VES-13-18 CO:R:IT:C 111554 JBW
Deputy Assistant Regional Commissioner
Commercial Operations
c/o Regional Commissioner
New Orleans, LA 70130-2341
RE: Vessel Repair; Casualty; Explosion; Modification; PRIDE OF
TEXAS, Voyage 41; Entry No. VR-C20-0012282-3; 19 U.S.C.
1466; 19 C.F.R. 4.14.
Dear Sir:
This letter is in reference to your memorandum dated
February 21, 1991, which forwards for our review the application
for relief filed in conjunction with the above-referenced vessel
repair entry.
FACTS:
The record reflects that the subject vessel, the PRIDE OF
TEXAS, arrived at the port of Lake Charles, Louisiana, on
September 22, 1990. Vessel repair entry number VR-C20-0012282-3,
marked incomplete, was filed indicating repairs in Alexandria,
Egypt, and Lisbon, Portugal.
The subject vessel last departed the United States on April
18, 1990, bound for Alexandria, Egypt. The vessel arrived in
Alexandria on May 9, 1990, for discharge of its cargo. On May
18, 1990, the vessel proceeded to Lisbon, Portugal, for "routine
shipyard work." The vessel arrived in Lisbon on May 25, 1990,
and departed Lisbon on June 6, 1990. After leaving Lisbon, the
vessel developed engine failure that required it to return to
Lisbon. Specifically, the master's log and the engineer's log
both indicate that the vessel experienced an "explosion" of the
crank case of the starboard main engine. From the reports of the
engineer and surveyors, the number 1 piston assembly failed. The
piston skirt failed, which in turn caused a misalignment of the
piston. This misalignment of the piston caused damage to the
internals of the engine when the piston separated from the piston
crown and skirt. The applicant contends that the damage is
related to undetected damage from an earlier engine failure. See
Headquarters Ruling Letter 111169, dated October 12, 1990
(pending in this office as a petition for review). The
applicant also seeks relief for work claimed to be a modification
to the vessel.
ISSUES:
(1) Whether the evidence submitted demonstrates that damage
to the starboard main engine resulted from a casualty and is
therefore subject to remission under 19 U.S.C. 1466(d)(1).
(2) Whether certain work performed in the Lisnave Shipyard
resulted in modifications to the vessel and is therefore not
subject to duty under 19 U.S.C. 1466.
LAW AND ANALYSIS:
Title 19, United States Code, section 1466, 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 foreign or
coastwise trade, or vessels intended to engage in such trade.
The statute provides for the remission of the above 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).
The Customs Service has interpreted the term casualty, as it
is used in the vessel repair statute, to denote an occurrence
that, like stress of weather, comes with unexpected force or
violence, such as fire, explosion, or collision. See Dollar
Steamship Lines, Inc. v. United States, 5 Cust. Ct. 23, 29, C.D.
362 (1940). An explosion, however, does not result in an
automatic determination of casualty. The Customs Service assumes
that such an occurrence is a casualty unless the cause of the
occurrence is attributable to normal wear and tear or to improper
maintenance. C.S.D. 79-283, 13 Cust. B. & Dec. 44, 45 (1979);
T.D. 55670(2), 97 Treas. Dec. 524 (1962).
The damage in this case resulted from improper maintenance.
The applicant states that the present engine failure can be
linked to unchecked residual damage resulting from the February,
1990, breakdown. This statement implies that the February,
1990, repairs were improperly performed; the engine failure
therefore cannot be characterized as resulting from a casualty.
The cost associated with the damage to the starboard main engine
are therefore not subject to remission.
The applicant also seeks relief for a "speed log
modification." In its application of the vessel repair statute,
the Customs Service has held that modifications, alterations, or
additions to the hull and fittings of a vessel are not subject to
vessel repair duties. Over the course of years, the
identification of work constituting modifications on the one hand
and repairs on the other has evolved from judicial and
administrative precedent. In considering whether an operation
has resulted in a modification that 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, 18 C.C.P.A. 137 (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. This element
should not be given undue weight in view of the fact
that vessel components must be welded or otherwise
"permanently attached" to the ship as a result of
constant pitching and rolling. In addition, some
items, the cost of which is clearly dutiable, interact
with other vessel components resulting in the need,
possibly for that purpose alone, for a fixed and stable
juxtaposition of vessel parts. It follows that a
"permanent attachment" takes place that does not
necessarily involve a modification to the hull and
fittings.
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 constitutes a new design feature
and does not merely replace a part, fitting, or
structure that is performing a similar function.
4. Whether an item under consideration provides an
improvement or enhancement in 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.
T.D. 34150, 26 Treas. Dec. 183, 184 (1914)(quoted with approval
in Admiral Oriental).
The Customs Service has held that the decision in each case
as to whether an installation constitutes a nondutiable addition
to the hull and fittings of the vessel depends to a great extent
on the detail and accuracy of the drawings and invoice
descriptions of the actual work performed. Even if an article is
considered to be part of the hull and fittings of a vessel, the
repair of that article, or the replacement of a worn part of the
hull and fittings, is subject to vessel repair duties.
The applicant seeks relief for the replacement of the
existing transducer in the speed log. The applicant does not
offer an explanation as to why this operation is being performed
or whether the new transducer constitutes a new design feature.
It simply states that the existing transducer was replaced by a
new one. This operation does not constitute a modification.
HOLDINGS:
(1) The cost associated with the damage to the starboard
main engine are not subject to remission under 19 U.S.C.
1466(d)(1).
(2) The replacement of the existing transducer in the speed
log does not constitute a modification, and the cost of the
replacement is subject to duty.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch