19 U.S.C. § 1466; Vessel Repair Entry C20-0082525-0; Protest 2002-14-100044; M/V HOS SANDSTORM

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H258000 January 20, 2015 VES-3-18-OT-RR:BSTC:CCR H258000 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 C20-0082525-0; Protest 2002-14-100044; M/V HOS SANDSTORM Dear Sir: This is in response to your memorandum of September 9, 2014, forwarding for our further review the protest filed by Harvey Jones Vessel Agents, Inc., on behalf of their client, Hornbeck Services, LLC, (hereinafter “protestant”) with respect to Vessel Repair Entry C20-0082525-0. Our decision is set forth below. FACTS The M/V HOS SANDSTORM (the “vessel”) is a U.S.-flag vessel. The vessel arrived at the port of Morgan City, Louisiana, on April 6, 2012, having incurred foreign shipyard costs. An incomplete vessel repair entry, CBP Form 226 was filed on April 6, 2012, with a completed vessel repair entry filed later pursuant to an approved request for extension of time to file. A duty determination was made on February 7, 2014. A protest was filed August 1, 2014, and is now before us for further review. 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 United States July 17, 2011, enroute to Rio de Janeiro, Brazil. The vessel log indicates that the PME (port main engine) shut down on August 3, 2011, but the vessel was able to continue its voyage. The vessel docked for interim repairs to the port reduction gear August 9, 2011, six days after the PME shutdown. The work performed was described as “[r]epair of pto [sic] (Power Take-Off) shaft and pto [sic] housing.” The work included removal of the complete PTO shaft and housing from the vessel for repair ashore; replacement of the housing and fabrication of a new shaft; mounting of new bearings; re-machining of the PTO housing; installation of new bushings; installation of a new PTO output shaft, output seal, and coupling; mounting of the clutch boss; and return of the PTO to the vessel and remounting. New bearings and an oil inlet ring were installed and the gearbox was re-mounted. The repairs were completed and the vessel sailed August 10, 2011. 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. (emphasis added). Protestant claims that it is entitled to relief from vessel repair duties on the basis of the “one round voyage” rule under 19 C.F.R. § 4.14(h)(2)(i). The “One Round Voyage” rule was set forth in Bureau Letter CR 212.6 PH (Jan. 21, 1971), abstracted as Treasury Decision (T.D.) 71-83(38), which stated, in pertinent part: If satisfactory evidence is furnished clearly showing any part of a vessel to have been repaired and/or serviced just prior to the commencement of a voyage from a United States port, it is reasonable to assume that the part is seaworthy for a round voyage, foreign and return. Unless evidence indicates some other reason necessitated the repairs during the voyage, failure of that part to function within six months after the repair and/or servicing in the United States may be considered a casualty within the meaning of section 258(1), United States Code [recodified as 19 U.S.C. § 1466(d)]. However, remission of duty under that statute in the circumstances is limited to duty on the essential, minimum foreign repairs to the part.  Further, in HQ 116037 (Oct. 3, 2003), CBP held that, “…a ‘casualty’ arises from an identifiable event of some sort. In the absence of evidence of such a casualty event, we must consider the repair to have been necessitated by normal wear and tear.” Citing C.I.E. 1829/58; HQ 106159 (Sept. 8, 1983). “If satisfactory evidence is furnished clearly showing any part of a vessel to have been repaired and/or serviced just prior to the commencement of a voyage from a United States port, we have held that it is reasonable to assume that the part is seaworthy for a round voyage, foreign and return.” See HQ 116037. Protestant asserts in its Application for Relief, that prior to departing for Brazil, the vessel underwent repair and inspection work at Bollinger Shipyard’s drydock in Louisiana. Protestant has provided its Authorization for Expenditure (AFE) as documentation of the work undertaken during this drydock cycle, which includes work described as “inspect and repair” for both the Port Main Engine and the Main Propulsion Reduction Gears. The work order for the Port Main engine, dated May 17, 2011, describes the work undertaken as follows: Drop one main bearing cap to inspect lower main bearing. Remove one connecting rod bearing to inspect. Remove one connecting rod assembly to measure liner wear, ring wear, and piston groove wear. Replace turbo inlet bellows due to exhaust leak. Inspect all exhaust manifold and bellows for leaks and repair as necessary. Pyrometer not reading properly, suspect bad thermocouples or thermocouple wiring Remove oil filters and use filter cutter to inspect inside of fillers for contaminants. Replace oil filters. Replace air and fuel filters. Check for oil, fuel, exhaust, or air leaks on the engine and report findings. Inspect camshaft and camshaft followers. Remove, clean, and reinstall aftercooler core. Crew on the vessel will change oil. Adjust valve clearance, valve bridges, and injector timing. Replace jacket water temperature regulators Replace AC/OC temperature regulators in AMOT valve. Replace oil temperature regulators. Test engine after repairs including seatrial. Protestant also provided two service reports of work undertaken at this time. The first service report was for inspection of gears at intermediate drydocking. The work undertaken in this service report was described as: Port and Starboard Gears appear to be well maintained and in good condition. All pressure gauges on starboard gear damaged, or un-readable. After internal visual inspection of the port gear I found indication that something has passed through the PTO gear (marks only no damaged teeth noted). Also noted that this gear has been operated hot at some time as indicated by the smell of the oil and the colour [sic] and condition of the inside coating. Internal visual inspection of starboard gear, nothing of notice gear looks excellent. Work description: Inspected outside of gears for leaks, damage, missing or loose part, etc. ... Removed all inspection covers, visually inspected inside of gears and took photos of all gears. New parts: All pressure gauges for starboard gear ordered and confirmed. The second service report was for work undertaken to troubleshoot port gear overheating, occasioned by a lack of water flow across the port-side coolers. This service report listed no new parts. The work undertaken was described as: Worked with [ ] to determine why t6here [sic] is lack of water flow across port side coolers. Removed thermostat, found insides removed and bypass blocked. All oil is being directed through the cooler. [ ] found the raw water side of the main engine and gear oil coolers to be blocked. Coolers cleaned and re-assembled tested vessel at dock temperatures normal. While underway to test area, stbd. gear input bearing temperature running high. Removed oil nozzle, found it clogged, cleaned and replaced nozzle. Tested vessel under load for 5.5 hours, all [ ] equipment operating normally. The work undertaken in Brazil consisted of repairs of the port PTO shaft and housing. The description of the work undertaken in the U.S. prior to the vessel’s departure for Brazil describes only an internal visual inspection of the port gear revealing indications that something had passed through the PTO gear, leaving marks but no damage. The corresponding pre-departure service report only indicated that the PTO had been inspected; describing the work as, “Inspected outside of gears for leaks, damage, missing or loose part, etc. ... Removed all inspection covers, visually inspected inside of gears and took photos of all gears,” and that the only new parts installed were pressure gauges for the starboard gear, not the port, which was the subject of the work in Brazil. Protestant has submitted insufficient evidence to prove that the specific part, in this case the port main engine PTO, was repaired, serviced, or replaced as contemplated by 19 C.F.R. § 4.14(h)(2)(i). Therefore, without any identifiable casualty event, we consider the repair to have been necessitated by normal wear and tear. 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