VES-13-18-CO:R:P:C 110759 KVS
Chief
Residual Liquidation and Drawback Branch
ATTN: Vessel Repair Liquidation Unit
6 World Trade Center
New York, New York 10048-0945
RE: Vessel: ADM WM M CALLAGHAN; Claim # 1001-9-202453
Vessel Repair Entries:
1001-79-388116-7 5/13/79
1001-80-786181-1 3/10/80
1001-80-790365-6 4/21/80
1001-81-103050-2 12/27/80
1001-81-514752-7 5/6/81
1001-81-514811-5 5/23/81
1001-81-515071-8 7/30/81
Dear Sir:
This is in response to your memorandum of December 22, 1989,
which transmits for our consideration a request for
reconsideration regarding the seven vessel repair entries listed
above. Our findings are set forth below.
FACTS:
The ADM WM M CALLAGHAN (hereinafter abbreviated as
CALLAGHAN) is owned by Sunexport Holding Corp. By contract
number MST-TC-253(X), the CALLAGHAN was time chartered to the
Department of the Navy, Military Sealift Command, for a term of
20 years (upon the exercise of all time options) commencing
December 19, 1967.
From May 3, 1979 to July 24, 1981, while under time charter
to the Military Sealift Command, the vessel underwent various
repair operations in Bremerhaven, West Germany and entries were
submitted for these repairs. By telex dated June 11, 1981, the
liquidation of the entries listing those repairs was suspended.
By telex dated August 24, 1983, the suspension of those entries
was lifted and the entries were finally liquidated on November 4,
1983. Upon liquidation, the bills for duty were sent to the
Counsel for the Military Sealift Command as per the August 24,
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1983, telex. Subsequently, a telex dated April 31, 1984 was
issued directing that all bills for time chartered vessels be
sent directly to the owner of the vessel.
In the case before us, the petitioner claims that the
CALLAGHAN was under the complete control of the U.S. Navy. It is
also alleged that the vessel is experimental in nature due to the
installation of a gas turbine engine, that artificial stress
conditions were imposed on the vessel and that because of these
factors, the repairs to the vessel are not ordinary. It is
further alleged that the repairs were emergency in nature and
necessary for the safety of the vessel and that the repaired
equipment was serviced in the U.S. six months prior to the
emergency repair.
ISSUE:
Whether the repairs performed on the subject vessel for
which the petitioner seeks relief are dutiable under 19 U.S.C.
1466.
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.
Although 19 U.S.C. 1466(d) provides for the remission of
duty in certain circumstances, we know of no provision that would
permit remission of duty by reason of the "experimental" nature
of a vessel. Such an exemption would necessarily have to be
created by legislative action. In the absence of such action, we
must examine the petitioner's claim in light of the existing
statutory exemptions.
However, 19 U.S.C. 1466 (d)(1) does provides that the
Secretary of the Treasury is authorized to remit or refund vessel
repair duties if the owner or master furnishes good and
sufficient evidence that the vessel was compelled, by stress of
weather or other casualty, to put into a foreign port and make
repairs to secure the safety and seaworthiness of the vessel to
enable her to reach her port of destination.
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, explosion or
collision (Dollar Steamship Lines, Inc. v. United States, 5 Cust.
Ct. 28-29, C.D. 362 (1940). In this sense, a "casualty" arises
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from an identifiable event of some sort. In the absence of
evidence from such a casualty event, we must consider the repair
to have been necessitated by normal wear and tear (see Customs
Letter Ruling 106159 LLB (dated 9/8/83)).
Section 4.14(c)(3)(i), Customs Regulations (19 CFR
4.14(c)(3)(i)), provides that the term "casualty" includes a
part's failure to function if satisfactory evidence shows that
the specific part was repaired or serviced immediately before
starting the voyage from the United States and that the part
failed to function within six months of such repair or servicing.
While the petitioner claims that the repairs to the
CALLAGHAN were emergency repairs and that the repaired parts were
serviced in the United States six months prior to the foreign
repair, the statute and corresponding regulations provide for
remission of duties only upon the submission of "good and
sufficient evidence" of such casualty and U.S. servicing. The
petitioner, despite requests from the Customs Service, has not
produced evidence in support of its claim. Since the
requirements allowing the remission of duty have not been met, we
find the costs to be dutiable.
Having determined that vessel repair duties are due, we now
turn to the issue of the party responsible for the payment of
those duties. It is the petitioner's contention that it is not
responsible for the duty since the vessel was completely under
the control of the Department of the Navy, Military Sealift
Command.
We have held that under an MSC bareboat charter, the
charterer retains responsibility for the payment of duties. When
a vessel is chartered under a demise or time charter, the vessel
owner retains responsibility for the payment of vessel repair
duties (see Customs Letter Rulings 109916 KMF (dated 2/2/1989);
109260 LLB (dated 6/15/88); 109347 (dated 2/12/88)).
An examination of the contract involved in this case reveals
that Contract no. MST-TC-253(X) states, on Attachment A,
"Contract for: TIME CHARTER OF VESSEL FOR SPECIFIED TIME". The
contract, then, clearly evidences in unambiguous terms the
nature of the agreement created. Accordingly, the vessel owner
remains liable for the vessel repair duties assessed.
HOLDING:
1) Without good and sufficient evidence establishing that
vessel repairs were occasioned by casualty or that the parts
requiring repair were serviced or repaired in the United States
immediately before the voyage and that the part failed within 6
months of such servicing, the foreign repairs performed on the
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subject vessel are dutiable under 19 U.S.C. 1466.
2) When a vessel is chartered under a time charter
agreement, the vessel owner, not the charterer, remains liable
for Customs duties.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch