Cormorant Shipholding Corp. v. United States

Slip Op. 09-38
UNITED STATES COURT OF INTERNATIONAL TRADE
CORMORANT SHIPHOLDING CORPORATION,
Plaintiff,
Before: Pogue, Judge
v.
Court No. 08-00235
UNITED STATES,
Defendant.
OPINION
[Plaintiff’s motion to dismiss Defendant’s Counterclaims, for lack
of jurisdiction, denied.]
Dated: May 12, 2009
Williams Mullen, PC (Evelyn M. Suarez, Dean A. Barclay, and
George H. Bowles) for the Plaintiff.
Michael F. Hertz, Acting Assistant Attorney General; Barbara
S. Williams, Attorney in Charge, International Trade Field Office,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice (Edward F. Kenny) for the Defendant.
Pogue, Judge: In this action, Cormorant Shipholding Corporation
(“CSC”) challenges ship repair duties assessed on CSC’s U.S.-flagged
vessel, M/V American Cormorant (the “Cormorant”) by Defendant U.S.
Customs and Border Protection (“Customs” or “the government”).
Customs assessed duties on the Cormorant’s repairs in accordance
08-00235 Page 2
with section 466 of the Tariff Act of 1930 (the “Vessel Repair
Statute”), as amended, 19 U.S.C. § 1466.1 The court has
jurisdiction over Plaintiff’s protest action pursuant to 28 U.S.C.
§ 1581(a).2
In response to CSC’s complaint, Customs asserts two
counterclaims. CSC now moves, pursuant to USCIT R. 12(b)(1), to
dismiss Customs’ counterclaims, asserting that the court lacks
subject matter jurisdiction to hear those claims. The court denies
Plaintiff’s motion because Customs’ counterclaims involve the same
imported merchandise that is the subject of Plaintiff’s protest
action, giving the court jurisdiction to entertain the counterclaims
under 28 U.S.C. § 1583.3BACKGROUND
First enacted by Congress in 1866, the Vessel Repair Statute
1
Unless otherwise stated, further citations to the Tariff
Act of 1930 are to the relevant provisions of Title 19 of the
U.S. Code, 2000 edition.
2
28 U.S.C. § 1581(a) provides: “The Court of International
Trade shall have exclusive jurisdiction of any civil action
commenced to contest the denial of a protest, in whole or in
part, under section 515 of the Tariff Act of 1930.”
3
28 U.S.C. § 1583 provides:
In any civil action in the Court of International
Trade, the court shall have exclusive jurisdiction to
render judgment upon any counterclaim, cross-claim, or
third-party action of any party, if (1) such claim or
action involves the imported merchandise that is the
subject matter of such civil action, or (2) such claim
or action is to recover upon a bond or customs duties
relating to such merchandise.
08-00235 Page 3
imposes a 50% tariff on the value of repairs performed abroad.4 See
Texaco Marine Servs., Inc. v. United States, 44 F.3d 1539, 1540
(Fed. Cir. 1994).
Certain exclusions apply to these ad valorem duties. Relevant
to this litigation, a vessel that “arrives in a port of the United
States two years or more after its last departure from a port in the
United States” is subject to the duties only on those repairs made
“during the first six months after the last departure of such vessel
from a port of the United States.” 19 U.S.C. § 1466(e)(1)(B). This
exclusion, however, generally will not apply “if the vessel departed
from the United States for the sole purpose of obtaining” the
repairs. Id. § 1466(e)(2).
The Cormorant left a U.S. port on March 21, 1992. The ship
returned to a U.S. port, in September, 2001, after a continuous
nine-and-one-half-year voyage outside the United States. Upon the
Cormorant’s return, CSC timely filed a vessel repair entry and an
4
The statutory text states:
The equipments, or any part thereof, including boats,
purchased for, or the repair parts or materials to be
used, or the expenses of repairs made in a foreign
country upon a vessel documented under the laws of the
United States to engage in the foreign or coasting
trade, or a vessel intended to be employed in such
trade, shall, on the first arrival of such vessel in
any port of the United States, be liable to entry and
the payment of an ad valorem duty of 50 per centum on
the cost thereof in such foreign country. . . .
19 U.S.C. § 1466(a).
08-00235 Page 4
application for relief. In 2006, Customs made a duty assessment on
the Cormorant’s foreign repairs in the amount of $5,231,610.88. CSC
timely protested the assessed duties in accordance with the
statutory and regulatory protest provisions. See 19 U.S.C. § 1514;
19 C.F.R. § 174.12. In particular, CSC challenged Customs’
assessment of duties on invoices5 reflecting certain repairs
performed in Southampton, United Kingdom;6 Gothenberg, Sweden;7 and
the Blohm & Voss Shipyard in Hamburg, Germany.8
Customs denied the protest. See HQ H008155 (Apr. 16, 2008),
available at 2008 WL 5568232.9 First, Customs noted that “[b]ecause
the vessel was overseas for more than two years, work undertaken
after the first six months from the [Cormorant’s] departure from the
U.S. is exempted from vessel repair duties.” Id. 2. As a result,
5
Invoices submitted to Customs to account for the foreign
vessel repairs are referenced as “Items.” In its protest, CSC
challenged Customs’ determination that Items 5, 7-8, 10-16, 24-
25, 29-30, 33, 35-36, 38 and 41 were dutiable.
6
Reported repair expenses in Southampton include, inter
alia, Items 5, 7 and 8.
7
Reported repair expenses in Gothenberg include, inter
alia, Items 10-16, 24-25 and 29-30.
8
Reported repair expenses in Hamburg include, inter alia,
Items 33, 35-36, 38 and 41.
9
CSC claims that Customs in fact denied the protest in part
and affirmed in part. The court notes that Customs ruled, in HQ
H008155, that it “determined that the protest should be denied.”
Id. 7. Further, every item protested by CSC in HQ H008155 was
found by Customs to be dutiable. Id. 3-7; see also supra notes 5-
7.
08-00235 Page 5
Customs reasoned, “only repairs or expenses of repairs that took
place within the first six months from the date the vessel left the
last U.S. port on March 21, 1992 [i.e., before September 21, 1992]
are dutiable.” Id. Second, in accordance with its previously-
articulated practice, Customs identified dutiable repairs in the
Cormorant’s entry.10 Of specific relevance to the motion to dismiss
at issue here, Customs denied CSC’s protest as to Item 41,
generally, because CSC had failed to provide sufficient information
or documentation to qualify these expenditures as exempt from the
duty assessment.11 Id. 3-6.
10
In doing so, Customs applied the Texaco “but for” test
for identifying dutiable repairs. In Texaco, the Federal Circuit
held: “we interpret ‘expenses of repairs’ as covering all
expenses (not specifically excepted in the statute) which, but
for dutiable repair work, would not have been incurred.” Texaco
Marine Servs., 44 F.3d at 1544. Expanding upon Texaco, the
Federal Circuit also has sanctioned Customs’ apportionment of
expenses attributable to dutiable and nondutiable repairs so as
to assess ad valorem taxes “on only that portion of the expense
that is fairly attributable to the dutiable repairs.” SL Serv.,
Inc. v. United States, 357 F.3d 1358, 1362 (Fed. Cir. 2004).
The Cormorant arrived at a U.S. port after the Federal
Circuit’s issuance of the Texaco decision in 1994.
11
Specifically, Customs denied CSC’s protest as to Item 41,
which, according to Customs, reflected $10,000,000 (i.e., the
total invoice minus a credit note) in repairs taking place
between September 1 and November 16, 1992 (66 days). See HQ
800815, 5. As the six-month dutiable period ended September 21,
it was incumbent upon CSC to demonstrate which repairs were
performed outside the statutory period. Id. The only
“independent” documents that CSC provided Customs were the
overall invoice and the first three weekly status reports, which
demonstrated that, as of September 25, 32% of the contracted work
had been completed. Id. As Customs had no other information,
Customs determined that “we must conclude that 32% of the work
that is the basis of the $10,000,000.00 invoice was completed
08-00235 Page 6
In response to Customs’ protest decision, CSC, in its complaint
here, claims that Customs erred in assessing ad valorem duties on
all previously-challenged invoices except Item 38. Answering CSC’s
complaint, the government asserts two discrete counterclaims,
claiming jurisdiction for each pursuant to 28 U.S.C. § 1583. First,
the government claims that CSC’s “Application for Relief and
Protest, specifically with regard to [Item 41] . . . was not
supported by the required evidentiary elements” specified by 19
C.F.R. § 4.14.12 Def.’s Ans. to Amended Compl. & Countercl. ¶ 37.
within the dutiable 6-month period, thus $3,200,000.00 of the
invoice costs were performed or incurred during the 6-month
dutiable period.” Id.12
The government cites the current version of this
regulation, which requires each application for relief to contain
the following documentation:
(i) Itemized bills, receipts, and invoices for
[“foreign voyage expenditures for equipment, parts of
equipment, repair parts, materials and labor”]. The
cost of items for which a request for relief is made
must be segregated from the cost of the other items
listed in the vessel repair entry;
(ii) Photocopies of relevant parts of vessel logs, as
well as of any classification society reports which
detail damage and remedies;
(iii) A certification by the senior officer with
personal knowledge of all relevant circumstances
relating to casualty damage (time, place, cause, and
nature of damage);
(iv) A certification by the senior officer with
personal knowledge of all relevant circumstances
relating to foreign repair expenditures (time, place,
and nature of purchases and work performed);
08-00235 Page 7
Because CSC did not provide this required documentation, the
government now claims that “the entire $12,745,125.00 Shipyard
invoice [presumably, the $10 million amount with the credit note
added back in] must therefore be considered fully dutiable.” Id. ¶¶
38-40. Second, Customs alleges that CSC “failed to establish that
the relevant departure of [the Cormorant] was not for the sole
purpose of obtaining equipment, parts, materials or repairs” as
required for the section 1466(e) exemption to apply at all, and thus
“the entirety of [CSC’s] claim for relief from duties [is]
invalid.”13 Id. ¶ 41.
Standard of Review
Like all federal courts, the Court of International Trade is
a court of limited jurisdiction. Norsk Hydro Can., Inc. v. United
States, 472 F.3d 1347, 1355 (Fed. Cir. 2006). Therefore, the
government, as the party attempting to invoke the court’s
(v) A certification by the master that casualty-related
expenditures were necessary to ensure the safety and
seaworthiness of the vessel in reaching its United
States port of destination; and
(vi) Any permits or other documents filed with or
issued by any United States Government agency other
than CBP regarding the operation of the vessel that are
relevant to the request for relief.
19 C.F.R. § 4.14(i)(1)(i)-(vi). The government avers that CSC’s
application lacked (i)-(iii).
13
The court notes that the government’s counterclaims are
not consistent with Customs determination of CSC’s protest.
08-00235 Page 8
jurisdiction, bears the burden to establish that its counterclaim
lies within that jurisdiction. See id. (citing Kokkonen v. Guardian
Life Ins. Co., 511 U.S. 375, 377 (1994)). Contrary to CSC’s
arguments, however, the government has adequately met its burden and
its counterclaims are properly brought under 28 U.S.C. § 1583.
DISCUSSION
CSC’s motion to dismiss raises two issues: (1) whether vessel
repairs may be viewed as “imported merchandise” for the purposes of
establishing jurisdiction pursuant to section 1583, and, if so, (2)
whether the repairs identified in the government’s counterclaim may
be viewed as involving the same “subject matter” as CSC’s action.14
The court addresses each issue in turn.
I. The Vessel Repairs Constitute “Imported Merchandise”
A. Common Meaning of Section 1583's Text
The court’s interpretation of section 1583 begins with the
14
CSC also argues that the court should dismiss the
government’s counterclaim as it fails to explicitly state any
grounds for subject matter jurisdiction. In this regard, CSC is
correct. According to USCIT R. 8(a):
[a] pleading that states a claim for relief must
contain . . . a short and plain statement of the
grounds for the court’s jurisdiction, unless the court
already has jurisdiction and the claim needs no new
jurisdictional support. . . .
The original ground for jurisdiction asserted in CSC’s complaint,
i.e., 28 U.S.C. § 1581(a), is limited to actions to contest the
denial of a protest and neither extends to counterclaims nor to
actions commenced by the government. However, as the government
has amended its counterclaims to assert jurisdiction pursuant to
28 U.S.C. § 1583, CSC’s first argument has become moot.
08-00235 Page 9
words of the statute. Exxon Mobil Corp. v. Allapattah Servs., Inc.,
545 U.S. 546, 568 (2005) (“[T]he authoritative statement is the
statutory text, not the legislative history or any other extrinsic
material.”); Timex V.I., Inc. v. United States, 157 F.3d 879, 882
(Fed. Cir. 1998) (“To ascertain . . . Congress[‘s] . . . intention
. . ., [the Court] employ[s] the ‘traditional tools of statutory
construction.’” (citing Chevron U.S.A. Inc. v. Natural Res. Def.
Council, Inc., 467 U.S. 837, 843 n. 9 (1984))); id. (“The first and
foremost ‘tool’ to be used is the statute’s text, giving it its
plain meaning . . . .”) (citing VE Holding Corp. v. Johnson Gas
Appliance Co., 917 F.2d 1574, 1579 (Fed. Cir. 1990))).
By its terms, however, neither section 1583 nor any other of
the court’s jurisdictional statutes define “merchandise.”
Accordingly, when a term is not defined in a statute, the court
looks to the term’s common meaning. See Witex, U.S.A., Inc. v.
United States, 577 F. Supp. 2d 1353, 1356 (CIT 2008) (citing
Bentkamp v. United States, 40 CCPA 70, 78, C.A.D. 500 (1952)). In
discerning this common meaning, federal courts, including the
Federal Circuit and this Court, rely on dictionary definitions of
the statute’s words. See Archer Daniels v. United States, No. 2008-
1342, 2009 WL 777459, at *2 (Fed. Cir. Mar. 26, 2009) (“When, as
here, ‘a tariff term is not defined in [the statute] or its
legislative history, the term’s correct meaning is its common or
dictionary meaning in the absence of evidence to the contrary.’”
08-00235 Page 10
(quoting Airflow Tech., Inc. v. United States, 524 F.3d 1287, 1291
(Fed. Cir. 2008))); Pesquera Mares Australes Ltda. v. United States,
266 F.3d 1372, 1382 (Fed. Cir. 2001) (in determining the common or
“established” meaning of a term, “it is appropriate to consult
dictionaries.”); Outer Circle Prods. v. United States, No. 05-00678,
2009 Ct. Intl. Trade LEXIS 3, at *27 (CIT Jan. 9, 2009); Witex, 577
F. Supp. 2d at 1356.
Common definitions of “merchandise” include vessel repairs.
See, e.g., American Heritage Dictionary of the English Language
1099, 1939 (4th ed., Houghton Mifflin Co. 2000) (“merchandise” are
“goods bought and sold in business; commercial wares”; further, a
“ware” is “an article of commerce” or “an immaterial asset or
benefit, such as a service or personal accomplishment, regarded as
an article of commerce”); 1 Shorter Oxford English Dictionary 1754,
464 (6th ed., Oxford University Press 2007) (“merchandise” are
“[t]he commodities of commerce; goods to be bought and sold”);
Webster’s Third New International Dictionary of the English Language
1413 (Merriam-Webster, Inc. 2002) (“merchandise” means “the
commodities or goods that are bought or sold in business: the wares
of commerce”); 3 Oxford English Dictionary 563-64 (2d ed., Clarendon
Press 1989) (in turn, a “commodity,” especially in commerce,
constitutes “[a] kind of thing produced for use or sale, an article
of commerce, an object of trade”); 1 Shorter Oxford English
Dictionary, supra, 464 (a “commodity” is “[a] thing of use or value
08-00235 Page 11
. . . a thing that is an object of trade”). Vessel repairs, as
goods and services with commercial benefits, are plainly “commercial
wares” and constitute things “produced for use or sale” in that they
restore vessel parts to their previous state of operation.
In addition, the vessel repairs at issue here were clearly
“imported.” 1 Shorter Oxford English Dictionary, supra, at 1339
(“import” is defined as “[t]o bring in; to introduce from an
external source; . . . bring in (goods, etc.) from another
country”).15 Thus, section 1583(1) includes vessel repairs when
those repairs are brought into the country from a foreign or
external source.16
15
CSC points to United States v. Shabahang Persian Carpets,
Ltd., 21 CIT 360, 361, 963 F. Supp. 1207, 1209-10 (1997) to
support its statement that a counterclaim not involving “imported
merchandise” is not within section 1583 jurisdiction. However,
Shabahang is inapposite. In Shabahang, the court did not inquire
into the definition of “merchandise” under section 1583 because
the items under scrutiny were not “imported” in the first place.
Id.16
CSC cites 19 U.S.C. § 1401(c) which defines “merchandise”
for purposes of the Tariff Act of 1930 as “goods, wares, and
chattels of every description, and includes merchandise the
importation of which is prohibited, and monetary instruments as
defined in section 5312 of title 31.” 19 U.S.C. § 1401(c). As
demonstrated above, however, dictionary definitions of “wares”
include CSC’s vessel repairs. CSC further argues that 19 U.S.C.
§ 1401(c) purposely distinguishes “monetary instruments” to
denote their inclusion because the ordinary meaning of
“merchandise” fails to do so. However, unlike vessel repairs,
money or currency is not considered “merchandise,” but rather the
means by which that merchandise is acquired. See generally 31
U.S.C. §§ 5312(a)(3)(c), 5316, 5331. Thus, CSC’s use of section
1401(c) to show a limited statutory circumscription of
“merchandise” is unpersuasive.
08-00235 Page 12
B. Section 1583’s Interpretation
The court’s plain language reading of “imported merchandise”
to include CSC’s vessel repairs also comports with prior
interpretation of section 1583. First, the court interprets
section 1583 broadly. See, e.g., United States v. Mecca Export Co.,
10 CIT 644, 645-47, 647 F. Supp. 924, 925-27 (1986); M&M/Mars
Snackmaster, Div. of Mars, Inc. v United States, 5 CIT 43, 44
(1983). The prudential reasons for broadly exercising federal
district courts’ ancillary jurisdiction are similar to those the
court should use in applying its own jurisdiction under § 1583:
The same considerations enunciated by numerous Federal
Courts supporting liberal exercise of ancillary
jurisdiction in Federal District Courts apply with even
greater force in this case. . . . Just as with ancillary
jurisdiction questions, this Court as a matter of sound
judicial administration and to insure consistent results
should, in considering § 1583, endeavor to avoid
multiplicity of actions. If the Court were to accept
plaintiff's arguments, the result would discourage the
proper settlement of cases by sureties with the
government.
Mecca Export Corp., 10 CIT at 647.
Moreover, this broad interpretation reflects Congress’s intent
that related actions be consolidated. In adopting section 1583,
Congress recognized the need to allow all claims arising out of an
underlying import transaction to be adjudicated fully and completely
in one action before this Court. See H.R. Rep. No. 96-1235, at 37-38
(1980), reprinted in 1980 U.S.C.C.A.N. 3729, 3748-49; see also Tikal
Distrib. Corp. v. United States, 24 CIT 149, 156 n.4, 93 F. Supp.
08-00235 Page 13
2d 1269, 1275 n.4 (2000).17 Thus, to exclude vessel repairs from
the statutory term “imported merchandise,” as CSC requests, would
frustrate congressional intent in adopting the statute. See Texaco
Marine Servs., Inc. v. United States, 44 F.3d 1539, 1544 (Fed. Cir.
1994) (“To interpret the statute any more restrictively would thwart
the broad, general language which we presume was deliberately used
by Congress.”).
C. Sections 1581 and 1582
The statutory structure of the Court’s other jurisdictional
statutes also supports the use of the common meaning of “imported
merchandise” to include vessel repairs. See Fin. Planning Ass’n v.
SEC, 482 F.3d 481, 487 (D.C. Cir. 2007) (“Applying the ‘traditional
tools of statutory construction,’ the court looks to the text,
structure, and the overall statutory scheme, as well as the problem
Congress sought to solve.” (quoting Chevron, 467 U.S. at 843 n. 9)
(internal citation omitted)).
Arguing against the court’s plain language reading, CSC evokes
the doctrine of expressio unius est exclusio alterius, see Int’l
Trading Co. v. United States, 28 CIT 1, 7, 306 F. Supp. 2d 1265,
17
Prior to the adoption of section 1583, if the court found
Customs’ appraisement to be incorrect, the court could not uphold
a different appraised value claimed by the Government. Rather,
the court could only dismiss the action, without requiring the
plaintiff to pay any additional duties. Section 1583 remedied
this problem and permits the government to “assert[] a claim that
would allow the court to make the proper determination and
accordingly would enable the Government to collect the full
amount of duties.” H.R. Rep. No. 96-1235, at 36.
08-00235 Page 14
1270 (2004), to claim that the explicit listing, in 28 U.S.C. §
1581(h), of “vessel repairs,” necessarily precludes a broader
reading of that phrase in other sections of this Court’s
jurisdictional statutes. But the language of Section 1581(h) of
title 28 of the United States Code provides otherwise.
Specifically, Section 1581(h) gives the court
exclusive jurisdiction of any civil action commenced to
review, prior to the importation of the goods involved,
a ruling issued by the Secretary of the Treasury, or a
refusal to issue or change such a ruling, relating to
classification, valuation, rate of duty, marking,
restricted merchandise, entry requirements, drawbacks,
vessel repairs, or similar matters . . . .
Id. The enumeration of “vessel repairs” refers back to the phrase
“importation of the goods involved.” As such, subsection (h)
supports rather than controverts the conclusion that these repairs
are considered imported merchandise for purposes of jurisdiction.
In addition, merely because “vessel repairs” are listed in
subsection (h), does not preclude the inclusion of “vessel repairs”
elsewhere in the jurisdictional statutes, even when not specifically
enumerated there. For example, plaintiffs filed this action
originally pursuant to section 1581(a), although this subsection
says nothing specific about “vessel repairs.”18
18
See also Bar Bea Truck Leasing Co. v. United States, 4
CIT 104, 106-08 (1982) (the doctrine of expressio unius est
exclusio alterius does not preclude the court’s jurisdiction to
review the revocation of cartage licenses pursuant to the
residual grant of jurisdiction in section 1581(i)); Di Jub
Leasing Corp. v. United States, 1 CIT 42, 47, 505 F. Supp. 1113,
1117 (1980) (“the legislative history of the residual
08-00235 Page 15
Moreover, 28 U.S.C. § 1582 uses similarly broad language,
referring to jurisdiction “of any civil action which arises out of
an import transaction and which is commenced by the United States-
. . . (3) to recover custom duties.” Yet, CSC could not
successfully argue that expressio unius est exclusio alterius would
prevent the United States from filing an action to recover duties
under § 1582.
D. 19 U.S.C. § 1498Further, vessel repairs have been found to constitute
“merchandise” in related statutory contexts. For example, 19 U.S.C.
§ 1498, a sister statute to section 1466, defines “merchandise” as
including “vessel repairs.” Through 19 U.S.C. § 1498(a)(10),
Congress granted the Secretary of the Treasury broad authority to
promulgate rules and regulations with respect to “merchandise,”
including specifically 19 U.S.C. § 1466, stating, in relevant part,
that:
The Secretary of the Treasury is authorized to prescribe
rules and regulations for the declaration and entry of -
. . .
(10) Merchandise within the provisions of sections
1465 and 1466 of this title (relating to supplies,
repairs, and equipment on vessels and railway cars)
at the first port of arrival . . . .
jurisdictional provisions in section 1581(i) obviously evinces
congressional intent that these special provisions shall be
accorded a broad construction” (citing H.R. Rep. No. 96-1235, at
33-34.)).
08-00235 Page 16
Id. Interpreting this provision, the Federal Circuit has concluded
that section 1466 “vessel repairs” come within the scope of
“imported merchandise.” Specifically, based on the language of §
1498(a)(10), the Federal Circuit held that 19 U.S.C. §
1315(d)(1988)19 applies to the Vessel Repair Statute. See Texaco
Marine Servs., Inc. v. United States, 44 F.3d 1539, 1547-48 (Fed.
Cir. 1994). The Federal Circuit Court noted that 19 U.S.C. §
1498(a)(10) (1988) “indicates an intention by the Congress that
expenses within the vessel repair statute shall be regarded as
merchandise imported into the United States.” Id. at 1547 (citing
Int’l Navigation Co. v. United States, 38 Cust. Ct. 5, 9, C.D. 1836,
148 F. Supp. 448, 453 (1957); Pac. Transp. Lines, Inc. v. United
States, 29 Cust. Ct. 21, 27, C.D. 1439 (1952)); accord Sea-Land
Serv., Inc. v. United States, 69 F. Supp. 2d 1371, 1378 n.6 (CIT
1999).
CSC asserts that Congress deliberately used the two terms
“merchandise” and “repairs . . . on vessels” in § 1498(a)(10) to
clarify its reference to both, as the former does not typically
19
Currently, section 1315(d) provides in relevant part:
No administrative ruling resulting in the imposition of
a higher rate of duty or charge than the Secretary of
the Treasury shall find to have been applicable to
imported merchandise under an established and uniform
practice shall be effective with respect to articles
entered for consumption or withdrawn from warehouse for
consumption prior to the expiration of thirty days
after the date of publication in the Federal Register
of notice of such ruling....
08-00235 Page 17
comprise the latter. But Congress used “merchandise”
interchangeably with “supplies, repairs, and equipment on vessels
and railway cars,” as is denoted by the parentheses, further
specifying the type of merchandise to which Congress referred, and
thus intended for “merchandise” to comprise “repairs” within section
1466.20 Consequently, CSC’s position conflicts with clearly-stated
Federal Circuit case law. See Texaco Marine Servs., 44 F.3d at 1547-
48. While Congress did not define “imported merchandise” for the
specific purpose of section 1583, there is no indication that it
intended for vessel repair expenses to be merchandise under §
1498(a)(10) but not under section 1583.
E. CSC’s Remaining Arguments
Finally, CSC unpersuasively cites to various parts of Title 19
in isolation, as well as to certain regulations to allege that
Congress intended to distinguish vessel repairs from merchandise.
None of these statutory or regulatory provisions, however, when read
in context, supports CSC’s position. The court addresses each in
turn.
CSC first alleges that the fact that the word “merchandise”
20
CSC additionally asserts that the government’s reliance
on 19 U.S.C. § 1498(a)(10) as expressly using “merchandise” to
refer to vessel repair expenses, is moot, as it relates only to
the Secretary’s authority to promulgate “rules and regulations”
for “declaration and entry,” rather than for jurisdiction under
28 U.S.C. § 1583. Reply to Government’s Opp. to Mot. to Dismiss
Countercl. 8. Reading the provision in context, however, the
court cannot agree with this limited interpretation.
08-00235 Page 18
does not appear anywhere in 19 U.S.C. § 1466 dictates that Congress
did not intend to treat vessel repairs as such. However, section
1466 simply separates “merchandise” into more specific terms; for
instance, section 1466 regularly refers to “equipments,” “parts,”
“materials” and/or “repairs” collectively, thus indicating its
intent to treat them similarly. See 19 U.S.C. § 1466(a); (d)(2)-(3);
(e)(1)(B),(2); (f); (g); (h). Just as equipment, parts, and
materials are all considered “merchandise,” the more general term
“repairs” must also be included within this reading.
Second, CSC asserts that General Note 1 to the Harmonized
Tariff Schedule of the United States (“HTSUS”) handling “Tariff
Treatment of Imported Goods and of Vessel Equipments, Parts and
Repairs,” demonstrates congressional intent to distinguish vessel
repairs from other goods, because “imported goods” and “vessel . .
. repairs” are separated by a conjunction, instead of being
presented as one and the same. The narrow view, that “and” is used
in a conjunctive sense in every statutory provision and that its
existence is conclusive in determining which terms Congress intended
to group together, conflicts with established jurisprudence. See,
e.g., Doughten Seed Co. v. United States, 24 CCPA 258, 260 (1936)
(It is a “well-settled principle that courts may construe the words
‘and’ and ‘or’ to have a meaning different from that arrived at by
a strict grammatical construction, if by so doing the different
provisions of the paragraph or act under consideration can be
08-00235 Page 19
harmonized, and anomalous results avoided.”); see also Noss Co. v.
United States, 7 CIT 111, 116, 588 F. Supp. 1408, 1413 (1984).
Moreover, the word choice in this specialized statute reflects the
need for precision in describing which goods are subject to a duty.
As already noted, this in no way contradicts the broad reading of
the court’s jurisdictional statutes. See Di Jub Leasing Corp., 1 CIT
at 47.
CSC finally claims that Customs itself has stated that it
“believes that vessel repair entries do not involve entries of
imported merchandise as provided in 19 U.S.C. § 1500(d)”21 and
argues that Customs cannot now claim that the two are the same in
21
28 U.S.C. § 1500 provides:
The Customs Service shall, under rules and regulations
prescribed by the Secretary--
(a) fix the final appraisement of merchandise by
ascertaining or estimating the value thereof, under
section 1401a of this title, by all reasonable ways and
means in his power, any statement of cost or costs of
production in any invoice, affidavit, declaration,
other document to the contrary notwithstanding;
(b) fix the final classification and rate of duty
applicable to such merchandise;
(c) fix the final amount of duty to be paid on such
merchandise and determine any increased or additional
duties, taxes, and fees due or any excess of duties,
taxes, and fees deposited;
(d) liquidate the entry and reconciliation, if any, of
such merchandise; and
(e) give or transmit, pursuant to an electronic data
interchange system, notice of such liquidation to the
importer, his consignee, or agent in such form and
manner as the Secretary shall by regulation prescribe.
08-00235 Page 20
order to assert section 1583 jurisdiction. Foreign Repairs to
American Vessels, 66 Fed. Reg. 16,392, 16,396 (Dep’t Treas. Mar. 26,
2001) (final rule). However, through this regulatory language,
Customs simply emphasized the distinction between, and the need to
keep separate, the liquidation procedures for goods imported into
the United States and the duty assessment process under the Vessel
Repair Statute; section 1466 “is self-contained and sets a parallel
procedure for making a final determination of the duty due on such
repairs.” Id. Moreover, Customs added, “[a]lthough vessel repair
entries will not be liquidated, any duties assessed on such entries
will still be subject to protest under 19 U.S.C. § 1514(a)(2).” Id.The court finds no indication that Customs implied that vessel
repair duty assessment restricts the scope of the protest process;
as such, Customs regulatory language concerning duty assessment
certainly does not restrict the court’s jurisdiction.22
22
In one sense, certainly, “vessels [themselves] have been
treated as sui generis, and subject to an entirely different set
of laws and regulations from those applied to imported articles.”
The Conqueror, 166 U.S. 110, 118 (1897) (holding that a 272-ton
pleasure yacht sailed into New York is not, itself, a dutiable
article). At the same time, however, as the Court noted, there
is a difference between tonnage duties on vessels themselves and
the duty rates for “dutiable articles.” Id. (explaining that
“boats . . . imported or brought upon the decks of other vessels,
[which] are mere manufactures of other ‘articles,’ are within the
description of the tariff acts.”) As explained above, the Vessel
Repair Statute places repairs in the latter category.
08-00235 Page 21
II. The Government’s Counterclaim Involves the “Subject” Merchandise
The government’s counterclaim also involves the “subject”
merchandise of CSC’s action. CSC argues to the contrary, citing
Export Packers Co. v. United States, 16 CIT 394, 398, 795 F. Supp.
422, 426 (1992) (holding that the Court of International Trade did
not have jurisdiction over a government counterclaim).
But Export Packers is inapposite. In Export Packers,
Plaintiff, an importer of frozen egg yolks, challenged Customs’
classification, under HTSUS 119.65 and 119.70, of 67.5% of its
products - resulting in duty rates of 27 and 5.5 cents per pound,
respectively; the remaining 32.5% of its products had been
classified under HTSUS 800, and thus had entered duty-free. Id. at
394-95. The government counterclaimed to reclassify the 32.5%
remaining imports and obtain duty thereon. Id. The court dismissed
the counterclaim, as it involved the liquidation of merchandise that
were “separate and distinct” from those put at issue by plaintiff’s
complaint, “evidenced by the distinguishable classification
treatment assessed by Customs when the entries were liquidated.” Id.
at 398; see also id. (“the genesis of Export Packers’ complaint
concerns 67.5% of the imported frozen salted liquid egg yolks which
were derived from shell eggs and assessed with duty under TSUS Items
119.65 and 119.70. Export Packers, maintaining that said merchandise
was properly subject to classification in accordance with Item
806.20, protested Customs’ liquidation and commenced this civil
08-00235 Page 22
action for purposes of obtaining judicial review of Customs’ denial
respecting said protests. . . . Plainly, the remainder of the
subject entries, representing 32.5% of the frozen salted liquid egg
yolks derived from liquid egg yolk, were liquidated in compliance
with Item 800.00. But Export Packers has not contested that
liquidation.” (emphasis in original)).
In contrast, the vessel repairs originally contested by CSC
here cannot be said to constitute “separate and distinct” entries
or duty assessments that are different from those potentially added
in the government’s counterclaims. The vessel repairs referenced
in CSC’s complaint and the government’s counterclaims all involve
the same vessel repair entry, the same Customs duty assessment, and
indeed even the very same invoices referenced in CSC’s complaint.23
Furthermore, nothing from the record demonstrates that the Item
23
Compare Am. Permac, Inc. v. United States, 24 CIT 933,
937, 116 F. Supp. 2d 1317, 1322 (2000) (finding jurisdiction when
“there appears to be no dispute among the parties that
defendant’s counterclaims involve those entries at issue in
plaintiff’s claim”), amended by, 24 CIT 1158 (2000), with United
States v. UPS Customhouse Brokerage, Inc., 442 F. Supp. 2d 1290,
1303-04 (CIT 2006) (finding the court did not have jurisdiction
over the counterclaim because “it lacks jurisdiction over the
underlying entries.”) and United States v. Lun May Co., 11 CIT
18, 21, 652 F. Supp. 721, 723-24 (1987) (“The Court holds that
Lun May may only raise claims relating to the six entries which
are the subject of this civil action,” rejecting Lun May’s
attempt to file a counter claim regarding all entries covered by
the bond beyond the government’s complaint’s six entries). This
does not mean, however, that the fact that the government’s
counterclaims involve repairs covered by the same entry put at
issue by CSC’s complaint is necessarily sufficient to demonstrate
that the counterclaims involve the same subject matter as the
complaint.
08-00235 Page 23
41 repairs themselves are different in type or kind so as to be
“separate and distinct” from one another, Export Packers, 16 CIT at
398, or involve “different stream[s] of goods.” United States v.
Shabahang Persian Carpets, Ltd., 21 CIT 360, 361, 963 F. Supp. 1207,
1210 (1997). Rather, the repairs referenced in Item 41, to which
the government’s first counterclaim exclusively pertains, spanned
several days at the Hamburg port, and the duties assessed on some
of those repairs depended solely upon the date on which the repairs
were assumed to have taken place. CSC challenges the dates Customs
applied to the repairs in Item 41, and the government now
counterclaims on the dates applied to the same repairs. In
addition, the government’s second counterclaim addresses the
entirety of CSC’s protest claim, citing CSC’s alleged failure to
document that the Cormorant’s trip was not for the sole purpose of
obtaining repairs. This second counterclaim asserts only that CSC
is not entitled to any relief with regard to the items put at issue
by the complaint. Thus, both counterclaims involve the merchandise
that is the subject of CSC’s action.
08-00235 Page 24
CONCLUSION
Therefore, upon consideration of Defendant United States’
Counterclaim, and the Motion to Dismiss Counterclaim filed by
Plaintiff Cormorant Shipholding Corp., CSC’s motion is hereby
DENIED.
/s/ Donald C. Pogue
Donald C. Pogue, Judge
Dated: May 12, 2009
New York, New York
ERRATA
Slip Op. 09-38, issued May 12, 2009
Cormorant Shipholding Corporation v. United States
Please add after (Edward F. Kenny)in the preliminary paragraph
identifying the counsel for the Defendant:
and, of counsel, Paula Smith, Office of the Assistant Chief
Counsel, International Trade Litigation, U.S. Customs and Border
Protection