HQ 110892: Honolulu Vessel Repair Entry No. H19-00110335-9 dated June 7, 1989, AMERICAN SUN. Application; casualty; modifications; owner-supplied parts; Customs and Trade Act of 1990 (Pub. L. 101-382); 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 110892

                          May 13, 1991


VES-13-18-CO:R:IT:C 110892 BEW

CATEGORY:  Carriers

Chief, Technical Branch
Pacific Region
1 World Trade Center
Long Beach, California 90831

RE:  Honolulu Vessel Repair Entry No. H19-00110335-9 dated
     June 7, 1989, AMERICAN SUN.  Application; casualty;
     modifications; owner-supplied parts; Customs and Trade Act
     of 1990 (Pub. L. 101-382); 19 U.S.C. 1466; 19 CFR 4.14

Dear Sir:

FACTS:

     The record shows that the shipyard work in question was
performed on the subject vessel in Singapore during the period
from April 17 through May 12, 1989.  The subject vessel arrived
in the United States at the port of Honolulu, Hawaii, on June 6,
1989.

     The entire vessel repair entry involves a potential duty of
$478,449.50.

     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 and section 4.14 of the Customs Regulations.

     The applicant contends that the vessel sustained hull damage
as a result of contact with the bow of a lighter vessel M.V.
SAPPORO OLYMPICS when she was coming along side at 1916 hours on
April 3, 1989, at Chittagong Anchorage, located in Bangladesh.
The American Bureau of Shipping (ABS) report No. Report No. CI
1187 sustains that on April 3, 1989, the vessel was damaged on
the port side.  It also indicates that no repairs were carried
out at that time.  The repairs were not performed until the
vessel arrived in Singapore a few weeks later.

     You have requested our advice concerning the following
repairs listed on Keppel Shipyard invoice No. 89/E/Y/031A/B which
relate to modifications/alterations/additions and a casualty.

          Item Nos. Description

          000001 -                   Shell damage Repairs
          000003 -  0001             Steaming out line
                    0002             Sounding pipe
                    0003             Watertight door
                    0004             Ballast suction lines
                    0005             Butterworth opening
                    0006             Gunwale installation
                    0007             Crude oil washing main line
                    0008             Fuel oil bypass
                    0009             Incinerator Unit
                                     Installation
                    0010             Sewage Treatment Plant
                                     Replacement
                    0011             Smit Bracket
                    0012             Butterworth plates
                    0013             Gunwales Scupper
          000005 -  0012             Engine room supply fan
          000010 -  0008             American Bureau of Shipping
                                     Survey - hull modifications.
          000025 -  0001             Hamworthy pumps - sewage
                                     treatment plant
          000038 -  0002             Testron Services - lubetron
          000041 -  0001             Unitor - acetylene
                 -  0003             Unitor - oxygen
          000043 -  0001 - 0007      American United Marine
                                     Equipment

     The applicant claims that all of the above items are
modifications/alterations/additions to the hull and fittings of
the vessel with the exception of Item No. 000001 - Shell damage
repairs, and 000038 - 0002, 000041-0001 and 0003, and 000043 -
0001-0007 which are either spare parts or U.S. owner-supplied
spare parts.

ISSUES:

     1.   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?

     2.   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).

     3.   Whether sufficient evidence is presented to establish
          that certain parts used in the repairs are owner-
          supplied spare parts or U.S. parts which are free under
          the vessel repair statute (19 U.S.C. 1466(h)).

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.

     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).

     Section 1466, states that the vessel must be compelled to
obtain the repairs and/or purchases "to enable it to reach its
port of destination".  Three of the elements necessary under the
statute to qualify for remission after a casualty has been proven
are evidence of unsafe and unseaworthy conditions, the inability
to reach the port of destination without obtaining foreign
repairs, and the performance of only those minimal repairs which
were necessary to enable the ship to reach that port.

     The subject accident occurred while the vessel was at
anchorage.  Vessels cannot be said to be compelled for the safety
and seaworthiness of the vessel to obtain repairs after a
thousand mile voyage subsequent to the "casualty."   Accordingly,
the cost associated with the casualty repair is dutiable.

     Following a thorough review of the evidence submitted in
support of the subject Application for Relief, as well as a
careful analysis of the law and applicable precedents, we have
determined that the materials listed on Keppel Shipyard, invoice
No. 89/E/Y/031A/B, and described below constitute neither
repairs nor equipment, the purchase of which is dutiable under
title 19, United States Code, section 1466 (for a general
discussion of "ships' equipment" see the discussion in, inter
alia, Otte v. United States, 7 C.C.P.A. 166 (1916); United States
v. Admiral Oriental Line et al., 18 C.C.P.A. 137 (T.D. 44359
(1930))).

          Item Nos. Description

          000003 -  0001             Steaming out line
                    0002             Sounding pipe
                    0003             Watertight door
                    0004             Ballast suction lines
                    0005             Butterworth opening
                    0006             Gunwale installation
                    0007             Crude oil washing main line
                    0008             Fuel oil bypass
                    0009             Incinerator Unit
                                     Installation
                    0010             Sewage Treatment Plant
                                     Replacement
                    0011             Smit Bracket
                    0012             Butterworth plates
                    0013             Gunwales Scupper
          000005 -  0012             Engine room supply fan
          000025 -  0001             Hamworthy pumps - sewage
                                     treatment pumps

Since the subject items appear to be of such a nature, and to
have been incorporated into the ship in such a manner, as to
constitute neither a dutiable repair nor a dutiable purchase or
equipment, relief is granted as to those items.

     With regard to the items of cost relating to the items
which are alleged to be spare parts and U.S. owner-supplied
parts, we have found that the Customs administration of duty
assessment issues under section 1466 regarding U.S.-made
materials purchased in the U.S. had for some time been guided by
the terms of Treasury Decision 75-257 (T.D. 75-257).

     The climate with regard to parts shipped abroad from the
United States for foreign installation was transformed on
August 20, 1990, when the President signed Public Law 101-382
which added a new subsection (h) to section 1466.  While this
provision applies by its terms only to foreign-made imported
parts, there is ample reason to extend its effect to U.S.-made
materials as well.  To fail to do so would act to discourage the
use of U.S.-made materials in effecting foreign repairs since
continued linkage of remission provisions of subsection (d)(2)
with the assessment provisions of subsection (a) of section 1466
would obligate operators to pay duty on such materials unless
they were installed by crew or resident labor.  If an article is
claimed to be of U.S. manufacture, there must be proof of its
origin in the form of a bill of sale or domestic invoice.  If an
article is claimed to have been previously entered for
consumption, duty paid by the vessel operator, there must be
proof of this fact in the form of a reference to the consumption
entry number for that previous importation, as well as to the
U.S. port of importation.  If imported articles are purchased
from third parties in the United States, a domestic bill of sale
to the vessel operator must be presented.  Further, with regard
to imported articles, there must be presented a certification
from the owner or master that the vessel at issue is a cargo
vessel and that the imported articles were purchased for
installation aboard the company's vessels.

     If the elements stated above are proven to the satisfaction
of Customs, the cost of foreign labor utilized for installation
of U.S.-made or previously imported articles will be subject to
duty under section 1466 in matters concerning repairs, and only
the cost of qualifying materials used in repairs will be free of
duty.  Modifications will of course continue to be treated as
duty-free, both materials and labor.

     Since the applicant has not submitted the above stated
evidence to sustain that either duty has been paid on or that
certain other owner-supplied parts are of U.S. origin, the cost
of the owner supplied parts is dutiable.  The application is
denied as to the following items:

          000041 -  0001             Unitor - acetylene
                 -  0003             Unitor - oxygen
          000043 -  0001 - 0007      American United Marine
                                     Equipment

Please proceed with liquidation on that basis.

     With regard to Testron Services Invoice No. 9470, all items
are dutiable.

     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 holdings in C.I.E. 429/61, C.S.D. 79-2, and C.S.D. 79-277.

     With regard to the surveys listed on ABS invoice No.
643907, we find them to be nondutiable with the exception of the
Tank Repairs Survey.

     The Contact (shell) Damage Survey listed on ABS invoice No.
CI 1274-S is dutiable.

HOLDING:

     1.   The evidence presented is not sufficient to prove that
          the foreign repairs performed on the subject vessel
          were necessitated by a casualty occurrence, thus
          warranting remission pursuant to 19 U.S.C. 1466.  The
          application is denied as to the casualty.

     2.   The installation of Item Nos. 000003 -0001 through
          0013, 000005 -0012, and 000025 - 0001 constitutes
          modifications/ alterations/additions to the hull and
          fittings rather than repairs.  As such, the cost of
          this work in not dutiable under 19 U.S.C. 1466.

     3.   The evidence is insufficient to sustain that either
          duty has been paid on or that certain spare parts and
          other owner-supplied parts are of U.S. origin.  As
          such, the cost of the subject U. S. spare parts and
          owner supplied parts is dutiable.

     4.   All surveys listed on ABS invoice No. 643907 are non-
          dutiable except the tank Repairs Survey.  The Contact
          (shell) Damage Survey listed on ABS invoice No. CI
          1274-S is dutiable.
                                     Sincerely,




                                     B. James Fritz
                                     Chief
                                     Carrier Rulings Branch