VES-13-18:CO:R:IT:C 111883 LLB
Chief, Technical Branch
Commercial Operations Division
Pacific Region
One World Trade Center
Long Beach, California 90831
RE: Vessel repair; Casualty; Underwater object; Vessel BEACON
TWO; Vessel repair entry number 203-0004131-4, Port of
arrival, Bellingham, Washington
Dear Sir:
Reference is made to your memorandum of August 21, 1991,
which forwards for our consideration the Application for Relief
filed in regard to the above-captioned vessel repair entry.
FACTS:
The vessel BEACON TWO is documented as a vessel of the
United States with a dual endorsement for coastwise trade and
pleasure. While in the Strait of Georgia off British Columbia,
Canada, the vessel struck an underwater object which caused on
engine to become disabled and the other to run poorly. The
vessel was taken to the nearest repair facility which was in
Sidney, British Columbia. Upon maneuvering for docking at the
repair facility, the vessel was scraped and damaged. Upon being
hauled, it was discovered that the collision incident had allowed
water to enter the fuel lines. The damage work reported includes
charges to haul the vessel, repair the scraped hull sides and
paint the vessel, remove and repair the propellers, remove and
refit engine couplings, replace a damaged dodger panel and paint
it to match the hull, and re-secure a quarter guard swim grid.
Non-damage work included renewal of anti-fouling paint and zinc
anodes, measuring wear to the cutlass bearing, and repainting the
vessel's name and registration.
ISSUE:
Whether sufficient evidence is presented to substantiate
that the vessel suffered a casualty occurrence which will permit
refund or remission of vessel repair duties.
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.
Title 19, United States Code, subsection 1466(d)(1), states
that the Secretary of the Treasury is authorized to remit or
refund such duties if the owner or master furnishes good and
sufficient evidence that the vessel was compelled 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 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. See Customs
Ruling Letter 106159 LLB (9-8-83).
In the case of United States v. George Hall Coal Co., 134 F.
1003 (1905), it was held that any of various types of expenses
associated with foreign shipyard operations are classifiably free
from the assessment of duty, regardless of the character of the
overall shipyard work (repair vs. modification). The case found
that the expense of drydocking a vessel is not a repair cost.
Drydocking is not an isolated expense, and is commonly associated
with numerous others. These may include, but are not limited to,
sea water supply (for firefighting capability), fresh water
supply, hose hook-up and disconnection, fire watch services,
shore power hook-up, etc.
While painting operations are for the most part dutiable,
painting which is ornamental in the sense that it is not
performed for the preservation of the vessel and cannot,
therefore, be considered a maintenance operation, is considered
non-dutiable (C.D. 1430 (41 CCPA 57, C.A.D. 529)).
In the present matter we find that repainting the vessel's
name and registration is a non-dutiable ornamental painting
operation. We find that the repairs performed on the engine
couplings and the propellers was related to the striking of an
underwater object, a demonstrated casualty occurrence. The
remaining operations previously detailed are in the nature of
dutiable repairs and maintenance operations, with the exception
of measuring were on the cutlass bearings. This is in the nature
of an inspection not associated with any repair operation and is,
therefore, non-dutiable.
HOLDING:
Following a thorough review of the evidence as well as an
analysis of the applicable law and precedents, we have determined
to allow the Application for Relief in part and to deny it in
part, as specified in the Law and Analysis portion of this
ruling.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch