VES-13-18-CO:R:IT:C 111474 GEV
Edward L. Merrigan, Esq.
6000 Connecticut Avenue, N.W.
Washington, D.C. 20815-4238
RE: Policy Regarding 19 U.S.C. 1466(h); Spare Parts; Retroactive
Effect on Pending Customs Cases
Dear Mr. Merrigan:
This is in response to your letter of January 14, 1991,
referencing our letter to you dated December 21, 1990 (111280
LLB) regarding Customs interpretation and implementation of the
newly-enacted Public Law 101-382 (section 484E). There are two
matters in our letter to which you take exception and you
therefore request that we give them further consideration.
FACTS:
On August 20, 1990, the President signed into law Pub. L.
101-382, section 484E of which amends section 466, Tariff Act of
1930, as amended (19 U.S.C. 1466), by adding a new paragraph (h)
to the statute (19 U.S.C. 1466(h)).
The new section 1466(h) provides that:
(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,
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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.
Based upon the language of these new provisions of law, you
provided advice to your clients, outlined in your letter to us
dated August 28, 1990, and asked that we determine whether the
Customs Service is in accord with that advice. By letter dated
December 21, 1990 (111280 LLB) we provided you with the comments
you requested. You now take exception to the following two
matters addressed in our December 21 letter.
The first matter of concern is the spare parts exemption.
You reference the second paragraph on page 4 of our letter of
December 21 which states in part that "...the cost of imported
parts and materials upon which duties have previously been paid
under the Harmonized Tariff Schedule of the United States will
not be subject to vessel repair duties." While we are both in
accord with this basic premise, you take exception to the last
sentence of the same paragraph which states in part that, "This
benefit...is subject to proof of prior importation and duty
payment." (emphasis added)
You state that this limitation is unsustainable because it
fails to take into account the Senate Finance Committee Report
(S. Rept. 101-252) which is reflected in the wording of section
1466(h) which states that the duty exemption becomes operative to
those parts which are duty-paid under the appropriate commodity
classification of the Harmonized Tariff Schedule of the United
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States "upon first entry into the United States of each such
spare part purchased in, or imported from, a foreign country."
(emphasis added)
It is apparent that the points of contention/confusion are
the terms "prior importation" and "first entry." This
distinction, however, is merely a question of semantics.
Obviously, a foreign part being entered for the first time is not
susceptible of proof of prior importation. We agree with your
statement that spare parts purchased by a U.S.-flag vessel during
a foreign voyage are exempt under 19 U.S.C. 1466(h) if duty is
paid on those parts under the appropriate HTSUSA commodity
classification "at the time of their first entry into the United
States" on board that vessel provided the parts are not installed
on that vessel. We also agree that spare parts previously
imported into the United States by air or other vessel and later
placed aboard a U.S.-flag vessel for use, are likewise exempt
under 19 U.S.C. 1466(h) if duty under the appropriate HTSUSA
commodity classification was paid "upon first entry into the
United States" by air or aboard the first mentioned vessel.
The second point with which you take exception is in regard
to the retroactive impact of 19 U.S.C. 1466(h) on pending Customs
cases involving entries made before the August 20, 1990, date of
enactment. Specifically, you object to the last paragraph of our
December 21, 1990, letter which states:
"The final statement is also generally correct. The
benefits of the new law will be applied to all entries
which were not finally liquidated on or before August 20,
1990. Exception is taken, however, to the definition of
the phrase "finally liquidated" appearing in the incoming
request for ruling. It is stated that an entry would not
be considered finally liquidated if "...duty thereon
under 19 U.S.C. 1466 remained 'unpaid' because of pending
administrative or judicial proceedings." Customs does not
consider that payment of final liquidation amount bears any
relation to the liquidation of an entry. Under the Customs
Regulations (19 C.F.R. 159.9(c)), except for entries
liquidated by operation of law, entries are considered to
be liquidated on the date stamped on the bulletin notice of
liquidation, which coincides with the date that notice is
posted or lodged in the Customhouse." (Emphasis Supplied).
In noting your objection to our position as stated above,
you reiterate the position on this matter as espoused in your
letter of August 28, 1990; that is, the term "liquidated" as used
in 19 U.S.C. 1466(h) is intended to mean "finally liquidated" and
an entry is not "finally liquidated" if it is still the subject
of administrative or judicial proceedings. In support of this
position you cite the following: a statement of Senator Breaux
to this effect (Congressional Record, April 20, 1990, p. S4715);
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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 further review of this matter we are in accord with
the position as stated by Senator Breaux that the new amendments
to section 1466 "...are intended to apply to any entry made prior
to the date of enactment of [this Act] which is not finally
liquidated when the bill becomes law." Accordingly, for purposes
of the retroactive impact of new section 1466(h) the benefits of
said legislation will inure to those entries which were not
finally liquidated (i.e., for which no timely protest was filed
or court action initiated) on or before August 20, 1990.
Sincerely,
Harvey B. Fox
Director, Office of Regulations
and Rulings