HQ 110716: Perth Amboy, New Jersey, Vessel Repair Entry No. C514- 3003635-3, dated January 30, 1989, M/V AMERICAN PRINCESS

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                           HQ 110716

                          July 26, 1990


VES-13-18-CO:R:P:C  110716 BEW

CATEGORY:  Carriers

Deputy Assistant Regional Commissioner
Commercial Operations
ATTN:  Regional Vessel Repair Liquidation Unit
New York, New York 10048-0945

Re:  Perth Amboy, New Jersey, Vessel Repair Entry No. C514-
     3003635-3, dated January 30, 1989, M/V AMERICAN PRINCESS

Dear Sir:

     This is in reference to an application for relief from
duties filed by Seahawk Management, Inc. in relation to the
above referenced vessel repair entry dated January 30, 1989,
transmitted to this office by memorandum dated December 18, 1989.

FACTS:

     The record shows that the shipyard work in question was
performed on the subject vessel in Mombasa, Kenya, Durban, South
Africa, and Rotterdam, Holland, during the period October 22,
1988, December 14, 1988, and January 12, 1989, respectively.  The
subject vessel arrived in the United States at the port of Perth
Amboy, New Jersey, on January 24, 1989.

     The entire vessel repair entry involves an estimated duty
of $549,100.

     The applicant claims that relief for the subject items
should be granted because the items should be classified as
nondutiable items covered under title 19, United States Code,
section 1466(a) and sections 4.14(a) and 4.14(c) of the Customs
Regulations.

     The applicant claims that the repairs or equipment
purchases described in the documents were necessitated by a
casualty, i.e., starboard main engine casualty.  It claims that
the vessel was compelled, because of damage, to make repairs and
to purchase such equipment to secure the safety and seaworthiness
of the vessel to enable it to reach its port of destination.

ISSUE:

     Whether the foreign work performed on the subject vessel is
dutiable under 19 U.S.C. 1466.

LAW AND ANALYSIS:

     Title 19, United States Code, section 1466(a), provides in
pertinent part for payment of duty in the amount of 50 percent ad
valorem on the cost of foreign repairs to vessels documented
under the laws of the United States to engage in the foreign or
coastwise trade, or vessels intended to be employed in such
trade.

     Paragraph (1), subsection (d) of section 1466 provides that
duty may also be remitted if good and sufficient evidence is
furnished establishing that the vessel was compelled by stress of
weather or other casualty to put into a foreign port to make
repairs to secure the safety and seaworthiness of the vessel to
enable her to reach her port of destination.  It is Customs
position that "port of destination" means a port in the United
States."

     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.

     3.   The inability to reach the port of destination without
          obtaining foreign repairs.

     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, explosion, 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 a casualty event, we must consider the repair to
have been necessitated by normal wear and tear (ruling letter
106159, September 8, 1983).

     The applicant describes a total of 23 invoices and alleges
that each of the described invoices are repairs or costs
relating to the damage which was the result of the casualty
which occurred in Nacala, Mozambique.  The point is made by the
applicant that the vessel was not fit for a voyage to the United
States.  It contends that because of the choppy waters
prohibiting the American Bureau of Shipping (ABS) inspector from
boarding to inspect the damage, the inspector allowed the vessel
to proceed slowly to Nacala where he met the vessel.  It states
that after the examination of the damage, the vessel was
permitted to proceed slowly on to Mobasa to complete the
discharge of her cargo provided that she proceed to the nearest
drydock in Durban for repairs.  It claims that there were no
repair facilities at Nacala or Mobasa.

     In the instant case, the evidence is clear that the vessel
suffered a break down in the starboard main engine.  The vessel's
log dated October 3, 1988, (applicant's exhibit 5) reflects the
sailing restrictions imposed and the requirement that the vessel
put in at Durban for casualty repairs.  The Salvage Association
report indicates that the damage was accidental and not the
result of wear and tear (exhibit 7).  Other documents submitted
with the application state that the starboard main engine repairs
were required because of an accident and were not the result of
ordinary wear and tear.   The ABS report indicates that severe
overheating (just short of an explosion), possibly due to an oil
stoppage, was indicated as the probable cause of the damage.

     It is clear from the evidence that the vessel was in need of
repairs to secure her safety and seaworthiness, however,
the evidence is insufficient to show what actually caused the
break down of the starboard main engine other then possibly an
oil stoppage.  Based on the evidence it appears that the oil
stoppage may have been due to the lack of proper maintenance.
Absent clear proof of an identifiable event to show an unexpected
force or violence, such as fire, explosion, or collision
resulting in damage, such cost of repairs is not remissible (see
C.I.E. 1826/58).  The documentation submitted is insufficient to
support a finding of a casualty as provided in section
1466(d)(1).  Accordingly, the cost incurred for the repairs
associated with the starboard main engine casualty is dutiable as
follows:

     1.   J.T. Rennie and Sons Invoice No. R3,012.97 - all items
          are nondutiable,

     2.   J.T. Rennie and Sons Invoice. No. R2,578.87 - all items
          are nondutiable.

     3.   Wartsila Diesel, Inc. No. W-9-0342 - all items are
          dutiable except charges for services of Morgan,
          Anderson and McKenna, and air fare, lodging and other
          transportation expenses.

     4.   Wartsila Diesel, Inc. No. W-9-0339F - all items are
          dutiable, except charges for expenses, air fare and
          travel.  The service engineers' time for Morgan,
          Anderson and McKenna is not segregate on this invoice,
          Pursuant to C.I.E. 1325/58 and C.I.E. 565/55, duties
          may not be remitted where the invoice does not
          segregate the dutiable costs from the non-dutiable
          costs, therefore all time is dutiable.

     5.   Dorbyl Marine (PTY) Ltd. Contract No. 087588 B - all
          items are dutiable, except charges for air freight,
          transportation.  Item No. 38 - sea trials are dutiable
          when perform to determine whether a repair has been
          properly done.

     6.   Dorbyl Marine (PTY) Ltd. Contract No. 087588  - all
          items are nondutiable.

     7.   Dorbyl Marine (PTY) Ltd. Contract No. 087588  - all
          items are nondutiable.

     8.   Dorbyl Marine (PTY) Ltd. - all items are nondutiable
          drydocking expenses except the gas free certificate
          which is prorated between the dutiable and nondutiable
          charges.

     12.  Fluid Mechanics, Inc. No. 988404 - all items are
          dutiable.

     13.  S.E.M.T. Pielstick Invoice No. 8122087 - all freight
          charges are non-dutiable.

     14.  National Ship Chandlers (PTY) LTD. Invoice No. 7256 -
          all items are non-dutiable as ship stores.

     15.  National Ship Chandlers (PTY) LTD. Invoice No. 7258 -
          all items are dutiable.

     16.  National Ship Chandlers (PTY) LTD. Invoice No. 7262 -
          all items are dutiable.

     17.  National Ship Chandlers (PTY) LTD. Invoice No. 7256 -
          all items are dutiable.

     18.  National Ship Chandlers (PTY) LTD. Invoice No. 7257 -
          all items are dutiable.

     19.  National Ship Chandlers (PTY) LTD. Invoice No. 7600 -
          all items are dutiable except soft rags which are ship
          stores.

     20.  Chandling International Ltd. Invoice No. 13857 - all
          items are dutiable.

     21.  Panasonic Invoice No. 62713 - all items are non-
          dutiable clerical expenses.

     22.  Echalaz & Osborne (PTY) Ltd. Invoice No. 6045 - all
          items are dutiable.

     23.  John T. Rennie and Sons - all items are nondutiable as
          drydocking and transportation expenses.

     Customs has held that where periodic surveys are undertaken
to meet the specific requirements of a classification society,
insurance carrier, etc., the cost of the surveys is not dutiable
even when dutiable repairs are effected as a result thereof;
however, in the liquidation process Customs should go beyond the
mere labels of "continuous" or "ongoing" before deciding whether
the item is dutiable.  If an inspection or survey is conducted as
a part of an ongoing maintenance and repair program labelled
"continuous" or "ongoing" the cost is dutiable.  Also, if the
survey is to ascertain the extent of damage sustained, or to
ascertain if the work is adequately completed, the costs are
dutiable as part of the repairs which are accomplished pursuant
to the holdings in C.I.E. 429/61, C.S.D. 79-2, and C.S.D. 79-
277.  Accordingly, the following items are dutiable:

     9.   ABS survey No. BB 11478

     10.  Invoice No. DB11364

     11.  Invoice No. DB11479

     31.  Hull Damage Survey  Invoice No. 11480.

 The remaining surveys are nondutiable:

     30. - Invoice No. DB 11481, is nondutiable.

     37. - South African Diving Services invoice No. 7273.

     A leading case in the interpretation and application of
section 1466 is United States v. Admiral Oriental Line et al., 18
C.C.P.A. 137 (T.D. 44359 (1930)).  That case distinguished
between equipment and repairs on one hand and permanent
additions to the hull and fittings on the other, the former being
subject to duty under section 1466.

     The Court in Admiral Oriental, supra., cited with approval
an opinion of the Attorney General (27 Op. Atty. Gen. 228).  That
opinion interpreted section 17 of the Act of June 26, 1884 (23
Stat. 57), which allowed drawback on vessels built in the U.S.
for foreign account, wholly or in part of duty-paid materials. In
defining equipment of a vessel, the Attorney General found that
items which are not equipment are:

          ... those appliances which are permanently
          attached to the vessel, and which would remain on
          board were the vessel to be laid up for a long
          period ... [and] are material[s] used in the
          construction of the vessel ....

While the opinion of the Attorney General interpreted a
provision of law other than section 1466 or a predecessor
thereof, it is considered instructive and has long been cited in
Customs Service rulings as defining permanent additions to the
hull and fittings of a vessel.

     For purposes of section 1466, dutiable equipment has been
defined as:

          ... portable articles necessary or
          appropriate for the navigation, operation, or
          maintenance of a vessel, but not permanently
          incorporated in or permanently attached to
          its hull or propelling machinery, and not
          constituting consumable supplies.  (T.D.
          34150 (1914)).

     It should be noted that the fact that a change or addition
of equipment is made to conform with a new design scheme, or for
the purpose of complying with the requirements of statute or
code, is not a relevant consideration.  Therefore, any change
accomplished solely for these reasons, and which does not
constitute a permanent addition to the hull and fittings of the
vessel, would be dutiable under section 1466.

     In its application of the vessel repair statute (19 U.S.C.
1466), Customs has consistently held that modifications/
alterations/additions to the hull and fittings of a vessel which
allow the vessel to operate more efficiently are not subject to
vessel repair duties.  To be found non-dutiable as a
modification/alteration/addition, the work done must involve no
element of repair due to damages, deterioration or wear and
tear.  If those are present, the work will be considered a
repair and dutiable.  Accordingly, we find the cost of repairs on
the following invoices to be nondutiable modifications to the
hull and fittings:

     24.  Dorbyl Marine (PTY) Ltd. 087588 A - all items are
          dutiable except items 20, 21, and transportation
          charges.

     25.  Dorbly Marine (PTY) Ltd. Invoice No. 087588 C, all
          items are  nondutiable.

     In Headquarters ruling 106543 JM, we held that mere cleaning
operations are not dutiable.  However, cleaning operations which
remove rust and deterioration or worn parts, and which are a
necessary factor in the effective restoration of a vessel to its
former state of preservation, constitute vessel repairs (See
C.I.E. 429/61).   Our review of the following invoices reveals
that general cleaning and cleaning in preparation for cargo were
done, as such these items are nondutiable:

     33.   Dusty Miller Invoice No. 3129 R4,392.00.

     34.   Dusty Miller Invoice No. 3138 R13,908.00,

     35.   Dusty Miller Invoice No. 3131 R6,702.00,

     36.   Dusty Miller Invoice dated November 18, 1988,

     Pursuant to B/L dated February 21, 1947, cleaning to
fumigate a vessel is a non-dutiable expense.   The cost in
exhibit no. 32 - Rentokil invoice No. 11388 was for spraying of
the vessel for domestic pests.   Accordingly, we find this cost
to be nondutiable.

     Finally, with the exception of the transportation charges,
all items listed on the following invoices are dutiable:

     26.  S.M.D. Telecommunications CC, invoice No. 38215,

     27.  S.M.D. Telecommunications CC, invoice No. 38214,

     28.  S.M.D. Telecommunications CC, invoice No. 38192,

     29.  S.M.D. Telecommunications CC, invoice No. 1339,

     38.  Radio-Holland BV invoice No. 34502,

     39.  Woodward invoice No. 65347,

     40.  Manothermm b.v. invoice No. 50411,

     41.  Van Ommeren invoice no. 37.276.5, all items are
          dutiable except the charges for redelivery.

     42.  Mobasa (no vendor) Pro forma invoice for chipping and
          painting vessel.

HOLDING:

     The foreign work for which the applicant seeks relief is
dutiable under 19 U.S.C. 1466 with the exception of those items
noted above.

                                     Sincerely,




                                     B. James Fritz
                                     Chief
                                     Carrier Rulings Branch