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10 • MarineNews • March, 2005 Legal Beat By Jeanne M. Grasso and Charles T. Blocksidge Trade and Technical Corrections Act of 2004 (the Act), signed into law on December 3, 2004, contains a provision that reverses a final rule, issued by the Bureau of Customs and Border Protection (CBP) in 2001 (Final Rule; 66 Fed. Reg. 16392 (March 26, 2001)), that subjected repairs made to U.S.-flag vessels while on the high seas to declaration, entry, and duty requirements. Simply put, the Act expands the list of items that are exempt from the 50 percent ad valorem duty requirement contained in the Vessel Repair Statute (19 U.S.C. § 1466) and, as a result, could possibly save owners and operators of U.S.-flag vessels large sums of money. The Vessel Repair Statute requires the payment of a 50 percent ad volorem duty on the cost of equipment, materials, and parts purchased for, or the expenses of repairs made to, a U.S.-flag vessel in a foreign country. The purpose of the Ves- sel Repair Statute is to protect U.S. ship- yards from foreign competition by dis- couraging vessel owners/operators from taking their vessels abroad for the purpose of obtaining less expensive foreign repairs. Generally, the owner, operator, or master of a U.S. flag vessel must, upon the vessel's first arrival in a U.S. port, declare all equipment, parts, or materials purchased for, and all repairs made to, the vessel outside the United States and, with- in ten calendar days after arrival, file a formal entry of such equipment, materi- als, parts, and expenses of repairs. Fol- lowing the submission of the entry, vessel owners/operators may submit an applica- tion for relief for certain items that, based on statutory interpretations and regulatory exemptions, they believe should be non- dutiable or, in the alternative, subject to a lower duty rate. Changing Tide The Vessel Repair Statute has under- gone change multiple times since its inception in 1866, but several significant events throughout the 1990s, attributable to both statutory amendment and judicial interpretation, motivated CBP to revise the regulations that implement the Vessel Repair Statute's mandate. In 1999, CBP published a proposed rule implementing such changes and requested the public's input. Following an extended comment period, CBP published its Final Rule in 2001. In part, the Final Rule was a mani- festation of Customs' interpretation of the decision in Mount Washington Tanker Co. v. United States, 505 F. Supp. 209, 214 (1980), aff'd 665 F.2d 340 (C.C.P.A. 1981), as well as an effort to streamline the process for seeking relief from vessel repair duties. Consequently, this Final Rule made parts, materials, and equip- ment utilized in repairs performed by crewmembers while a vessel was "on the high seas" dutiable under the Vessel Repair Statute (despite the fact that the Vessel Repair Statute used the languageCircle 207 on Reader Service Card Congress Voids Certain Ad Valorem Duties on Ship Repairs MN MARCH05 2(9-16).qxd 3/4/2005 12:08 PM Page 10
