibility between different HFO used onboard. Therefore an emergency repair was needed. After stopping the Engine, the crew discovered that all seven fuel pumps were seized. HFO Service Tk, Settling Tk, Port & Centre Storage Tk were emptied and cleaned. HFO bunker analysis report available onboard showed a high content of cat fines in the received bunker which clearly has affected to the engine components.” (emphasis added). A Report of Survey was rendered by Noble Denton Consultants who attended the vessel at Algeciras. The Noble Denton surveyor described the incident as follows: The vessel was reported to have sailed from Israel following cargo operations and after anchoring outside the port, in order to make temporary repairs to the water tubes inside the boiler, which had suffered a number of leaks. As part of the boiler checks following temporary repairs, it was necessary to bring the boiler slowly up to pressure to ensure the tubes were not leaking. The first test was unsuccessful but was repeated satisfactorily the following day. The vessel then sailed for the USA via Algeciras where it was scheduled to receive fuel bunkers. Because of the problems with the boiler, it was necessary to operate the engine on MGO for a period of time, before changing back to HFO (Heavy Fuel Oil), this change over was made numerous times, until the exhaust gas economizer could be used to heat the fuel oil. It was reported that within two hours of the vessel sailing from Israel, differential pressure readings across the in-line fuel filters had reached a maximum and the crew by-passed the filters in order to keep the Main Engine running. Shortly after these filters were by-passed, number 3 unit on the Main Engine sounded a high exhaust temperature alarm. Investigations by the crew, reportedly found that the fuel pump plunger was found stuck in the barrel but had no signs of any mechanical defect. Within 24 hours similar problems with plungers and barrels had affected number 1 and then number 4 units. During the voyage from Israel to Algeciras it was reported that similar instances occurred on all of the Main Engine fuel pumps a number of times, with a total of 15 plungers and barrels requiring changing. When the fuel pumps were stripped down, the plungers were found stuck to the barrels and on inpecting [sic] the suction valves, slide plungers were found stuck to the thrust pieces. No mechanical damage, abnormal wear or debris was found either on the plungers or on the valve seats. In addition, the fuel oil residue on the pumps was a brown-green colour and it was abnormal to the touch, similar to paraffin. When the fuel tanks had been opened up for inspection, a large build up [sic] of sludge deposit was evident in the HFO service tank …. (emphasis added). The damage to the vessel was described as: The fuel system components suffered extensive damage which required either complete replacement or overhaul and repair. The full list of major items on the Main Engine and the fuel systems, which required replacement, are as follows: • 3 Piston Crowns • 1 Cylinder Liner • 4 Exhaust Valve Spindles • 4 Exhaust valves • 6 Plunger & Barrels (Fuel Pumps) • Spare parts for 3 Piston Rod Stuffing Boxes • Spares for 4 Cylinder Covers • Spares for overhauling the 4 Exhaust valves • Spares for 6 fuel pump shock absorbers • Spares for 12 fuel Injectors • Main Fuel Oil filter elements renewed In addition to the above work it was necessary to renew the return fuel lines, due to excessive clogging because of the sludge in the fuel supply. The fuel purifiers were both overhauled by the manufacturers’ representative … and the affected fuel tanks were cleaned by shore side workers…. The fuel filters required complete replacement, due to the amount of damage caused by the contaminated fuel trying to pass through the mesh. It was reported that the filters could not be cleaned ultrasonically due to the amount of blocking and that renewal was the only option. The Noble Denton Report of Survey also examined the causes of damages suffered by the OVERSEAS LUXMAR. It stated: The fuel system layout on the vessel is such that if the Main Engine uses MGO, the return fuel line feeds back to the HFO fuel tank, whereas the HFO fuel line returns only back to the HFO tank. This means it is not possible to prevent mixing of the different fuel types inside the service tank and if there is any incompatibility between the MGO and HFO, degrading of the fuel will end up passing directly to the engine. The diagram below is a simplified line drawing of the fuel system to show the arrangement on the vessel and how the mixing of HFO and MGO could occur in the HFO tank. The Auxiliary Engines return fuel line goes back to the same tank as the delivery, which means that no mixing of HFO and MGO can take place inside the Auxiliary Engine fuel tank, these engines have been reported by the crew as running normally with no signs of damage apparent. It is considered possible that a combination of faults and some unexplained events may have contributed to the damages noted during our inspection. Fuel analysis results from DNV petroleum services regarding the compatibility between MGO and HFO have been received and they have reported that the two types of fuel were fully compatible, so the mixing of fuel in the HFO fuel tank alone is not believed to have caused any problems. When the fuel filters blocked causing a high differential pressure across them, probably as a result of the sludge in the fuel, (emphasis added) the filters were by-passed, in order to keep the Main Engine running, this action would have allowed the poor quality fuel to access the engine without being filtered beforehand which is thought to have seriously affected the machinery. Although recent bunker fuel analysis reports sighted [sic] were within specification, Catalytic fines (Aluminium [sic] and Silicon) in the fuel are also considered to be a possible factor of the damage. Cat fines could cause excessive and rapid abrasive wear on all the fuel systems parts, similar to that noted on-board. Cat fines which are present in the fuel oil when it is delivered to the vessel can settle on the bottom of storage tanks due to gravitational force and they can remain there for a long period. It can mean that cat fines content at the bottom of tanks increases beyond the recommended limits, following numerous bunker supplies within specification. When the vessel then sails in rougher sea conditions, these components can be stirred up and they can reach the settling tanks after transfer from storage tanks. Faulty operation of the [ ] fuel separators has been investigated following attendance on-board by the [ ] representative. It was reported that both the separators appeared to be mechanically and electrically working correctly, however incorrect operation or a lack of scheduled maintenance and cleaning by the crew cannot be ruled out. The reason for the amount of sludge in the HFO settling tank, which has undoubtedly caused some of the major problems (emphasis added) has not been explained and from the fuel line diagrams it is unclear how this has accumulated in the tank or how it can be prevented from causing further problems in the future. (emphasis added). The findings of the ABS surveyor echoed those of Noble Denton. The ABS Report of Survey found, “In accordance with Owner Representative report, Main Engine suffered frequently stoppages due to FO [Fuel Oil] quality issues. Exhaust valves seat were found worn out in Main Engine cylinders, as well fuel injection pumps, plunger and barrel were found seized by an oil film created from the fuel oil used.” Similarly, the ABS surveyor observed, “1.In accordance with Owner Representative report, Main Engine suffered frequently stoppages due to FO quality issues. 2. The M/E had to be repaired in Algeciras prior departure to US. Many components were found worn out beyond limit and had to be repaired and renewed.” The M/T OVERSEAS LUXMAR departed Algeciras April 17, 2012, upon completion of 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 fuel oil contamination, including contamination with catalytic fines. Our position with regard to engine failure caused by contamination of the fuel is set forth in Customs Service Decision (C.S.D.) 81-154 (Jan. 9, 1981). In C.S.D. 81-154, damage to the vessel in question was caused by the failure of the crew to close valves in the ballast system, allowing water to flood the engine room. The flooding allowed debris to enter the engine oil tanks. The contamination of the oil, in turn, led to the failure of the vessel’s engines while steaming from Israel and forced it to put into Gibraltar for repairs. We held in that matter, that such facts did not constitute a remissible casualty under 19 U.S.C. 1466(d)(1). The facts in this matter are similar to those described in C.S.D. 81-154, with the sludge in the HFO being analogous to the debris which contaminated the fuel oil in C.S.D. 81-154. The evidence provided by the protestant clearly indicates that the cause of the incident was fuel contamination. The U.S. Coast Guard Form CG-2692 of April 1, 2012, signed by the Master, states that the cause of high pressure fuel pump failure was the accumulation in the pumps of heavy deposits in the fuel lines. Similarly, the April 9, 2012 CG-2692, also signed by the Master, further stated that preliminary findings indicates that impurities in the bunker fuel were causing the high pressure fuel pumps to seize. The Report of Survey found: When the fuel filters blocked causing a high differential pressure across them, probably as a result of the sludge in the fuel , the filters were by-passed, in order to keep the Main Engine running, this action would have allowed the poor quality fuel to access the engine without being filtered beforehand which is thought to have seriously affected the machinery. Although recent bunker fuel analysis reports sighted were within specification, Catalytic fines (Aluminium and Silicon) in the fuel are also considered to be a possible factor of the damage. Cat fines could cause excessive and rapid abrasive wear on all the fuel systems parts, similar to that noted on-board. Insofar as the proximate cause of the damage to the vessel was fuel contamination, we do not reach the Protestant’s arguments that the damage was allegedly caused by stress of weather or other casualty. Any such damage would not have occurred but for the contamination of the vessel’s fuel. 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