Horizon Lines Llc v. United States

• Decision Date: 21 October 2010
• Docket Number: Slip Op. 10–119.Court No. 08–00009.
• Parties: HORIZON LINES, LLC, Plaintiff,v.UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

752 F.Supp.2d 1305

HORIZON LINES, LLC, Plaintiff,

v.UNITED STATES, Defendant.

Slip Op. 10–119.Court No. 08–00009.

United States Court of International Trade.

Oct. 21, 2010.

Williams Mullen, Richmond, VA (Evelyn M. Suarez, Dean A. Barclay, and George H. Bowles), for Plaintiff Horizon Lines, LLC.Tony West, Assistant Attorney General; Barbara S. Williams, Attorney in Charge, International Trade Field Office, U.S. Department of Justice (Edward F. Kenny); and Paula Smith, U.S. Customs and Border Protection, Of Counsel, for Defendant United States.

OPINION

WALLACH, Judge:

I

INTRODUCTION

Plaintiff Horizon Lines, LLC (“Plaintiff”) challenges a determination by U.S. Customs and Border Protection (“Customs”) that certain coatings work performed on Plaintiff's vessel is subject to a 50 percent ad valorem duty as a foreign repair under 19 U.S.C. § 1466(a). Jurisdiction is available under 28 U.S.C. § 1581(a). Defendant United States (“Defendant”) has moved for summary judgment. See Defendant's Motion for Summary Judgment (“Defendant's Motion”). Because Plaintiff has abandoned its claims with respect to work performed above the waterline, see infra n.4, Defendant's Motion is GRANTED as to these claims. Because material facts regarding Plaintiff's other claims remain in dispute, see infra Part IV, Defendant's Motion is DENIED as to these claims.

II

BACKGROUND

The work at issue in this action relates to the antifouling system of the CRUSADER, a U.S.-flagged vessel owned by Plaintiff. See Complaint ¶ 1. ¹ The growth of marine organisms on the hull of a nautical vessel can impair the speed or fuel efficiency of that vessel. See Defendant's Statement of Undisputed Material Facts with Respect to Its Motion for Summary Judgment (“Defendant's Facts”) ¶ 3; Plaintiff's Statement of Material Facts as to Which Genuine Issues to Be Tried Exist (“Plaintiff's Facts”) ¶ I–3. Antifouling paint is generally designed to impede this growth by killing organisms that come into contact with it and by sloughing off if organisms attach to it. See Defendant's Facts ¶ 4; Plaintiff's Facts ¶ I–4. This paint has a limited service life and may be reapplied as part of vessel maintenance. See Defendant's Facts ¶ 7; Plaintiff's Facts ¶ I–7.

In some antifouling paint, organotin compounds perform the biocidal function. See Plaintiff's Facts ¶ II–1; Defendant's Response to Plaintiff's Statement of Additional Material Facts as to Which Genuine Issues to Be Tried Exist (“Defendant's Fact Response”) ¶ US–2.² Under the auspices of the International Maritime Organization (“IMO”), a number of states (including the United States) agreed that these compounds “pose a substantial risk of toxicity and other chronic impacts to ecologically and economically important marine organisms” and may harm the health of humans who consume “affected seafood.” International Convention on the Control of Harmful Anti–Fouling Systems on Ships, 2001 (“IMO AFS Convention”) at 1; see Plaintiff's Facts ¶ II–1; Defendant's Fact Response ¶ US–1. These states therefore agreed that, as of January 1, 2008, certain vessels subject to their authority either:

(1) shall not bear [organotin compounds which act as biocides in antifouling systems] on their hulls or external parts or surfaces; or

(2) shall bear a coating that forms a barrier to such compounds leaching from the underlying non-compliant anti-fouling systems[.]

IMO AFS Convention at 15. Vessels are to be inspected and certified by their flag state or by an organization designated by that state. See id. at 19–21. ³

In 2006, the CRUSADER dry-docked at a shipyard in the People's Republic of China for certain inspections and operations, including the work at issue. See Defendant's Facts ¶ 1; Plaintiff's Facts ¶ I–1. Prior to that work, the coatings on the CRUSADER's external hull below the waterline comprised (from overcoat to undercoat): “tin-free anti-fouling coating; a sealer, forming a barrier against any tin-bearing coatings underneath it; tin-bearing anti-fouling coating; and regular paint, possibly tin-bearing.” Plaintiff's Facts ¶ II–3; see Defendant's Fact Response ¶ US–3. The condition of the coatings was described in part as follows:

ESTIMATED SIZE OF COATING DEFECTS EXTERNAL HULLFlatbottom25%Local blistering5%Scatered corrosionUnder water vertical10%Local blistering2%Scatered corrosion

Defendant's Exhibit 4, W. Mann, 2006 CRUSADER Drydock Paint Report (“2006 Paint Report”) (syntax and spelling in original), cited in Defendant's Facts ¶ 5; see Plaintiff's Facts ¶ I5. Plaintiff and Defendant dispute whether these coatings “compl[ied] with the requirements of the IMO AFS Convention.” Plaintiff's Facts ¶ II–5; see Defendant's Fact Response ¶ US–4. They also dispute how much service life, if any, remained in the tin-free antifouling coatings. See Defendant's Facts ¶¶ 5–10; Plaintiff's Facts ¶¶ I–5–10.

The work at issue was performed below the waterline and consisted of (1) removal of all existing coatings such that bare steel was exposed, (2) application of “wholly tin-free regular paint,” and (3) application of “wholly tin-free anti-fouling coatings.” Plaintiff's Facts ¶ II–4; see Defendant's Fact Response ¶ US–4. The American Bureau of Shipping certified that “the new, wholly tin-free anti-fouling system complied with the IMO AFS Convention.” Plaintiff's Facts ¶ II–4; see Defendant's Fact Response ¶ US–4.⁴ Plaintiff alleges that compliance with the IMO AFS Convention, rather than repair or maintenance, was the “sole purpose” of this work. Plaintiff's Facts ¶¶ II–4–6. Defendant denies this allegation. See Defendant's Fact Response ¶¶ US–4–6. If not for the IMO AFS Convention, Plaintiff claims that it would not have removed the existing coatings but “would have done ... a spot treatment and ... added another layer of antifouling coating.” Defendant's Exhibit 11, Deposition of Joseph Edward Walla (“Walla Deposition”) at 78. ⁵

Following the CRUSADER's return to the United States, Plaintiff submitted Customs Form 226, “Record of Vessel Foreign Repair or Equipment Purchase.” See Defendant's Memorandum in Support of Its Motion for Summary Judgment (“Defendant's Brief”) at 3–4. This form, as subsequently supplemented, identified the work performed on the CRUSADER. See id. at 4. Customs reviewed this form and determined that, pursuant to 19 U.S.C. § 1466, Plaintiff “would owe $251,077.63 on the entire entry which included duties on the charges associated with the application of tin-free antifouling paint.” Id.

Plaintiff protested portions of this determination, and Customs denied the protest in part. See Customs Headquarters Ruling (“HQ”) H015615 (October 23, 2007). Plaintiff then commenced the instant action to challenge portions of the denial, arguing that the work at issue is not a repair under 19 U.S.C. § 1466(a). See Summons; Complaint. Following discovery, Defendant moved for summary judgment. See Defendant's Motion.

III

STANDARD OF REVIEW

In a civil action contesting the denial of a protest under 19 U.S.C. § 1515, the plaintiff bears the burden of demonstrating that such denial is incorrect. See 28 U.S.C. § 2639(a)(1). The court makes its decision “upon the basis of the record made before the court.” 28 U.S.C. § 2640(a). The purpose of this de novo review is to “reach the correct result.” Rheem Metalurgica S/A v. United States, 20 C.I.T. 1450, 1456, 951 F.Supp. 241 (1996) (citing Jarvis Clark Co. v. United States, 733 F.2d 873, 878 (Fed.Cir.1984)).

The court will grant a motion for summary judgment “if the pleadings, discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” USCIT R. 56(c); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). “The court may not resolve or try factual issues on a motion for summary judgment.” Phone–Mate, Inc. v. United States, 690 F.Supp. 1048, 12 CIT 575, 577 (1988), aff'd, 867 F.2d 1404 (Fed.Cir.1989). Instead, it must view the evidence “in a light most favorable to the nonmovant” and draw “all reasonable inferences ... in the nonmovant's favor.” Avia Group International, Inc. v. L.A. Gear California, Inc., 853 F.2d 1557, 1560 (Fed.Cir.1988).

IV

DISCUSSION

Jurisdiction is available under 28 U.S.C. § 1581(a). 19 U.S.C. § 1466(a) does not apply generally to all vessel work, see infra Part IV.A.1, or specifically to all painting, see infra Part IV.A.2. The factors frequently cited by Customs in its administration of that provision are not necessarily determinative as to the nature of the work at issue. See infra Part IV.A.3. Defendant's arguments in favor of summary judgment are not persuasive, see infra Part IV.B.1, and material facts remain in dispute, see infra Part IV.B.2. Accordingly, summary judgment is not appropriate.

ALegal Framework

19 U.S.C. § 1466(a) Applies Only To Equipment And Repairs

19 U.S.C. § 1466 reflects a Congressional desire to “protect the American shipbuilding and repairing industry.” Texaco Marine Services, Inc. v. United States, 44 F.3d 1539, 1545 (Fed.Cir.1994) (quoting Erie Navigation Co. v. United States, 83 Cust.Ct. 47, 475 F.Supp. 160, 163 (1979)). The 50 percent ad valorem duty imposed by the statute was first prescribed in 1866. See Foreign Repairs to American Vessels, 66 Fed.Reg. 16,392, 16,392 (March 26, 2001). The statute's current (and pertinent) version provides in relevant part that:

[t]he 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...