This for for all you carriers, ship owners, and yachters out there.
General practice and business lawyers often overlook customs and trade law as a practice area. Even those in the practice think of it as a narrow field. But, an odd thing about customs and trade law is that even within the narrow confines of the practice, there are sub-specialties. Some folks do more import than export, some people spend a lot of time on free trade agreements, others are computed value mavens. Of course, we all do all those things, but it is fair to say that becoming a real expert in one or two things takes a certain amount of focus.
One of the more obscure issues in customs law is the dutiability of the value of repairs done on vessels. A similarly obscure issue is whether certain voyages do or do not violate the coastwise shipping laws. These issues generate a lot of Customs and Border Protection rulings, but not many court cases.
Which is all by way of introduction to Cormorant Shipholding Corp. v. United States, a recent decision of the U.S. Court of International Trade on the dutiability of ship repairs. The M/V American Cormorant is an American-flagged vessel. [Check out this exceedingly cool picture of the ship transporting at least five amphibious landing vehicles.] The law provides for a 50% tariff on the value of vessel repairs performed abroad on an American-documented ship. Customs assessed more than $5 million in duties on repairs to this ship, which the owner protested for various reasons. The protest was denied and the owner filed a suit, which prompted two counterclaims from the government seeking additional duties.
The substantive issue involves an exception to the general rule of dutiablity. The exception is that repairs undertaken more than six months after the departure of the ship from the U.S. are exempt. So, the question revolves around whether the owner can prove the departure date and the date of the repairs. Unfortunately, this opinion does not go to the merits but to the owner's motion to dismiss the counterclaims.
Section 1583 of Title 28 of the US Code give the Court of International Trade jurisdiction over counterclaims asserted by the government that involve the "imported merchandise that is the subject" of the main case. CSC, the vessel owner, moved to dismiss the counterclaim arguing that vessel repairs are not imported "merchandise." This seems to be a rational argument based on a normal English understanding of the word merchandise. Unfortunately, the law often does not comport with the language. Looking to several dictionaries, the Court found that merchandise is something sold in commerce. At least one definition specifically included services. In addition, there are several places throughout the law and regulations that seem to include vessel repairs in the broader category of merchandise. There are also counter examples, including the Tariff Schedule, which uses the construction "Tariff Treatment of Imported Goods and of Vessel Equipments, Parts and Repairs." While this clearly distinguishes repairs from goods, it does not necessarily follow that both repairs and goods are not "merchandise" for tariff purposes. [That's my analysis, not the Court's.]
The Court was also unmoved by CSC's argument that the counterclaims involved different merchandise than what was covered by the protests.
Thus, the motion to dismiss was denied, which sets up what might be an interesting future decision on the merits.
