South Corp. v. United States, Court No. 76-8-01816.

• Citation: 3 CIT 28,531 F. Supp. 180
• Decision Date: 21 January 1982
• Docket Number: Court No. 76-8-01816.
• Parties: SOUTH CORPORATION et al., Plaintiffs, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

531 F. Supp. 180

3 CIT 28

SOUTH CORPORATION et al., Plaintiffs, v. UNITED STATES, Defendant.

Court No. 76-8-01816.

United States Court of International Trade.

January 21, 1982.

Hinds & Meyer, Houston, Tex. (John K. Meyer, Houston, Tex., at the trial and on the briefs), for plaintiffs.

J. Paul McGrath, Asst. Atty. Gen., Washington, D. C., Joseph I. Liebman, Atty. in Charge, International Trade Field Office, Commercial Litigation Branch, New York City (Madeline B. Kuflik, New York City, at the trial and on the brief), for defendant.

RE, Chief Judge:

Plaintiffs sue to recover duties paid for foreign repairs on two of their vessels, M/V North Seal and M/V Atlantic Seal. The parties have stipulated that plaintiff, South Corporation, was the owner of the vessel M/V North Seal which departed Woods Hole, Massachusetts on July 18, 1972 and was on a foreign voyage until it returned to the port of Galveston, Texas on December 23, 1972. Repairs were made at Montego Bay, Jamaica, on December 2, 1972 and the repair entry was filed on April 5, 1973.

Plaintiff, Seal Fleet, Inc., was the owner of the M/V Atlantic Seal which departed New Bedford, Massachusetts in December 1970, and was on an overseas voyage until it returned to the United States port of Freeport, Texas, on May 29, 1973. Repairs were made on December 29, 1970, January 2 and 22, and February 9, 1971 in Ancona, Italy. The repair entry was filed on July 17, 1973.

The parties stipulated that at all material times on the voyages in question each of the vessels was engaged exclusively in oceanographic research; was designed and used primarily for purposes other than transporting passengers or property in the foreign or coasting trade; and was documented under the laws of the United States with a certificate of registry.

After the foreign repairs were made and the vessels entered into the United States, pursuant to section 466(a) of the Tariff Act of 1930, as amended (19 U.S.C. § 1466(a)), duties of 50 per centum ad valorem were assessed on the cost of the repairs. This section provides for the imposition of duties on the cost of repairs made in a foreign country on vessels documented under the laws of the United States to engage, or vessels intended to be employed, in the foreign or coasting trade. Subsection (e) of section 466 of the Tariff Act of 1930, as amended (19 U.S.C. § 1466(e)), added as subsection (c) on January 5, 1971, and redesignated subsection (e) on October 3, 1978, provides for an exemption from repair duties for "any vessel designed and used primarily for purposes other than transporting passengers or property in the foreign or coasting trade" if certain specifically enumerated criteria are met.

The pertinent provisions of 19 U.S.C. § 1466(a) and (e) read as follows:

"§ 1466. Equipment and repairs of vessels

(a) Vessels subject to duty; penalties

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 * *.

* * * * * *

(e) Vessels used primarily for purposes other than transporting passengers or property in the foreign or coasting trade

In the case of any vessel designed and used primarily for purposes other than transporting passengers or property in the foreign or coasting trade which arrives in a port of the United States two years or more after its last departure from a port of the United States, the duties imposed by this section shall apply only with respect to (1) fish nets and netting, and (2) other equipments, and parts thereof, and repair parts and materials purchased, or repairs made, during the first six months after the last departure of such vessel from a port of the United States."

In addition to the stipulation of the parties, the defendant presented the testimony of Mr. Joseph A. Yglesias, Chief of the Merchant Vessel Documentation Division, United States Coast Guard. Mr. Yglesias explained the purpose for the documentation of vessels. He also testified that the certificates of registry issued for the vessels in question permitted them to engage in foreign trade, and that a certificate of registry establishes the nationality of the vessel upon which it relies in a foreign port.

The plaintiffs claim that the repair duty provisions of section 466(a) do not apply to the vessels in question since they were neither engaged in, nor intended to be engaged in, foreign trade. They maintain that these foreign repairs were not subject to the assessment of duties under section 466(a) regardless of the other provisions of section 466. In essence, plaintiffs submit that since the repairs were made to vessels that do not come within the scope of subsection (a), the provisions set forth in subsection (e) do not apply. Plaintiffs cite this court's opinion in Corpus Co. v. United States, 69 Cust.Ct. 170, C.D. 4390, 350 F.Supp. 1397 (1972), appeal dismissed, 60 CCPA 185 (1973), and urge that the repairs in question are not subject to the assessment of duties.

Over and beyond the statutory presumption of correctness found in 28 U.S.C. § 2635 (1976), defendant contends that the duties for foreign repairs performed on a vessel documented under the laws of the United States were properly assessed. The defendant maintains that the congressional intent underpinning section 466 is to protect American shipyards and American labor from the competition of foreign shipyards, a longstanding policy with national defense implications, since American shipyards are used in time of war or emergency to supplement American naval yards.

Defendant further contends that the plain language of the statute leaves no doubt that oceanographic research vessels are included within the scope of subsection (e). In enacting that section as subsection (c), defendant maintains that Congress intended that oceanographic vessels come within the meaning of section 466 since they are expressly mentioned in the legislative history of subsection (c) as examples of "special service" vessels. See S.Rep.No. 91-1474, 91st Cong., 2d Sess., reprinted in 1970 U.S.Code Cong. & Ad.News 5910-11. Hence, defendant contends that foreign repairs on documented vessels are dutiable unless they meet the strict criteria of the limited exemptions.

The plaintiffs' reliance on the Corpus case requires careful consideration. In Corpus, a number of vessels had engaged in lengthy voyages outside the United States. At all times during their voyages they were engaged solely in oceanographic research. The vessels were not equipped to engage in foreign trade and were intended to engage solely in oceanographic research. During their respective voyages each vessel had undergone repairs in a foreign port and, upon reentry into the United States, was assessed with duties upon the foreign repairs pursuant to section 466 of the Tariff Act of 1930, in effect prior to January 1, 1971. Thus, the question presented in Corpus was whether foreign repairs on vessels documented to engage in foreign trade, but which in fact were engaged exclusively in oceanographic research, were properly subject to assessment pursuant to section 466 of the Tariff Act of 1930, as enacted prior to January 1, 1971. In Corpus, this court decided that "where a vessel does not engage in trade, is not intended to engage in trade, and indeed is physically incapable of engaging in trade, its repairs are not dutiable under section 466." 69 Cust.Ct. at 176, 350 F.Supp. 1397.

This court, in the more recent decision of Elizabeth River Terminals, Inc. v. United States, 1 CIT—509 F.Supp. 517, (1981), examined the Corpus case and, in view of the 1971 amendment to the Tariff Act of 1930, rejected arguments similar to those being made here, stating:

"In Corpus, the foreign repairs were made `during the period of 1966-1969,' and the court expressly stated that duties had been imposed under section 466 of the Tariff Act of 1930 `in effect prior to January 5, 1971.' Id. at 171 350 F.Supp. 1397. Clearly, therefore, as indicated by the defendant, the decision in Corpus was an interpretation and application of the language of section 466 before the 1971 amendment. In Corpus, the court examined prior decisions, and concluded that the pertinent cases closely scrutinized the actual and intended use of the vessel in determining whether the cost of foreign repairs was dutiable under the statute prior to the 1971 amendment. Consequently, it cannot be asserted that Corpus is dispositive of the present case which involves foreign repairs made on the Cambria in 1973 after the enactment of subsection (e) to section 466 in 1971." (Emphasis in original.) 509 F.Supp. at 521-22.

The following statements by the court in the Elizabeth River case are equally applicable here:

"To accept plaintiff's interpretation of section 1466 would mean that, in 1971, by enacting subsection (e), Congress enacted a subsection which, for special service vessels, either repeated or contradicted subsection (a) since, according to plaintiff's reading of the statute, special service vessels like the Cambria were not and are not subject to the duties provided for in subsection (a). Such a meaning would do violence to the basic principle of statutory interpretation and application that a court should give effect to all provisions of a statute. It cannot adopt a meaning which would render a section or subdivision of a statute a mere redundancy. See Jarecki v. G. D. Searle & Co., 367 U.S. 303, 307-308, 81 S.Ct. 1579, 1582 6 L.Ed.2d 859 (1961). Moreover, as stated by the United States Court of Customs and Patent Appeals, in construing

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