source: Caselaw Access Project

author: RESTANI, Judge:

license: Public Domain

text:
    TODD SHIPYARDS CORP., Plaintiff, v. The UNITED STATES, Defendant.
    Court No. 83-12-01754.
    United States Court of International Trade.
    Sept. 20, 1985.

      Haight, Gardner, Poor & Havens (James J. Sentner, Jr.), Houston, Tex., for plaintiff.
    Richard K. Willard, Acting Asst. Atty. Gen., Washington, D.C., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office, Judith M. Barzilay, Civil Div., U.S. Dept, of Justice, New York City, for defendant.
   OPINION AND ORDER

RESTANI, Judge:

This action involves the proper classification of a large floating drydock (the Big “T”) exported from Japan and entered at the port of Houston, Texas, on February 25, 1982. The entry was classified by the United States Customs Service (Customs) under item 696.50 of the Tariff Schedules of the United States (TSUS) which encompasses “floating docks and parts thereof” and was liquidated and assessed duty at $1,034,411 (4.5% ad valorem). Plaintiff, Todd Shipyards Corporation, claims the merchandise is properly classified as a vessel within the meaning of general headnote 5(e) of the TSUS (1982) and should therefore enter the country free of duty. Plaintiff has met the jurisdictional requirements for relief in this court under 28 U.S.C. §§ 1581(a) and 2631(a) (1982). Defendant moves and plaintiff cross-moves for summary judgment pursuant to Court of International Trade Rule 56. Both parties agree that there are no genuine issues of material fact in dispute and that this matter is ripe for decision.

For purposes of the customs laws, the term “vessel” is defined in 19 U.S.C. § 1401 (1982), which provides:

(a) The word “vessel” includes every description of water craft or other contrivance used, or capable of being used, as a means of transportation in water, but does not include aircraft.

This definition is also found at 1 U.S.C. § 3 (1982), entitled “ ‘Vessel’ as including all means of water transportation,” which is part of the rules of construction of the United States Code. Part 6, subpart D of schedule 6 of the TSUS (1982), which applies to “Pleasure boat; Floating Structure,” mentions the word “vessels.” The headnote to that subpart provides:

1. This subpart does not cover—
(i) yachts or pleasure boats provided for in items 696.05-.10 if in use or intended to be used in trade or commerce, or if brought into the United States by non-residents thereof for their own use in pleasure cruising; or
(ii) vessels which are not yachts or pleasure boats (see general headnote 5(e)) [emphasis added].

General headnote 5(e) provides:

5. Intangibles. For the purposes of headnote 1 —
(e) vessels which are not “yachts or pleasure boats” within the purview of subpart D, part 6, of schedule 6, are not articles subject to the provisions of these schedules.

TSUS, general headnote 5(e) (1982). Therefore, if the Big “T” is a vessel it cannot be classified and found dutiable under part 6, subpart D of schedule 6 as a “floating dock.”

The undisputed facts in this case reveal that: The Big “T” is a floating dry dock, measuring 787.5 feet in length and 200.2 feet in breadth, with a registered depth of 17.0 feet. As a floating dry dock, the primary function of the Big “T” is to raise vessels out of the water to allow maintenance and repair of the normally underwater portion of the vessel. The Big “T” performs this function by being partially submerged to permit a vessel to enter it. Once the vessel is in place, the Big “T” is floated to raise the ship and expose the underwater portion of the ship. The Big “T” was constructed by Kawasaki Heavy Industries, Ltd., in Japan, for sale to plaintiff Todd Shipyards Corporation. Since it is not self-powered, the Big “T” was towed from Sakaide, Japan, to Galveston, Texas. On this voyage, the Big “T” carried four people, cargo, and lifesaving and firefighting equipment. The structure was also equipped with navigation lights and was protected by marine insurance against damage or loss while in transit (the insurance also covered injuries to the crew). Since arriving in Texas, the Big “T” has been used exclusively in its ship repair capacity. Plaintiff intends to tow the Big “T” between plaintiffs various facilities along the United States Gulf and West Coast to perform the ship repair function. In the course of such movement, vehicles, equipment, and materials for shipyard operations at the destination facility may be transported aboard the Big “T”. Plaintiff claims that these activities, coupled with the transportation of cargo during the towing of the Big “T” from Japan to the United States, justify classification of the Big “T” as a vessel for tariff purposes.

Although the definition of the term “vessel” is quite broad, “judicial precedent has limited the definition of ‘vessel’ for tariff purposes.” United States v. Seagull Marine, 67 CCPA 89, 93, C.A.D. 1251, 627 F.2d 1083, 1085 (1980), rev’g 475 F.Supp. 158 (1979). Specifically, “the scope of the term ‘vessel’ has been narrowed to limit duty free treatment to watercraft that are instrumentalities of commerce as opposed to articles of commerce.” Elizabeth River Terminals, Inc. v. United States, 1 CIT 165, 170, 509 F.Supp. 517, 520 (1981) (emphasis in original) (quoting Seagull Marine, 67 CCPA at 93, 627 F.2d 1083). A “vessel” is not defined by “merely size and structure, or self-propulsion, but rather capability and design to serve as a means of transportation in water.” Elizabeth River, 1 CIT at 169, 509 F.Supp. at 520 (emphasis in original). Thus, although courts have occasionally itemized characteristics that were helpful in determining classification as a vessel, the presence or absence of specific characteristics is not determinative.

This view is reflected in Thayer v. United States, 2 Ct.Cust.App. 526, 529,

T. D. 32,252 (1912), in which the court found that Congress did not intend the term “vessel” to include structures used for “temporary, fugitive, impractical, although possible, ... transportation of articles or things” on water. In this case, the fact that the Big “T” was used as a vessel in a fugitive manner as it was being transported from Japan to the United States is not determinative of its classification. Specifically, the fact that the Big “T” carried a crew, cargo, and lifesaving and firefighting equipment, had navigation lights, and was protected by marine insurance when it was towed from Japan to the United States does not make it an instrumentality of commerce and thus a vessel. This use was temporary and incidental to its main function as a floating dry dock. As a predecessor to the Court of Appeals for the Federal Circuit stated ten years after Thayer,

[t]he fact that the structure has the shape of a vessel, or has been once used as one, or could by proper appliances be again used as such, cannot affect the question. The test is the actual status of the structure as being fairly engaged in or suitable for, commerce or navigation and as a means of transportation on water.

Hitner Sons Co. v. United States, 13 Ct. Cust.App. 216, 221, T.D. 41,175 (1922).

The recognition of the primary purpose of a structure as critical to its classification was also recognized in United States v. Bethlehem Steel Co., 53 CCPA 142, C.A.D. 891 (1966), cert. denied, 386 U.S. 912, 87 S.Ct. 865, 17 L.Ed.2d 786, reh’g denied, 386 U. S. 987, 87 S.Ct. 1284, 18 L.Ed.2d 241 (1967) and in Vancor Steamship Corp. v. United States, 76 Cust.Ct. 4, 406 F.Supp. 810 (1976). Bethlehem Steel involved the classification of midbodies towed across the Atlantic Ocean. The appellate court found that the midbodies were not vessels at the time of importation because they made the trip across the ocean “for the exclusive purpose, and were designed and intended for no other reason than to serve as midsections of ore carriers.” Bethlehem Steel, 53 CCPA at 153. Likewise, in Vancor Steamship, this court found that a forebody towed across the Atlantic Ocean was not a vessel because it “made the trip across the ocean for the exclusive purpose, and was intended for no other reason than to be used in the rebuilding of an American flag vessel____” Vancor Steamship, 76 Cust.Ct. at 9, 406 F.Supp. 810. The Big “T” was designed as a dry dock — a means of lifting large ships out of the water so that they can be repaired. Its use as a transporter of cargo was temporary and incidental to the necessary towing of the Big “T” to Texas for use as a dry dock. Plaintiff notes that it intends to tow the Big “T” between its various facilities and argues that the carrying of cargo on these trips substantiates its claim that the Big “T” is a vessel. However, since the towing of the Big “T” between facilities will occur solely due to the need for the Big “T” to perform its ship repair function at these various sites, the incidental use of the Big “T” to carry equipment does not transform it from a dry dock into a vessel.

The fact that the Big “T” was designed as a dry dock also distinguishes the present case from Elizabeth River. Elizabeth River involved in part the classification of a barge that was purchased for use as a crane platform. 1 CIT at 166, 509 F.Supp. at 518. This court classified the structure in question, the Cambria, as a vessel. In so doing the court stated: “There is no question that [the Cambria ] had been designed and intended for use as a means of transportation in water. Furthermore, there is no evidence that it had undergone any major structural alterations to change this primary purpose or capability.” Id. at 170, 509 F.Supp. at 521. Unlike the Cambria, the Big “T” is not designed nor is it intended for use as a means of transportation in water. Instead, its function is to serve as a dry dock for the repair of large ships and it has in fact served exclusively in this capacity since reaching the United States.

The Big “T” was designed for use as a dry dock. Therefore, the fugitive use of the structure to transport cargo does not transform the Big "T” from a dry dock into a vessel, for tariff purposes. Accordingly, defendant’s motion for summary judgment is granted and plaintiff’s cross-motion for summary judgment is denied. This ease is hereby dismissed.

      . General Headnote 1 provides generally for duties on articles imported into the United States.

      . The court does not agree with plaintiffs argument that "vessel” as defined by case law regarding the Rivers and Harbors Act, 33 U.S.C. §§ 409-15 (1982), is dispositive in this case. See International Spring Mfg. Co. v. United States, 85 Cust.Ct. 5, 8, C.D. 4862, 496 F.Supp. 279, 282 (1980), aff'd, 68 CCPA 13, C.A.D. 1257, 641 F.2d 875 (1981) ("[T]he definition of a term contained in a statute or regulation dealing with nontariff matters ... does not determine the common meaning of that term for tariff purposes.”); United States v. Mercantil Distribuidora, 43 CCPA 111, 116, C.A.D. 617 (1956) ("Unless the tariff term should be shown to have been drafted with reference to the regulation, this court cannot avoid its duty of inquiring into the meaning intended for tariff purposes, which may or may not have been the same as that of the regulation."). Although the tariff and general definitions of "vessel” arise from the same words, time and precedent have varied those definitions.


author: WATSON, Judge:

text:
    ASSOCIATION OF FOOD INDUSTRIES, INC., (PISTACHIO GROUP), Zenobia Company, J.F. Braun and Sons, Inc., American Pistachio Corporation, Setton International Food, Inc., Ace Pecan Company, John B. Sanfillippio and Sons Company, Inc., Plaintiffs, v. William VON RAAB, Commissioner, United States Custom Service, Defendant, and California Pistachio Commission, et al., Defendant-Intervenors.
    Court No. 85-11-01578.
    United States Court of International Trade.
    Dec. 17, 1985.
    Olsson and Frank, P.C., (Richard L. Frank, and David F. Weeda, Washington, D.C., on brief), for plaintiffs.
    Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Platte B. Moring, III, Washington, D.C., for defendant.
    Busby, Rehm & Leonard P.C., (Will E. Leonard, Jonathan Hemenway Glazier and Munford Page Hall, II, Washington, D.C., on brief), for defendant-intervenors.
   MEMORANDUM OPINION AND ORDER

WATSON, Judge:

The plaintiff importers and processors of pistachio nuts brought this action for declaratory and injunctive relief against a ruling of the Customs Service, the effect of which would be that the containers of pistachio nuts which they sell must be marked to show the country of origin of the nuts.

The ruling in question, T.D. 85-158, was published on September 18, 1985 (50 Fed. Reg. 37842) and determined that roasting and other treatment of imported pistachio nuts did not result in their substantial transformation. Substantial transformation is the standard used by the Customs Service to determine whether articles are exempt from the general requirement of Section 304 of the Tariff Act of 1930, as amended, (19 U.S.C. § 1304) that all articles of foreign origin be marked to indicate the country of origin.

The effective date of the ruling in question was postponed for two months and is now scheduled to go into effect on December 18, 1985 (50 Fed.Reg. 42683, October 22, 1985). Further postponement of the effective date was denied by the Commissioner of Customs on November 8, 1985.

On November 12, 1985, plaintiffs commenced this action, which, together with the government’s cross-motion to dismiss, has been given an expedited schedule of briefing. A hearing on all pending matters was held on December 12, 1985.

As a result, the court has determined that the action does not satisfy the jurisdictional requirements of 28 U.S.C. § 1581(h), the only jurisdictional basis available to plaintiffs for judicial review prior to the importation of the affected articles.

The provision of 28 U.S.C. § 1581(h) reads as follows:

“(h) The Court of International Trade shall have exclusive jurisdiction of any civil action commenced to review, prior to the importation of the goods involved, a ruling issued by the Secretary of the Treasury, or a refusal to issue or change .such a ruling, relating to classification, valuation, rate of duty, marking, restricted merchandise, entry requirements, drawbacks, vessel repairs, or similar matters, but only if the party commencing the civil action demonstrates to the court that he would be irreparably harmed unless given an opportunity to obtain judicial review prior to such importation.”

The action described in 28 U.S.C. § 1581(h) is also controlled by the terms of 28 U.S.C. §§ 2639(b) and 2643(c)(4) which read as follows:

28 U.S.C. § 2639
(b) In any civil action described in section 1581(h) of this title, the person commencing the action shall have the burden of making the demonstration required by such section by clear and convincing evidence.
28 U.S.C. § 2643(c)
# * * * # *
(4) In any civil action described in section 1581(h) of this title, the Court of International Trade may only order the appropriate declaratory relief.

It is clear that this dispute centers on the consequences of a ruling, the effect of which is sufficiently certain to represent a genuine legal dispute. This disposes of the government’s argument that the matter is not yet sufficiently related to a specific import transaction to obtain jurisdiction under subsection (h). In this case, the consequences of the ruling will be felt by all importations of pistachios made after December 18, 1985.

On the question of the ripeness of the dispute, the case of Pagoda Trading Co. v. United States, 6 CIT-, 577 F.Supp. 22 (1983) is easily distinguished. In that unsuccessful attempt to obtain pre-importation judicial review, it was not clear that the classification ruling involved would apply to the articles which plaintiff was going to import. Here there is no such doubt; the legal dispute is sufficiently concrete, and it is the failure to show irreparable harm which is the impediment to jurisdiction.

The general appropriateness of 28 U.S.C. § 1581(h) also disposes of plaintiffs’ attempt to assert an alternative jurisdictional basis under 28 U.S.C. § 1581(i), the residual jurisdiction of this court. It is plain that an action designed to obtain judicial review of a ruling prior to importation cannot avoid the special provision of § 1581(h) by stating a cause of action under the court’s residual jurisdiction. No claimant would willingly choose the strictures of 1581(h) if they could be avoided by bringing the action under 1581(i), and the former provision would become a dead letter. See generally, United States v. Uni royal, Inc., 69 CCPA 179, 687 F.2d 467 (1982).

The fact remains that for those who consider themselves sufficiently aggrieved by rulings to seek judicial review prior to importation of the articles involved, 28 U.S.C. § 1581(h) is the proper jurisdictional vehicle. The question then becomes whether the harm of the ruling is sufficient to justify an exception to the normal post-importation procedures for obtaining relief.

In this action the harm is alleged to be the cost of conforming to the country-of-origin labeling requirements. The court has carefully examined the affidavits submitted by the parties on this point. It is the considered judgment of the court that the costs of conforming to the ruling have not been shown to be of such magnitude as to constitute a clear threat to the profitable continuation of a prudently operated business. The court has not been persuaded that the use of adhesive labels to add the country of origin is an unacceptable or impractical interim measure. This method would allow the use of current label inventories until they are depleted.

In any event, even the prospect of having to print completely new labels, was not sufficiently connected to injury to the overall financial health of the plaintiffs to demonstrate the requisite harm.

In sum, the court has not been persuaded that the normal post-importation methods of obtaining judicial relief will be inadequate to deal with the grievances raised by plaintiffs.

For these reasons the court decides to grant the government’s cross-motion to dismiss the action.

In this disposition of the action, the court does not reach the merits of plaintiffs’ claims that the ruling was contrary to law, arbitrary, capricious and discriminatory.

For the reasons given above it is hereby

ORDERED that defendant’s motion to dismiss be, and the same hereby is, granted.