HQ 111324: Port Arthur Vessel Repair Entry No. VR-C21-0000091-1, dated May 17, 1990, GOLDEN ENDEAVOR, voyage 132. Application; casualty; modifications; surveys; leased equipment; CIE 289/49; 19 U.S.C. 1466; 19 CFR 4.14

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 111324

                          July 19, 1991

VES-13-18-CO:R:IT:C 111324 BEW

CATEGORY:  Carriers

Deputy Assistant Regional Commissioner
Commercial Operations Division
South Central Region
New Orleans, Louisiana  70130

RE:  Port Arthur Vessel Repair Entry No. VR-C21-0000091-1, dated
     May 17, 1990, GOLDEN ENDEAVOR, voyage 132.  Application;
     casualty; modifications; surveys; leased equipment; CIE
     289/49; 19 U.S.C. 1466; 19 CFR 4.14

Dear Sir:

     This is in reference to an application for relief from
duties filed by the attorney for American Maritime Transport,
Inc., in relation to the above referenced vessel repair entry.
The vessel arrived at the port of Port Arthur, Texas, on May 16,
1990.

FACTS:

     The GOLDEN ENDEAVOR is a U.S.-flag vessel owned by Bank of
New York as Trustee, and operated by American Maritime Transport,
Inc.  The record shows that the shipyard work in question was
performed on the subject vessel in St. Romauld, Quebec, Canada,
during the period from November 7, 1989 through November 11,
1989, and January 24, 1990, and in and Glasgow, Scotland, during
the period from March 21 through March 25, 1990.  The subject
vessel arrived in the United States at Port Arthur, Texas, on May
16, 1990.

     The entire vessel repair entry involves a potential duty of
$192,895.33.

     The applicant claims that relief for the subject items
should be granted because the items should be classified as
items which are not dutiable under title 19, United States Code,
section 1466 and section 4.14 of the Customs Regulations.

     The applicant contends that the vessel sustained damage as a
result of heavy weather damage during trans-atlantic crossings
between Quebec, Canada, and Norway.  The report shows that the
vessel made approximately twelve (12) trans-atlantic crossings

between Quebec, Canada, and Norway or Scotland during the period
from October 7, 1989 to May 16, 1990, before returning to her
U.S. port in May 1990.  The applicant claims that during several
of these crossings the vessel sustained damage as a result of
heavy weather and ice conditions.  The crossings that are the
subject of this entry are:

     1.   From Norway to Quebec, Canada, during the period from
          October 21 through November 2, 1989.

     2.   From Norway to Quebec, Canada, during the period from
          January 6 through January 21, 1990.

     3.   From Norway to Quebec, Canada during the period from
          February 9 through February 27, 1990.

     You have requested our advice concerning repairs which
relate to various casualties which occurred during the above
stated crossings, and certain other repairs alleged to be
modifications/alterations/additions.

ISSUES:

     1.   Whether sufficient evidence is presented to establish
          that the subject repairs were necessitated by a
          "casualty" which is remissible under the vessel repair
          statute (19 U.S.C. 1466).

     2.   Whether certain work performed in a foreign country
          constitutes modifications/alterations/additions to the
          hull and fittings rather than equipment purchases or
          repairs within the meaning of 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, or spontaneous
explosion of such dimensions as to be immediately obvious to
ship's personnel, 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).

     In addition, if the above requirements are satisfied by
evidence, the remission is restricted to the cost of the minimal
repairs necessary to enable the vessel to reach her port of
destination.  Repair costs beyond that minimal amount are not
subject to remission.

     Customs Regulations require that certain supporting
evidence be submitted with an application for relief for damages
resulting from stress of weather.  This evidence includes
photocopies of the relevant parts of the vessel's logs,
certification of any claimed casualty by the master or other
responsible vessel officer with personal knowledge of the facts,
and a certification by the master that the repairs were necessary
for the safety and seaworthiness of the vessel to enable her to
reach her port of destination in the United States (19 C.F.R.
4.14(d)(1)(iii)(D)-(F)).

     In a recent ruling, Customs noted that pursuant to 2.01-15,
U.S. Coast Guard (USCG) Regulations (46 CFR 2.01-15) a vessel may
not proceed from one port to another for repairs unless prior
authorization is obtained from the USCG Officer in Charge, Marine
Inspection (OCMI) either through the issuance of a USCG "Permit
to Proceed to Another Port for Repairs" (CG-948) or a CG-835
which would specify the restrictions on, and duration of, any
voyage undertaken prior to obtaining permanent repairs.  In the
absence of any determination of the USCG regarding a vessel's
safety and seaworthiness, and absent evidence that would be
adduced by the required USCG determination on the issue of
seaworthiness, the petitioner failed to substantiate its claim
for remission under 1466(d)(1) (see HQ 111477 GV).  The
circumstances surrounding the subject case differ from that
ruling in that in this case the GOLDEN ENDEAVOR was not
proceeding from one foreign port to another after it became clear
that repairs were required.  The damage occurred while the vessel
was at sea and the repairs were made at the first port of
arrival.  The master's affidavit dated July 20, 1990, states
that during the crossing of October 21 through November 2, 1989,
the vessel encountered very heavy weather and very rough seas.
During the period of October 21 through October 26, 1989, the
winds reached force 11 many times.  The affidavit reflects that
the following items were damaged:

     (a)  Forecastle deck set in.  Under deck girder buckled.
     (b)  Forward mast - bent down 45o angle and navigation
          lights and horn washed overboard.
     (c)  Inert gas pipeline cracked and leaking.
     (d)  100 feet of safety railing broken or missing.
     (e)  Electrical cable for steering system torn away.
     (f)  Water-tight door to steering room bent.
     (g)  Both forward and aft lifeboats and their stowage
          racks/breakwaters were torn away.

The master's affidavit dated July 18, 1990, states that during
the crossing of January 6 through January 21, 1990, the vessel
encountered almost continuous heavy seas and wind conditions (25'
to 40' swells and force 8-10 winds). The affidavit reflects that
the following items were damaged:

          (a)  Foremast and running lights.
          (b)  Safety railings on forecastle and main decks.
          (c)  No. 1 lifeboat.
          (d)  Accommodation ladder (required to board pilots in
               the North Sea).
          (e)  Fire line and steam line to forecastle area.
          (f)  Safety stanchions on the gangway.

In addition to the above stated affidavits, a third master's
affidavit also dated July 18, 1990, states that the vessel was
beset in ice on January 26, 1990, in the Gulf of St. Lawrence and
freed after maneuvering approximately six hours later.  The
vessel made the voyage to Norway with some unusual noises coming
from the propeller shafting.  Upon their return trip to Quebec
during the period of February 9 through 27, 1990, the vessel was
again beset in heavy ice (February 25, 1990).  Upon arrival in
Quebec, all blades of the propeller were found to be damaged.

     In Treasury Decision 78-180, we set out guidelines to be
used when relief is requested on the basis that the vessel
encountered high winds. (T.D. 78-180, 12 Cust. B. & Dec. 382
(1978)).  We held that winds of force 9 on the Beaufort Scale, a
numerical scale rating winds according to ascending velocity from
zero (calm) to twelve (hurricane), accompanied by a reasonable
description of the conditions and verified as required in the
regulations, raise a presumption that damages caused were due to
stress of weather.  The damage reports filed by the ship's
master indicate winds of force 8-12.  Moreover, these reports
describe "boarding seas" with heights of 25 to 40 feet swells in
each of the subject crossings (See Rene de Kerchove,
International Maritime Dictionary 52 (2nd Ed. 1961).

     In addition to the master's affidavits, the file contains
copies of the American Bureau of Shipping (ABS) reports
concerning the damage, and copies of relevant pages from the
ship's log and official log establishing that the vessel suffered
damage during each of the above stated crossings.  In addition,
the file contains the vessel's schedule of arrivals and
departures for the period from October 1989 to May 1990.  There
is no record of the vessel arriving or departing from a U.S. port
during this period of time.

     It is clear from the evidence that the vessel suffered
damage due to severe weather conditions, and that the vessel was
in need of repairs to secure her safety and seaworthiness.

     Our findings as to the entry are set for below:

     With respect to Mil Davie Inc, invoice No. 8911-60, the
     following items are nondutiable due to the casualty
     suffered during the period of October 21 through November 2,
     1989:

          1.0  Forecastle Deck steel work
          2.0  Forward Navigation Mast
          2.1  Additional work
          4.0  Inert Gas System
          5.0  140 Liner feet of Triple Handrail
          6.0  Liferaft support
          7.0  Poopdeck
          8.0  New brackets
          related drydocking services.

          With the exception of the installation and adjustment
          of new door hinges on the steering gear access
          watertight door, the costs for the other additional
          work and services are dutiable.

     With respect to Mil Davie Inc. invoice No. R-2336/02, page
     1, all costs relating to the propeller damage caused by
     heavy ice are nondutiable.

     With respect to Mil Davie Inc. invoice No. 9008-22, all
     costs relating to the repair of the accommodation ladder
     (item Nos. 1.1 to 1.6) are nondutiable.  The costs
     associated with the Fan repairs (item No. 2.0) are dutiable.

     In C.I.E. 429/61 we noted that:

          ... expenses which are incurred in conducting
          inspections made subsequent to the repairs,
          so as to ascertain whether the work had been
          properly performed, are dutiable as integral
          parts of the expenses of repairs although
          separatly [sic] itemized.  Moreover, testing
          which is effected for the purpose of
          ascertaining whether repairs to certain
          machinery or parts of the vessel are
          required, or are performed in order to
          ascertain if the work is adequately
          completed, are also integral parts of the
          repairs and are accordingly dutiable.

     Pursuant to the holdings in C.I.E. 429/61, and extending the
concept to surveys as well as inspections, if a survey is
conducted 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. In the
subject case, the surveys were conducted as a part of the repairs
relating to the casualty.  With respect to the American Bureau of
Shipping (ABS) Surveys, we find as follows:

     ABS Invoice Nos. 543888 and 543905 relating to the damage
     listed in ABS Report Nos. MO5938 and MO5970 which occurred
     during October 21 through November 2, 1989, and February 7
     through 27, 1990, all costs are remissible.

     ABS Invoice Nos. GL12573 - This invoice is for the cost
     associated with ABS report GL980 which was performed March
     27, 1990 to determined damaged alleged to have occurred
     during the trans-atlantic crossing of January 6 through
     January 21, 1990.  Subsequent to January 21, 1990, the
     vessel traversed the Atlantic at least three times before it
     arrived in Scotland on March 21, 1990, where the subject
     survey took place.  We note that an ABS survey, Report No.
     MO5970 was made immediately following the casualty that
     occurred during January 6 through January 21, 1990, and
     there is no mention at that time of any damage to the cargo
     tanks as a result of the heavy weather damage.  Vessels
     cannot be said to be compelled for the safety and
     seaworthiness of the vessel to obtain repairs after making
     several trans-atlantic voyages subsequent to the "casualty."
     Accordingly, for the foregoing and other reasons, the duty
     on the cost associated with the damage survey relating to
     cargo tanks is not subject to remission.
     Harris Pye Marine invoice No. MI3494 relates to the repairs
     made to the cargo tanks.  This invoice is for repair work
     performed in conjunction with the ABS Survey report GL980
     stated above.  Accordingly, no remission lies.

     ABS Invoice No. 543953 relates to ABS Report MO5990 - The
     documents submitted with the entry show that the lifeboat
     was damaged during the casualty which occurred during
     January 6 through January 21, 1990.  This invoice also
     relates to ABS report 5989 which is dated March 8, 1990.
     This survey was not to determine damage which had occurred
     as a result of the heavy weather casualty, but was for the
     purpose of reporting on the "conversion of fuel for
     operating the IGS System and change out of starboard
     lifeboat".  Accordingly, the costs associated with the
     modification of the inert gas system survey is nondutiable
     as a part of the modification.  The costs associated with
     the replacement lifeboat survey is nondutiable as a part of
     the rental agreement for a lifeboat which is being used
     until permanent lifeboats, which are being built, can be
     delivered in October 1990 (see explanation of dutiability
     under CIE 289/49 stated below).

     Attached to the documents relating to ABS Invoice No. 543953
     is a copy of a check for $39,950.  The description block
     indicates that this amount of money was for the rental
     deposit for a 24' lifeboat.  Pursuant to CIE 289/49,
     equipment leased in a foreign country for use on a vessel of
     the United States is not subject to the duty provisions of
     section 1466.  Customs has ruled that equipment leased is
     not dutiable under section because section 1466 is expressed
     limited by its terms to equipment which is "purchased"
     during the foreign voyage.  CIE 289/49 also held that the
     installation costs incurred in connection with the leasing
     of the aforementioned equipment are not dutiable, and that
     neither the equipment nor the cost of installation thereof
     need be reported or entered upon the vessel's return to the
     United States.  Accordingly, all costs relating to the
     rental of the lifeboat is nondutiable.

     ABS Invoice No. 543952 relating to the survey of the
     propeller damage caused by ice conditions, all costs are
     nondutiable.

     A question exists as to whether certain items are subject to
duty under section 1466 as equipment, or whether they might be
considered non-dutiable modifications.  In its application of
the vessel repair statute, Customs has held that modifications/
alterations/additions to the hull and fittings of a vessel are
not subject to vessel repair duties.

     Over the course of years, the identification of modification
processes has evolved from judicial and administrative precedent.
In considering whether an operation has resulted in a
modification which is not subject to duty, the following elements
may be considered:

     1.  Whether there is a permanent incorporation into the hull
     or superstructure of a vessel (see United States v. Admiral
     Oriental Line et al., T.D. 44359 (1930), either in a
     structural sense or as demonstrated by the means of
     attachment so as to be indicative of the intent to be
     permanently incorporated.

     2.  Whether in all likelihood, an item under consideration
     would remain aboard a vessel during an extended lay up.

     3.  Whether, if not a first time installation, an item under
     consideration replaces a current part, fitting or structure
     which is not in good working order.

     4.  Whether an item under consideration provides an
     improvement or enhancement in the operation or efficiency of
     the vessel.

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

          ...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.  Admiral Oriental,
          supra., (quoting T.D. 34150, (1914)).

     Under the rationale provided by a long-standing published
ruling (C.I.E. 1188/60) the cost of obtaining a gas free
certification, a necessary precursor to the initiation of any hot
work (welding) which may be necessary, constitutes an ordinary
dutiable expense which is associated with repair operations.  In
liquidating such an expense, however, its cost is apportioned
between those items which are remissible and those which remain
subject to duty.

     With respect to the following invoices alleged to be
modifications to the hull and fittings, we find as follows:

     Protecno LTD., Invoice No. 086/90 - The costs associated
     with this invoice relate to the labor of a riding crew which
     modified the vessel's fuel system to allow the vessel to
     use diesel oil which provides an improvement or enhancement
     in operation or efficiency of the vessel.  This repair is
     in the nature of a modification rather than a repair.  We
     find these costs to be nondutiable.

     Skarpenord International - Invoice Nos. 3610, 3578 and 3594
     relate to the installation of a new gauging system into the
     vessels cargo tanks which allows the monitoring of the tank
     levels by computer.  The documents submitted sustain that
     the gauging system is a permanent installation to the hull
     and fittings of the vessel's hull, however the Cargomaster
     computer system is considered vessel equipment.  We find
     that the costs associated with Invoice Nos. 3610 and 3578
     relating to the installation of the gauging system are
     nondutiable.  The amount of $34,164.57 associated with
     Invoice No. 3594 relating to the Cargomaster computer
     system including the monitor and keyboard are dutiable.

     With respect to the following invoices, we find as follows:

     Adelard Laberge Ltd. - all costs are dutiable except
     transportation and crane services.

     Roberge invoice Nos. 056109, 056332, and 056357, all costs
     are dutiable.

HOLDING:

     Following a thorough review of the facts and evidence, and
after an analysis of the law and applicable precedent decisions,
we have determined to partially allow and partially deny the
Application for Relief, as specified in the law and analysis
portion of this decision.

                                     Sincerely,




                                     B. James Fritz
                                     Chief
                                     Carrier Rulings Branch