HQ 112403: Casualty; Vessel Repair; Fish Net Caught in Propeller; Survey; 19 U.S.C. 1466(d)(1); 19 C.F.R. 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 112403

                                
                        December 16, 1992


VES-13-04-CO:R:IT:C 112403  GFM
                                        
CATEGORY:  Carriers

Deputy Assistant Regional Commissioner
Classification and Value Division
ATTN:  Regional Vessel Repair Liquidation Unit
New York  NY  10048-0945

RE:  Casualty; Vessel Repair; Fish Net Caught in Propeller;
     Survey; 19 U.S.C.   1466(d)(1); 19 C.F.R.   4.14. 

     Vessel Name:  S.S. LESLIE LYKES
     Vessel Repair Entry Number:  514-3004727-7   
     Date of Arrival:  May 11, 1992
     Port of Arrival:  Newark  NJ

Dear Sir:

     This letter is in response to your memorandum of July 31,
1992, which forwards for our review the above referenced
application for relief from the assessment of vessel repair
duties.

FACTS:

     The record reflects that while anchored at Damman, Saudi
Arabia, during March of 1992, the above referenced vessel was
damaged when the net of an unidentified fishing vessel became
entangled in the subject vessel's propeller.  An American Bureau
of Shipping damage survey was performed pursuant to this event. 
Applicant seeks relief from the assessment of vessel repair
duties on these items on the ground that they were the result of
a casualty occurrence.

ISSUE:

     Whether the repair operations undertaken are entitled to
duty remission under 19 U.S.C.   1466(d)(1) on the ground that
they were the result of a casualty occurrence.
LAW AND ANALYSIS:

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

     The statute provides for the remission of duties in those
instances where good and sufficient evidence is furnished to show
that foreign repairs were compelled by "stress of weather or
other casualty" and were necessary to secure the safety and
seaworthiness of the vessel to enable her to reach her port of
destination. 19 U.S.C.   1466(d)(1) (1988).  The Customs
regulations issued under the authority of this statute are found
in 19 C.F.R.   4.14 (1991).  The term "casualty", as it is used
in the statute, has been interpreted as something, like stress of
weather, that comes with unexpected force or violence, such as
fire, explosion, or collision.  Dollar Steamship Lines, Inc. v.
United States, 5 Cust. Ct. 23, 28-29, C.D. 362 (1940).  In the
absence of evidence of such a casualty causing event, the Customs
Service considers such repairs to have been necessitated by
normal wear and tear.  C.S.D. 89-95, 23 Cust. B. & Dec., No. 43,
4, 5 (1989).

     In the present case, the applicant presents three items for
our consideration:

REMOVAL OF FISH NET FROM PROPELLER
     Zamil Operations and Management, Co. 
     Invoice 7721 March 22, 1992......................$ 11,340.00

PROPELLER DAMAGE SURVEY
     American Bureau of Shipping, Co.
     Invoice 160419-03590 March 26, 1992..............$  5,382.36

     With regard to these two items, the Customs Service has held
that, in certain situations, the entanglement of another vessel's
netting within a vessel's propeller mechanism may properly be
considered a casualty occurrence.  The case before us is indeed
such a situation.  The facts indicate that the subject vessel was
anchored and in no other respect negligent.  A passing fishing
vessel allowed its netting to drift, which in turn allowed the
netting to become entangled in the subject vessel's propeller
mechanism.  Such facts constitute a clear example of casualty
occurrence which warrants remission of vessel repair duties for
repairs effected pursuant thereto.  We note that charges for the
propeller damage survey are also remissible due to the fact that
they were necessitated by the same casualty occurrence.  Thus,
the combined cost of these items ($ 16,722.36) is non-dutiable.  

COFFIN FEED PUMP REPAIR
     Marship Engineering, Co.
     Invoice item 42219 April 15, 1992................$ 37,021.00

     It is the applicant's apparent contention that the charges
for this item should be held non-dutiable in accordance with 
19 U.S.C.   1466(d)(2).  According to Section 1466(d)(2) and
implementing regulations, remission or refund of duties is
authorized if good and sufficient evidence is furnished showing
that the equipment, equipment parts, repair parts or materials
used on the vessel were manufactured or produced in the United
States and purchased by the owner of the vessel in the United
States, and the labor necessary to install such equipment or to
make such repairs was performed by residents of the United States
or by members of the regular crew of the vessel.

     The Customs and Trade Act of 1990 (Pub. L. 101-382), which
amends 19 U.S.C.   1466 by creating subsection (h), exempts from
duty under the statute, the cost of spare repair parts or
materials which have been previously imported into the United
States as commodities with applicable duty paid under the
Harmonized Tariff Schedule of the United States (HTSUS).  The
amendment specifies that the vessel owner or master must provide
a certification that the materials in question were imported with
the intent that they be installed on a cargo vessel documented
for, and engaged in, the foreign or coasting trade.  

     The certification required by 19 U.S.C.   1466(h)(2) as to
the vessel's documentation (foreign or coasting trades) and
service must be made by the master on the vessel repair entry (CF
226) at the time of arrival.  The fact of payment of duty under
the HTSUS for a particular part must be evidenced as follows:  In
cases in which the vessel operator or a related party has acted
as the importer of foreign materials, or where materials were
imported at the request of the vessel operator for later use by
the operator, the complete vessel repair entry will identify the
port of entry and the consumption entry number for each part
installed on the ship which has not previously been entered on a
CF 226.  

     In cases in which the vessel operator has purchased imported
materials from a third party in the United States, a bill of sale
for the materials shall constitute sufficient proof of prior
importation and HTSUS duty payment.  This evidence of proof of
importation and payment of duty must be presented to escape duty
and any other applicable consequences.

     In addition, certification must be included in the CF 226 or
an accompanying document by a person with direct knowledge of the
fact that an article was imported for the purpose of either then-
existing or intended future installation on a company's cargo 
vessels.  Ordinarily, the vessel's master would not have direct
knowledge of that fact, and an agent may also be without such
knowledge.  

     Customs has in the past linked this duty remission provision
to the duty assessment provision in subsection (a) of the
statute.  In face of argument to the contrary, we have held that
a two-part test must be met in order for remission of duty to be
granted:  First, the article must be of U.S. manufacture; and,
second, it must be installed by a U.S.-resident or regular vessel
crew labor.  The reason for this position is that section 
(d)(2) refers to "such equipments or parts...", etc., without any
other logical placement for the word "such" occurring in that
subsection. We inferred that "such" articles must refer to those
installed under subsection (a), absent any other reasonable
predication.  The new amendment puts this issue to rest; it is
clear that as concerns foreign-made parts imported for
consumption and then installed on U.S. vessels abroad, the labor
required for their installation is separately dutiable.  A part
may now be considered exempt from vessel repair duty albeit the
foreign cost of labor is dutiable.  

     Uniform treatment will be accorded to parts sent from the
United States for use in vessel repairs abroad, regardless of
whether they are proven to be produced in the U.S., or have been
proven to have been imported and entered for consumption with
duty paid.  In both cases, the cost of the materials is duty
exempt and only the cost of foreign labor necessary to install
them is subject to duty.  Crew member or U.S.-resident labor
continues to be free of duty when warranted. 

     The effective date of the most recent amendment makes the
section applicable to any entry made before the date of enactment
of the Act that is not "finally liquidated" (i.e., for which a
timely protest was filed or court action initiated) on the date
of enactment of this Act, and any entry made--

          (A) on or after the date of enactment of this 
              Act, and       
          (B) on or before December 31, 1992.

     Since the subject entry has not been "finally liquidated" as
noted above, the new section 1466(h) is applicable to this entry
as it relates to spare parts.

     With regard to the item under consideration, the provided
documentation fails to conclusively establish either the origin
of the parts used in the repairs or the relationship among the
various parties involved in their sale.  Accordingly, unless and


until evidence is presented which reveals such information in a
clear and unambiguous manner, the cost of this item ($ 37,021.00)
is fully dutiable.

HOLDING:

     After thorough review of the evidence presented, and as
detailed in the Law and Analysis portion of this ruling, the
application for relief is granted in part and denied in part.

                                        Sincerely,




                                        Acting Chief
                                        Carrier Rulings Branch