VES-13-18-CO:R:IT:C 112229 GEV
Chief, Technical Branch
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90731
RE: Vessel Repair Entry No. C27-0061918-4; SEA-LAND ENDURANCE
V-115; Casualty; Seaworthiness
Dear Sir:
This is in response to your memorandum dated May 6, 1992,
forwarding a petition for review of ruling 112009. Our ruling on
this matter is set forth below.
FACTS:
The SEA-LAND ENDURANCE is a U.S.-flag vessel owned by The
Connecticut National Bank of Wilmington, Delaware, and operated
by Sea-Land Service, Inc., of Long Beach, California. The
subject vessel had shipyard work performed in Nagasaki, Japan,
during the period of July 5-31, 1991. Subsequent to the
completion of the work the vessel arrived in the United States at
Long Beach, California, on September 1, 1991. A vessel repair
entry covering the work in question was filed on the date of
arrival.
An application for relief, dated October 29, 1991, was filed
requesting remission pursuant to 19 U.S.C. 1466(d)(1). The
applicant stated that on July 2, 1991, as the vessel proceeded to
berth at the Port of Pusan, South Korea, the Chief Engineer and
the First Assistant Engineer felt the vessel surge forward and
heard rumbling sounds. They inspected the machinery spaces,
found no apparent damage and reported the incident to the Master.
The Chief Mate reported that the vessel struck an underwater
object. After the vessel was secured at the dock, water was
found to be slowly rising in the no. 3 port double bottom tank.
- 2 -
Divers found damage to the hull in the bilge strake no. 2
and no. 3 double port ballast tanks. Specifically, six cracks
and a variety of dents were found in the bottom plates from frame
no. 128 to frame no. 164, and dents were found from the port
frame no. 128 bottom plates to the stern. The divers cut the
port side bilge keel which was torn approximately 3 meters long.
The American Bureau of Shipping (ABS) survey and the Posa
Marine Services, Ltd. (Posa) survey submitted with the
application indicate that the owners elected permanent repairs be
made at the first available shipyard at Nagasaki, Japan. Both
the ABS and Posa surveyor recommended that the vessel be
offloaded and drydocked to ascertain the amount of damages and
extent of necessary repairs. The record also contains the vessel
log and a U.S. Coast Guard (USCG) Report of Marine Accident. The
Posa survey indicates that the vessel owner's representative and
the USCG also carried out a preliminary survey of the damages.
Because the record neither contained a certification that the
repairs conducted were necessary for the safety and seaworthiness
of the vessel, nor any USCG documentation permitting the vessel
to proceed to Nagasaki, this office contacted the USCG. The USCG
indicated that a casualty had occurred, and that the vessel was
allowed to proceed to Nagasaki because that was where the vessel
was built and the shipyard was most familiar with the vessel.
At Nagasaki, the ABS and Posa conducted further surveys and
recommended that various repairs be made from frame no. 15 to
frame no. 171. The ABS also conducted a Continuous Survey of the
Machinery and Electrical Equipment and found damage to the engine
room void space, which was considered not to affect the fitness
of the vessel.
By ruling 112009, dated January 13, 1992, Customs denied the
application for relief. This denial was based upon a review of
the record in its entirety and our position at that time that, as
a general proposition, there do not exist degrees of seaworthi-
ness. It was our position that a vessel is either considered
seaworthy or not, and may not be considered seaworthy for one
purpose within the scope of its trade, and not so for another
within the scope of its trade. We noted that to support their
argument that the subject vessel was seaworthy for its Pusan-
Nagasaki voyage but not for a trans-Pacific crossing, the
petitioner relied heavily on the ABS and Posa documentation cited
above. While this documentation appeared indicative of the
opinion of the ABS and Posa on this matter, other than the USCG
Report of Accident, the record contained no USCG documentation of
any kind. This appeared to run contra to sections 2.01-15 and
31.10-25, of the USCG Regulations (46 CFR 2.01-15, 31.10-25).
- 3 -
Accordingly, Customs held the evidence submitted
insufficient to substantiate the claim that the repairs in
question were necessary to secure the safety and seaworthiness of
the vessel to enable her to reach her port of destination.
Rather, it appeared that the owners of the vessel elected to
proceed to Nagasaki for commercial reasons and that the USCG
permitted this movement because that was where the vessel was
built. Remission pursuant to 19 U.S.C. 1466(d)(1) was therefore
denied.
Pursuant to an authorized extension of time, counsel on
behalf of Sea-Land Service, Inc., and by letter dated April 7,
1992, submitted a petition for review of ruling 112009. In
reiterating their claim for remission pursuant to 19 U.S.C.
1466(d)(1), the petitioner submitted the following: (1) a
certification by the Master of the vessel that the repairs were
necessary for the safety and seaworthiness of the vessel to
enable it to reach its port of destination (Attachment 1); a copy
of USCG Form 835 which contained instructions/restrictions
regarding the vessel's proceeding from Pusan to Nagasaki
(Attachment 2); and a copy of the vessel's Certificate of
Documentation evidencing that the vessel was built in Ulsan,
Korea and not Nagasaki, Japan (Attachment 3).
ISSUE:
Whether evidence is presented sufficient to prove that the
foreign repairs performed on the vessel for which relief is
sought, were necessary for its safety and seaworthiness thus
warranting remission pursuant to 19 U.S.C. 1466(d)(1).
LAW AND ANALYSIS:
Title 19, United States Code, section 1466, provides in part
for payment of an ad valorem duty of 50 percent of 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 engage in such trade. Section 1466(d)(1)
provides that the Secretary of the Treasury is authorized to
remit or refund such duties if the owner or master of the vessel
was compelled by stress of weather or other casualty to put into
such 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 noted that section 4.14(c)(3)(i), Customs Regulations
(19 CFR 4.14(c)(3)(i)), provides that "port of destination" means
such port in the United States. This point is not in dispute,
however, it is an embellishment upon section 1466(d)(1) which
sets forth the following three-part test which must be met in
order to qualify for remission:
- 4 -
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.
In addition, if the above requirements are satisfied by
evidence, the remission is restricted to the cost of the minimal
repairs 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)). Repair costs beyond that minimal amount are
not subject to remission. In the case under consideration, the
evidence supports the claim that the subject vessel suffered a
marine casualty. However, the extent of that casualty (i.e.,
parts 2 and 3 of the three-part test set forth above) is the
critical issue upon which this case turns.
All parties concerned are in agreement that the USCG is the
controlling agency that determines questions of a vessel's
fitness to proceed. The procedure by which the USCG renders such
a determination is set forth in sections 2.01-15 and 31.10-25,
USCG Regulations (46 CFR 2.10-15, 31.10-25). The former states
that a vessel may not proceed from one port to another for
repairs unless prior authorization is obtained from the USCG
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. The latter
states that with respect to tank vessels, "No extensive repairs
to the hull or machinery which affect the safety of a vessel
shall be made without the knowledge of the Officer-In-Charge,
Marine Inspection."
Notwithstanding the clear wording of the above USCG
Regulations, specifically 46 CFR 2.10-15 which does not
distinguish between foreign or domestic locations, the OCMI, New
York, N.Y., in a letter dated November 7, 1991, states that "A
formal Permit to Proceed is not normally issued to a vessel
transiting foreign waters because the Certificate of Inspection
(COI) would have to be removed from the vessel which would cause
problems in transiting foreign waters."
In addition, we have subsequently learned from the Chief,
Merchant Vessel Inspection and Documentation Division, USCG
Headquarters, in a letter dated April 14, 1992, that "Vessel
operators often make casualty reports for U.S. flag vessels
damaged overseas verbally to the proper Coast Guard Marine
Inspection Office, followed by the required written report. The
- 5 -
Coast Guard cannot always send a marine inspector to a damaged
vessel overseas on short notice. In such cases, the Coast Guard
may consider the classification society report and the report of
the vessel's master to determine the required temporary repairs
and voyage restrictions."
In regard to the case now under consideration, at the outset
it should be noted that we have reconsidered our position on
"seaworthiness" and are of the opinion that it is a relative term
dependent upon a variety of factors including the condition of
the vessel, the proposed voyage, seasonal changes, etc. The
petitioner has submitted a copy of a USCG Form 835 (evidencing
compliance with section 2.10-15, USCG Regulations, discussed
above), dated July 4, 1991, from the Officer-In-Charge, USCG
Marine Inspection Office, Honolulu, Hawaii (Attachment 2) wherein
it is stated, "Vessel is to proceed directly without cargo, from
the Port of Pusan, Korea, to the Port of Nagasaki, Japan. Vessel
shall sail with no delay between ports. Vessel shall not sail
from the Port of Nagasaki, Japan until repairs have been
completed."
The fact that the vessel was permitted to proceed from Pusan
to Nagasaki on condition that it do so without cargo rebuts the
implication that commercial expediency was a factor in the
decision to repair the vessel in Nagasaki. The vessel's place of
build (Ulsan, Korea as evidenced by the Certificate of
Documentation in Attachment 3, not Nagasaki as the USCG
telephonically informed Customs) is also rebutted as a factor in
the decision to repair the vessel in Nagasaki. Furthermore, the
USCG's refusal to permit the vessel to leave Nagasaki until the
repairs were completed evidences their being necessary for the
safety and seaworthiness of the vessel to reach its port of
destination.
Accordingly, evidence is presented sufficient to prove that
the subject foreign repairs were necessary for the vessel's
safety and seaworthiness thereby warranting remission pursuant to
19 U.S.C. 1466(d)(1).
Parenthetically, we note that in regard to future cases
such as the one now under consideration (i.e., where a vessel
that has been damaged foreign proceeds in a state of disrepair
between two foreign locations prior to its being repaired
foreign, and subsequently sails to its U.S. port of
destination), notwithstanding any practice of verbally reporting
foreign casualties to the USCG and that agency's subsequent
verbal instructions, remission pursuant to 19 U.S.C. 1466(d)(1)
will not be granted in the absence of documentary evidence that
the casualty occurrence was timely reported to the USCG and that
agency, directly or through the medium of a marine surveyor,
permitted the vessel to proceed between two foreign locations in
a damaged condition. The mere submission of a USCG Report of
- 6 -
Marine Accident, Injury or Death (CG-2692), without accompanying
documentation from the appropriate USCG OCMI (New York or
Honolulu) authorizing the vessel to proceed in a damaged
condition, will not suffice for granting remission pursuant to 19
U.S.C. 1466(d)(1).
HOLDING:
The evidence presented is 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 granted.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch