HQ 0111474 - Policy Regarding 19 U.S.C. 1466(h); Spare Parts; Retroactive Effect on Pending Customs Cases - United States International Trade Commision Rulings

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HQ 111474

March 6, 1991

VES-13-18-CO:R:IT:C 111474 GEV

CATEGORY: CARRIER

Edward L. Merrigan, Esq.
6000 Connecticut Avenue, N.W.
Washington, D.C. 20815-4238

RE: Policy Regarding 19 U.S.C. 1466(h); Spare Parts; Retroactive Effect on Pending Customs Cases

Dear Mr. Merrigan:

This is in response to your letter of January 14, 1991, referencing our letter to you dated December 21, 1990 (111280 LLB) regarding Customs interpretation and implementation of the newly-enacted Public Law 101-382 (section 484E). There are two matters in our letter to which you take exception and you therefore request that we give them further consideration.

FACTS:

On August 20, 1990, the President signed into law Pub. L. 101-382, section 484E of which amends section 466, Tariff Act of 1930, as amended (19 U.S.C. 1466), by adding a new paragraph (h) to the statute (19 U.S.C. 1466(h)).

The new section 1466(h) provides that:

(h) The duty imposed by subsection (a) of this section shall not apply to--

(1) the cost of any equipment, or any part of equipment, purchased for, or the repair parts or materials to be used, or the expense of repairs made in a foreign country with respect to, LASH (Lighter Aboard Ship) barges documented under the laws of the United
States and utilized as cargo containers, or

(2) the cost of spare repair parts or materials (other than nets or nettings) which the owner or master of the vessel certifies are intended for use aboard a cargo vessel,
documented under the laws of the United
States and engaged in the foreign or coasting trade, for installation or use on such vessel, as needed, in the United States, at sea, or in a foreign country, but only if duty is paid under appropriate commodity classifications of the Harmonized Tariff
Schedule of the United States upon first entry into the United States of each such spare part purchased in, or imported from, a foreign country.

The effective date of the amendment is stated as follows:

Effective Date.--The amendment made by this section shall apply to--

(1) any entry made before the date of enactment of this Act that is not liquidated on the date of enactment of this Act, and (2) any entry made--
(A) on or after the date of enactment of this Act, and
(B) on or before December 31, 1992.

Based upon the language of these new provisions of law, you provided advice to your clients, outlined in your letter to us dated August 28, 1990, and asked that we determine whether the Customs Service is in accord with that advice. By letter dated December 21, 1990 (111280 LLB) we provided you with the comments you requested. You now take exception to the following two matters addressed in our December 21 letter.

The first matter of concern is the spare parts exemption. You reference the second paragraph on page 4 of our letter of December 21 which states in part that "...the cost of imported parts and materials upon which duties have previously been paid under the Harmonized Tariff Schedule of the United States will not be subject to vessel repair duties." While we are both in accord with this basic premise, you take exception to the last sentence of the same paragraph which states in part that, "This benefit...is subject to proof of prior importation and duty payment." (emphasis added)

You state that this limitation is unsustainable because it fails to take into account the Senate Finance Committee Report (S. Rept. 101-252) which is reflected in the wording of section 1466(h) which states that the duty exemption becomes operative to those parts which are duty-paid under the appropriate commodity classification of the Harmonized Tariff Schedule of the United

States "upon first entry into the United States of each such spare part purchased in, or imported from, a foreign country." (emphasis added)

It is apparent that the points of contention/confusion are the terms "prior importation" and "first entry." This distinction, however, is merely a question of semantics. Obviously, a foreign part being entered for the first time is not susceptible of proof of prior importation. We agree with your statement that spare parts purchased by a U.S.-flag vessel during a foreign voyage are exempt under 19 U.S.C. 1466(h) if duty is paid on those parts under the appropriate HTSUSA commodity classification "at the time of their first entry into the United States" on board that vessel provided the parts are not installed on that vessel. We also agree that spare parts previously imported into the United States by air or other vessel and later placed aboard a U.S.-flag vessel for use, are likewise exempt under 19 U.S.C. 1466(h) if duty under the appropriate HTSUSA commodity classification was paid "upon first entry into the United States" by air or aboard the first mentioned vessel.

The second point with which you take exception is in regard to the retroactive impact of 19 U.S.C. 1466(h) on pending Customs cases involving entries made before the August 20, 1990, date of enactment. Specifically, you object to the last paragraph of our December 21, 1990, letter which states:

"The final statement is also generally correct. The benefits of the new law will be applied to all entries which were not finally liquidated on or before August 20, 1990. Exception is taken, however, to the definition of the phrase "finally liquidated" appearing in the incoming request for ruling. It is stated that an entry would not be considered finally liquidated if "...duty thereon under 19 U.S.C. 1466 remained 'unpaid' because of pending administrative or judicial proceedings." Customs does not consider that payment of final liquidation amount bears any relation to the liquidation of an entry. Under the Customs Regulations (19 C.F.R. 159.9(c)), except for entries liquidated by operation of law, entries are considered to be liquidated on the date stamped on the bulletin notice of liquidation, which coincides with the date that notice is posted or lodged in the Customhouse." (Emphasis Supplied).

In noting your objection to our position as stated above, you reiterate the position on this matter as espoused in your letter of August 28, 1990; that is, the term "liquidated" as used in 19 U.S.C. 1466(h) is intended to mean "finally liquidated" and an entry is not "finally liquidated" if it is still the subject of administrative or judicial proceedings. In support of this position you cite the following: a statement of Senator Breaux to this effect (Congressional Record, April 20, 1990, p. S4715);
section 514(a) of the Tariff Act of 1930 (19 U.S.C. 1514(a)) which provides, in part, that the liquidation of an entry shall be final unless a protest is timely filed, or if a court action is filed to contest denial of a protest; and Hambro Automotive Corp. v. United States, 603 F.2d 850, 853 (CCPA, 1979); United States v. Desiree Intern USA Ltd., 497 F.Supp. 264, 265 (D.C. N.Y., 1980); and Computime, Inc. v. United States, 622 F.Supp. 1083 (CIT 1985).

Upon further review of this matter we are in accord with the position as stated by Senator Breaux that the new amendments to section 1466 "...are intended to apply to any entry made prior to the date of enactment of [this Act] which is not finally liquidated when the bill becomes law." Accordingly, for purposes of the retroactive impact of new section 1466(h) the benefits of said legislation will inure to those entries which were not finally liquidated (i.e., for which no timely protest was filed or court action initiated) on or before August 20, 1990.

Sincerely,

Harvey B. Fox

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