VES-13-18-CO:R:IT:C 111486 LLB
Deputy Assistant Regional Commissioner
Commercial Operations Division
423 Canal Street
New Orleans, Louisiana 70130-2341
RE: Vessel Repair; Entry Number C15-0008525-8; Protest Number
1501-90-000062; Date of Liquidation; Supplemental Petition;
LASH Barges; Mother Vessel; S/S GREEN VALLEY, V-33
Dear Madam:
Reference is made to your memorandum of January 15, 1991,
forwarding a protest, executed on Customs Form 19, from the
operators of the above-named vessel (Protest No. 1501-90-000062).
FACTS:
In August, 1984, the Central Gulf Lines LASH vessel, the SS
GREEN VALLEY, and its complement of LASH barges were chartered by
the Navy's Military Sealift Command (MSC) for a period of two to
four years of continuous military service at Diego Garcia in the
Indian Ocean. Under the charter, all of the vessels were to be
delivered at Subic Bay in the Philippines, with laydays for the
barges specified as September 10-15, 1984, and for the GREEN
VALLEY as September 24-October 1, 1984.
At the time the charter was awarded by MSC in August, 1984,
the GREEN VALLEY was in Egypt, having just completed a commercial
voyage from the United States. All of the LASH barges required
by the charter were likewise located aboard the GREEN VALLEY
overseas. Under the terms of the charter, the GREEN VALLEY and
each barge were subject to inspection upon delivery, and each had
to be in condition to "remain on station for four years", and to
be able "to operate without further inspection for at least two
years from delivery".
Since the GREEN VALLEY and all of the required LASH barges
were overseas and located far from the United States when the
charter was awarded by MSC in August, 1984, it was impossible for
Central Gulf to return them to this country to obtain the
services and equipment required by the charter and still arrive
at Subic Bay in the Philippines by the September/October 1
delivery dates mandated by the charter. Consequently, Central
Gulf had to comply with the Charter's requirements by procuring
all of the prescribed services, alterations, refittings and
equipment in foreign countries while the vessels were en route
from their overseas locations in mid-August, 1984, to the Navy's
designated delivery station in the Philippines.
Central Gulf was thus able to meet all of the charter
requirements and still deliver the GREEN VALLEY and its 73 LASH
barges to the Navy at Subic Bay on time in 1984. There, the
vessels were accepted by the Navy and they continuously operated
under the MSC charter at Diego Garcia in the Indian Ocean for a
period of four (4) years. During that entire period, none of the
vessels returned to the United States. However, the MSC charter
terminated, and on October 24, 1988, the GREEN VALLEY and its
barges reentered this country at Sunny Point, North Carolina.
The operations connected with this vessel repair entry have
twice been before Headquarters. The Application for Relief was
considered in case number 110184 (August 10, 1989), and the
Petition for Review was decided in case number 110799 (June 21,
1990). The matters now before Customs Headquarters on Protest
concern broad categories of dutiability rather than questions
regarding particular repair operations.
ISSUE:
The specific issues presented for resolution are:
1. Whether the posting of the bulletin notice of liquidation
equates with the entry being "finally liquidated" within the
contemplation of the newly amended vessel repair statute (19
U.S.C. 1466(h)), as expressed in the legislative history.
2. Whether an exemption from duty is justified in the case of
foreign shipyard operations being performed pursuant to the
orders and specifications of the Military Sealift Command.
3. Whether the filing of a Supplemental Petition for Review
covering issues other than remission of duty is problematic.
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.
On August 20, 1990, the President signed into law the
Customs and Trade Act of 1990 (Pub. L. 101-382), section 484E of
which amends the vessel repair statute by adding a new subsection
(h). Subsection (h) has two elements, which are as follows:
(h) The duty imposed by subsection (a) of this section shall
not apply to--
(1) the cost of any equipment, or any part of
equipment, purchased for, or the repair parts
or materials to be used, or the expense of
repairs made in a foreign country with
respect to, LASH (Lighter Aboard Ship) barges
documented under the laws of the United
States and utilized as cargo containers, or
(2) the cost of spare repair parts or
materials (other than nets or nettings) which
the owner or master of the vessel certifies
are intended for use aboard a cargo vessel,
documented under the laws of the United
States and engaged in the foreign or coasting
trade, for installation or use on such
vessel, as needed, in the United States, at
sea, or in a foreign country, but only if
duty is paid under appropriate commodity
classifications of the Harmonized Tariff
Schedule of the United States upon first
entry into the United States of each such
spare part purchased in, or imported from, a
foreign country.
The effective date of the amendment is stated as follows:
Effective Date.--The amendment made by this
section shall apply to--
(1) any entry made before the date of
enactment of this Act that is not liquidated
on the date of enactment of this Act, and
(2) any entry made--
(A) on or after the date of enactment of this
Act, and
(B) on or before December 31, 1992.
In a ruling dated March 6, 1991 (Ruling Letter 111474,
addressed to this same protestant), the issue of the finality of
liquidation under the newly-amended vessel repair statute was
addressed. The ruling considered the retroactive impact of 19
U.S.C. 1466(h) on Customs cases involving entries made before the
August 20, 1990, date of enactment. The Headquarters decision
found that the term "liquidated" as used in 19 U.S.C. 1466(h) is
intended to mean "finally liquidated" and that an entry is not
"finally liquidated" if it is still the subject of administrative
or judicial proceedings. Support for this position is found in
the following: a statement from Senator Breaux concerning the
amended statute (Congressional Record, April 20, 1990, p.
S4715); section 514(a) of the Tariff Act of 1930 (19 U.S.C.
1514(a)) which provides, in part, that the liquidation of an
entry shall be final unless a protest is timely filed, or if a
court action is filed to contest denial of a protest; and Hambro
Automotive Corp. v. United States, 603 F.2d 850, 853 (CCPA,
1979); United States v. Desiree Intern USA Ltd., 497 F.Supp. 264,
265 (D.C. N.Y., 1980); and Computime, Inc. v. United States, 622
F.Supp. 1083 (CIT 1985).
Upon full review of the matter we note the position stated
by Senator Breaux, that being that the amendments to section 1466
"...are intended to apply to any entry made prior to the date of
enactment of [the Act] which is not finally liquidated when the
bill becomes law." Accordingly, for purposes of the retroactive
impact of the new section 1466(h), the benefits of the
legislation are extended to those entries which were not finally
liquidated (i.e., for which administrative or court action was
on-going) on or before August 20, 1990. Such is the case with
the present matter.
With regard to the issue of the dutiability of operations
required to be performed by the Military Sealift Command, Customs
has long held that expenses incurred as the result of
requirements imposed by a governmental entity are not remissible
for that reason alone. Absent some independent grounds
justifying remission, agency-ordered operations are dutiable
under the statute. (See Customs Service Decision 79-272, ruling
letter 103712 dated December 27, 1978). Accordingly, the claim
of MSC-ordered operations advanced in this matter does not
justify a finding of non-dutiability.
With regard to the final issue, that concerning the filing
of a Supplemental Petition for Review, it was the position of
Customs as articulated in Customs Ruling Letters 110027 of
September 29, 1989, and 109671 of September 18, 1988, that a
bifurcated procedure existed for final administrative appeals of
vessel repair decisions, depending upon whether a particular
appeal involved classification issues (expenses incurred were not
for repairs or equipment purchases under section 1466(a)), or
whether remission issues were the subject of appeal (those
matters arising under section 1466(d)). It was our position that
classification issues were subject to Protest, and that the
proper filing for the appeal of remission issues was a
Supplemental Petition for Review. The Court in Penrod Drilling
Company v. United States, 727 F. Supp. 1463 (1989), ended
distinctions between the issues of classification and remission
so far as the question of appeal format is concerned by holding
that all matters arising under section 1466 may be protested. In
the present matter, the issues raised in the Supplemental
Petition for Review may merely be made a part of the Protest
under consideration.
HOLDING:
Following careful review, we have determined that the
Protest is allowed in part and denied in part, and will be
reliquidated in accord with the findings specified in the Law and
Analysis section of this decision.
Sincerely,
Stuart P. Seidel
Director, International Trade
Compliance Division