Texaco Marine Services, Inc. v. U.S., 93-1354

• Decision Date: 29 December 1994
• Docket Number: No. 93-1354,93-1354
• Citation: 44 F.3d 1539
• Parties: TEXACO MARINE SERVICES, INC. and Texaco Refining and Marketing, Inc., Plaintiffs-Appellants, v. The UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1539

44 F.3d 1539

16 ITRD 2249

TEXACO MARINE SERVICES, INC. and Texaco Refining and Marketing, Inc., Plaintiffs-Appellants, v. The UNITED STATES, Defendant-Appellee.

No. 93-1354.

United States Court of Appeals Federal Circuit.

Dec. 29, 1994.

Sharon Steele Doyle and Robert T. Givens, Givens & Kelly, Houston, TX, argued, for plaintiffs-appellants.

Bruce N. Stratvert, Commercial Litigation Branch, Dept. of Justice, New York City, argued, for defendant-appellee. With him on the brief were Frank W. Hunger, Asst. Atty. Gen., David M. Cohen, Director and Joseph I. Liebman, Atty. In Charge, Intern. Trade Field Office. Of counsel was Stephen Berke, Office of the Asst. Chief Counsel, Intern. Trade Litigation, U.S. Customs Service.

Lauren R. Howard, Collier, Shannon, Rill & Scott, Washington, DC, was on the brief, for amicus curiae, Shipbuilders Council of America, Inc.

Ernest J. Corrado, President and Counsel for the American Institute of Merchant Shipping, Washington, DC, was on the brief, for amicus curiae, The American Institute of Merchant Shipping (AIMS).

Before RICH, MAYER, and SCHALL, Circuit Judges.

SCHALL, Circuit Judge.

Texaco Marine Services, Inc. (TMSI) and Texaco Refining and Marketing, Inc. (TRMI) (collectively "Texaco") appeal from the March 10, 1993 judgment of the United States Court of International Trade, Texaco Marine Servs., Inc. v. United States, 815 F.Supp. 1484, which denied Texaco's motion for summary judgment, granted the government's cross-motion for summary judgment, and dismissed Texaco's action. In the opinion supporting its judgment, the Court of International Trade determined that certain expenses for cleaning, wrapping heating coils, and blanking cargo lines upon a United States-flagged vessel by a foreign crew were integral to foreign repairs subject to the fifty percent ad valorem duty of the vessel repair statute, 19 U.S.C. Sec. 1466 (1988), because the expenses would not have been necessary but for the repairs. Id. at 1486. Based upon that determination, the court held that the expenses were "expenses of repairs" within the meaning of the vessel repair statute and therefore subject to the ad valorem duty. We affirm.

BACKGROUND

I. The Vessel Repair Statute

The vessel repair statute, first enacted in 1866, imposes a fifty percent duty on the value of "expenses of repairs" made in a foreign country upon United States-flagged vessels. The statute, in subsection (a), provides in pertinent part:

(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 19 U.S.C. Sec. 1466(a) (1988). If expenses incurred in a foreign port are not "expenses of repairs" within the meaning of the statute, the expenses are not subject to the vessel repair duty. That is the case, for example, where the expenses are for routine cleaning of the vessel. See, e.g., Northern Steamship Co. v. United States, 54 Cust.Ct. 92, 96-98 (1965) (finding that certain expenses were for routine cleaning and not for repair or restoration of the vessel because of deterioration and damage, and therefore holding that such expenses were not subject to the vessel repair duty). ¹

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.

II. Facts of the Case

The subject vessel, the S.S. TEXACO GEORGIA (the GEORGIA), is an oil tanker registered under the laws of the United States. The GEORGIA is owned by TRMI and managed by TMSI. Commencing on June 16, 1987, and continuing until July 18, 1987, certain services and repairs were performed on the GEORGIA by foreign labor at the Hellenic Shipyards Co. (Hellenic) in Athens, Greece. Following the repairs, the GEORGIA returned to the United States, arriving in Port Arthur, Texas, on August 11, 1987. Upon arrival, TMSI declared and entered with the United States Customs Service (Customs) the expenses that were incurred for services and repairs performed on the GEORGIA in Greece (entry no. C21-0000060-6), as is required under 19 C.F.R. Sec. 4.14(b). ²

Four of the numerous itemized expenses in the entry are at issue in this appeal. Three of the four expenses were for cleaning performed subsequent to dutiable repairs. The fourth was for work associated with protective coverings used during dutiable repairs. The facts regarding the four expenses at issue--as set forth in uncontested documents, in an affidavit of Neal McPhee in support of Texaco's summary judgment motion, and in Texaco's appeal briefs--are as follows:

1. Clean-up following boiler room repairs: The first cleaning task is described in item B-27 of Hellenic's invoice to TMSI. Invoice item B-27 states: "After boiler repairs and other repairs are completed in the boiler room areas, furnish necessary facilities, materials and labour to clean completely all debris and accumulated soot in the upper and lower fire room...." Texaco did not dispute the dutiability of the expenses of repairs in the boiler room area. Neither did it dispute that at least some of the cleaned-up debris (e.g., soot, old brickwork, old insulation, casing sealer, and rust) was generated by the actual making of the repairs. Texaco argued, however, that a portion of the debris referred to in B-27 was not dutiable because it was trash (e.g., soft drink cans and plastic bags) left behind by the workers who performed the repairs in the boiler room area and therefore did not result from repair work itself.

2. Clean-up following cargo tank repairs: The second cleaning task is described in item G-2(g) of the invoice as follows: "All tanks cleaned by removal of grits, debris, etc. and left ready for cargo loading[,] also exposed decks and deck machineries cleaned." More 3. Clean-up following "after peak" tank repairs: The third cleaning task is described in invoice item H-29(f) as follows: "Removed all debris and sediment from After Peak, leaving ready for filling." The "after peak" tank is the extreme rear compartment in a vessel's hold where the ship narrows toward the sternpost. The cleaning of the after peak tank followed repair work on the tank. When the clean-up was finished, the tank was filled with fresh, distilled water. Texaco did not dispute the dutiability of the expenses of the repair work, and did not dispute that at least some of the cleaned-up debris (e.g., rust, scale, slack, air-borne materials) was generated by the repairs. As with the clean-up following repairs in the boiler room area, however, Texaco contended that expenses related to cleaning up debris left behind by the workers who performed the repairs were not dutiable.

                specifically, the item G-2(g) cleaning involved "sweeping and mopping inside the tanks and sweeping, mopping, shoveling, hosing down outside the tanks, and the removal and transport of debris off of the vessel."   The item G-2(g) cleaning work followed the grit-blasting and coating of fifteen of the GEORGIA's cargo tanks.  The work did not involve the tanks that were grit-blasted and coated, however.  Rather, it involved cleaning tanks that were left exposed to air-borne particles from the tanks that were being grit-blasted.  After the cargo tanks were cleaned, they were used to transport lubricating oils.  Texaco disputes the dutiability of the expenses from cleaning tanks that were not grit-blasted and coated
                

4. Protective coverings used during cargo tank repairs: The last expense related to protective coverings used in conjunction with the grit-blasting and coating repairs described above. The work relating to the protective coverings is described in item G-2(f) as follows: "Protected heating coils by wrapping in place, total 2661 meters and cargo lines blanked as necessary in way of removals." The heating coils were wrapped to prevent work crews from inadvertently coming in contact with the coils and damaging them. The blanking of the cargo lines involved covering the openings for the lines in the fifteen tanks that were grit-blasted and coated. The lines had to be blanked in order to prevent dirt and air-borne particles from entering them. Texaco contends that it did not request that the work set forth in invoice item G-2(f) be performed, although it is undisputed that Hellenic was paid for performing the work.

Customs concluded that the above-described expenses were dutiable as "expenses of repairs" within the meaning of the vessel repair statute. Thus, when Customs liquidated the GEORGIA's vessel repair entry and assessed duties in the amount of $294,846.38, the assessment included: (1) $17,454.50, as duties and interest on the cleaning expenses described above; and (2) $10,459.50, as duties and interest on the expenses associated with protective coverings described above. After the full amount of assessed duties was paid, Texaco filed a protest, arguing that the cleaning and protective covering expenses were not "expenses of repairs" within the meaning of the vessel repair statute. In due course, Customs denied the protest, whereupon Texaco filed suit in the Court of International Trade.

III. Proceedings in the Court of International Trade

In its motion for summary judgment pursuant to Rule 56(c), Ct.Int'l Trade R., Texaco argued that duties should not have been assessed on the cleaning expenses or on the expenses associated with protective coverings because those expenses were not "expenses of repairs" within the meaning of Sec. 1466(a). In cross-moving for summary judgment, the government countered that the subject expenses were "expenses of repairs" within the meaning of Sec. 1466(a) in that they were "integral to" and "necessary for" the dutiable repairs....