HQ 111572: Petition for Review on Baltimore, Maryland, Vessel Repair Entry No. C13-00176422 dated June 7, 1990, MARJORIE LYKES, Voyage 116. Casualty; owner-supplied spare parts; survey.

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 111572

                        October 30, 1991

VES-13-18 CO:R:IT:C  111572 BEW

CATEGORY:  Carriers

Chief, Residual Liquidation Branch
U.S. Customs Service
6 World Trade Center
New York, New York 10048-0945

RE:  Petition for Review on Baltimore, Maryland, Vessel Repair
     Entry No. C13-00176422 dated June 7, 1990, MARJORIE LYKES,
     Voyage 116.  Casualty; owner-supplied spare parts; survey.

Dear Sir:

     This is in reference to a memorandum from your office which
forwarded a petition for relief filed by Lykes Bros. Steamship
Co., on a partial denial of an application for relief for duties
assessed on repairs made to the vessel MARJORIE LYKES, Voyage
116.

FACTS:

     The petitioner's request for review centers on the cost for
damage to the No. 1 main deck hatch cover, forward section,
alleged to have been suffered by the vessel while at dock, due
to stevedore negligence, and parts and materials used in the
certain other repairs alleged to be U.S. spare parts and/or
materials.

     In a decision dated December 24, 1990, you denied in part
the application on the basis that there was no proof of a
casualty as to the stevedore damage, and that there was no proof
of United States manufacture of the spare parts used in certain
other repairs.  You ruled that all of the subject items were
considered dutiable.

     The petitioner has submitted additional evidence to show
that the vessel was damaged on April 24, 1990, by stevedores
while at dock in Mogadiscio, Republic of Somali.

     The file contains copies of relevant pages from the ship's
log and official log for the dates of April 24 and May 14, 1990.
The log for April 24, 1990, shows that at 01:00 hour, while the

vessel was docked, panels were hit by a sling of bags causing the
brackets to the "A" and "B" panels to break off at the bottom.
The breakage caused the panels to fall forward onto the deck.
The vessel log for May 14, 1990, shows that while the vessel was
docked at Durban, South Africa, the shipyard gang boarded the
vessel at 13:30 hours to repair the No. 1 main deck hatch cover,
forward section which had been damaged on April 24, 1990.

     The file also contains copies of internal documents relating
to the stevedore damage.

     In addition, the petitioner alleges that the parts contained
in Richardson Electronics, Ltd. invoice 0063533, namely,
M13111/M5039 magnetrons, used to make the repairs in item 1, 3CM
radar, listed on the CF 226, were taken from the ship's spares on
board the vessel.  The petitioner has submitted a document dated
July 19, 1990, to show that it purchased replacement parts for
the 3CM radar from a US company.

     With regard to item No. 3, electric motor for No. 1
distiller, the petitioner has submitted a service report from a
communications firm in Mombasa, Kenya, showing that new bearings
were supplied by the vessel to repair the No. 1 distiller.

ISSUES:

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

     2.   Whether sufficient evidence is presented to establish
          that parts used in the repair of the 3 CM radar and the
          electric motor for the No. 1 distiller are owner-
          supplied spare 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.  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)).

     It is clear from the evidence that the vessel suffered
damage to the main No. 1 hatch cover on April 24, 1990, by
stevedores while at dock in Mogadiscio, Republic of Somali.  With
regard to the evidence that the vessel was in need of repairs to
secure her safety and seaworthiness, however, the documents show
that the repairs were not made until May 14, 1990, when the
vessel was in the port of Durban, South Africa.

     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 petitioner has not met a burden of proof that is
provided for by federal regulations.  The controlling agency that
determines questions of fitness to proceed is the USCG which is
not empowered to assign this responsibility to a private
organization (i.e., the ABS, which is a surveying society the
primary purpose of which is to determine whether, for insurance
purposes, a vessel will remain in class).  The USCG regulations,
which have the force and effect of law, require a vessel operator
to prove certain facts to the federal government; that was not
done.

     Accordingly, in the absence of any determination of the USCG
regarding the subject vessel's safety and seaworthiness, and
absent the evidence that would be adduced by the required USCG
determination on the issue of seaworthiness, the petitioner has
failed to substantiate its claim for remission under 1466(d)(1).

     With regard to the items of cost relating to those items
which are alleged to be a part of the ship's spare 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).  That decision provides that when
materials of U.S.-manufacture are purchased by the vessel owner
in the U.S. for installation abroad by foreign labor, the labor
cost alone is subject to duty under section 1466.  When those
same materials are purchased by the owner overseas or purchased
in the U.S. by parties other than the owner, the cost of the
materials themselves (even though of U.S.-manufacture) was also
subject to vessel repair duty.

     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.  The documents
submitted are insufficient to sustain proof that the articles
used in the foreign repairs made to the radar and to the
distiller were spare parts that were previously imported and duty
paid or are US manufacture parts.

     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.

     With regard to the ABS report No. DB12380 covering the
repairs to the No. 1 generator with a "spare ship supplied new
control spring", 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.  Accordingly, we find that the survey is
dutiable.  The petition is denied as to cost for item No. 2, ABS
survey for repairs to the #1 main generator.

HOLDING:

     The evidence presented is not sufficient to prove that the
foreign repairs performed on the subject vessel for which relief
is sought were necessary for its safety and seaworthiness
therefore remission pursuant to 19 U.S.C. 1466(d)(1) is denied.

     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 petition is denied as to these
items.  If, prior to liquidation, the proper certification and/or
proof of prior importation is presented, the said items
considered under section 1466(h) may be considered free of duty.

     The ABS survey was performed to determine the extent of
damage to the No. 1 generator, the cost of the ABS survey is
dutiable.

                                     Sincerely,



                                     B. James Fritz
                                     Chief
                                     Carrier Rulings Branch