Extension of Time Limit in Which To File Vessel Repair Documents

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 4

RIN 1515-AB42

[T.D. 94-41]

Extension of Time Limit in Which To File Vessel Repair Documents

AGENCY: Customs Service, Department of the Treasury.

ACTION: Final rule.

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SUMMARY: This document amends the Customs Regulations to extend the

time limit allowed to vessel operators to file documentation submitted

in connection with vessel repair entries, including applications for

relief from the assessment of duties under the vessel repair statute.

It also amends the regulations to require that any shipyard cost

estimates available be submitted at the time that a vessel repair entry

is made. These changes will expedite the decision process in

determining duty liability.

EFFECTIVE DATE: May 19, 1994.

FOR FURTHER INFORMATION CONTACT: Bruce Friedman, Office of Trade

Operations, 202-343-0024 (operational matters), or Larry L. Burton,

202-482-6940 (legal matters).

SUPPLEMENTARY INFORMATION:

Background

On January 13, 1993, a document was published in the Federal

Register (58 FR 4114) soliciting comments regarding a Customs proposal

to amend the Customs Regulations regarding the time limit available for

the submission of documentation in support of required vessel repair

entries.

Section 1466 of title 19 of the United States Code provides that a

duty of 50 per cent ad valorem shall be assessed upon the value of

repairs accomplished outside of the United States on certain American-

flag vessels. The statute itself and numerous judicial and

administrative interpretations provide exceptions to the assessment of

duty under specific circumstances.

The statutory mandate is implemented under section 4.14 of the

Customs Regulations (19 CFR 4.14), which provides the necessary working

guidelines for Customs as well as vessel operators. Among the matters

set forth in Sec. 4.14 are the procedures for making entry and for

seeking administrative refund or remission of assessed duty. It is

required that American-flag vessels submit a vessel repair entry to

Customs within 5 days of arrival from a foreign port following any

shipyard work. Depending upon whether actual shipyard invoices are

available at the time an entry is submitted, the regulations provide

that such entry may be denominated either a complete or incomplete

submission.

The regulations provide, absent the grant of an extension, that in

the case of entries submitted as incomplete accounts, a full and

complete account of foreign shipyard costs incurred must be submitted

to Customs within 60 days from the date of vessel arrival in the United

States (19 CFR 4.14(b)(2)(ii)).

It has long been heard from vessel operators that the matter of

final charges is frequently the subject of negotiation between

themselves and foreign shipyards. It was claimed that this process

often makes it impossible to meet the regulatory submission deadline

without the necessity of seeking an extension from Customs. Customs had

been reluctant to extend the filing period, recognizing that extending

the period for the gathering of all evidence has the inevitable effect

of delaying the eventual collection of the revenue. Customs has come to

believe, however, that such a delay already existed owing to the large

number of operators seeking extensions, and that a savings could be

realized by not having to process numerous requests for extension. With

publication of the January 13, 1993, notice, Customs proposed extending

the filing period from the 60-day limit to a period of 90 days.

At the same time, Customs took the opportunity to propose an

additional amendment to the vessel repair regulations. In the case of

vessel repair entries submitted as incomplete accounts, Customs

requires that the best estimate of foreign repair costs be provided

pending receipt of actual final invoices. Such statements of cost are

used to calculate the amount of the bond or duties that must be

deposited with Customs prior to departure of vessels from port.

It has been noted that on some occasions, final invoice amounts

vary greatly from initially estimated costs, and that the revenue has

been inadequately protected by small deposits or bonds. It is also

known that in many cases, written estimates from foreign shipyards have

been provided to vessel operators prior to the commencement of repair

operations. Customs merely proposed to require that when a written

estimate has been provided to a vessel operator, documentary evidence

of that estimated cost must be filed at the time of submission of an

incomplete vessel repair entry.

Discussion of Comments

Five comments were received in response to the proposal. Four were

from vessel operators and interested industry members, and one was from

within the Customs Service. A discussion of the specific comments

follows.

Comment: The additional time proposed to submit documentation is

needed and its addition is welcomed. However, a major and much more

general review of the regulations should be undertaken. As for the

proposal to require the submission of written cost estimates which may

be in the possession of a vessel operator, that element should be

deleted. Such estimates are not always accurate and inclusion of this

element in the regulations may be interpreted by Customs officers in

the field as a requirement for all vessel entries.

Response: Customs is planning to undertake a total revision of the

vessel regulations, to include those governing vessel repair matters,

as soon as practicable. As to the accuracy of written estimates,

Customs prefers to have some written benchmark for establishing cost

rather than just a best guess. Further, there are only three Vessel

Repair Liquidation Units, all of which are familiar with and well

practiced at applying the Customs Regulations. All three Units are in

frequent contact with Customs Headquarters and thus any interpretive

problems could be quickly resolved.

Comment: The focus should be on elimination of the 50 per cent duty

on foreign repairs to United States vessels. The duty is an operational

and administrative burden to vessel operators.

Response: The comment is non-responsive to the published notice and

solicitation of comments. The Customs Service merely enforces the

statute as enacted by the Congress. Any change regarding the amount of

the vessel repair duty would require Congressional action. If repeal of

the statute is desired, it would be appropriate to lobby the Congress

and not Customs.

Comment: While in general agreement with the proposal, it should be

recognized that the final cost of foreign repairs is invariably less

than the written estimates received from shipyards. It is unfair to

liquidate entries 90 days after entry based upon such high estimates.

Response: In addition to the initial filing period, the regulations

also provide for a 30-day field-granted filing extension as well as an

additional filing extension of unspecified length to be granted by

Customs Headquarters. These combined periods in addition to the initial

90 days should provide sufficient time to obtain final cost figures

upon which liquidation may be based.

Comment: The extension to a 90-day filing period is needed and

welcomed. In regard to the additional element concerning the submission

of cost estimates, the wording of the proposal should be altered to

make it clear that actual estimate documents need not be submitted, and

that only the estimated cost amounts are needed.

Response: Customs does not expect cost estimates to be obtained by

all vessel operators anticipating the filing of vessel entries.

However, to the extent that such documentation already exists, Customs

does not believe it to be overly burdensome to require the submission

of copies of those documents. Given the fact that the regulations allow

five working days after arrival for the submission of a vessel repair

entry, it should be possible to provide existing written cost estimates

to Customs by the time the entry process is completed.

Comment: The addition of 30 days to the filing time is unnecessary

and will only serve to further delay the entry liquidation process.

Further, the language of the proposal should have been written to

require the submission of written estimates with all entries which are

filed as incomplete.

Response: Customs disagrees. The proposal was limited to requiring

the submission of existing estimated cost documents. Customs does not

wish to require that each operator generate new documentation and

submit it during the entry process.

Conclusion

After careful consideration of all comments received and further

review of the matter, it has been determined that the amendments should

be adopted.

Executive Order 12866

This document is not a ``significant regulatory action'' as defined

in E.O. 12866.

Regulatory Flexibility Act

Based on the above discussion, pursuant to the provisions of the

Regulatory Flexibility Act (5 U.S.C. 601 et seq.), it is certified that

the amendment will not have a significant economic impact on a

substantial number of small entities. Accordingly, they are not subject

to the regulatory analysis or other requirements of 5 U.S.C. 603 and

604.

Drafting Information

The principal author of this document was Larry L. Burton, Carrier

Rulings Branch, U.S. Customs Service. However, personnel from other

Customs offices participated in its development.

List of Subjects in 19 CFR Part 4

Customs duties and inspection, Reporting and recordkeeping

requirements, Vessels.

Amendments to the Regulations

Part 4, Customs Regulations (19 CFR part 4), is amended as set

forth below:

PART 4--VESSELS IN FOREIGN AND DOMESTIC TRADES

1. The general authority citation for part 4, Customs Regulations

(19 CFR part 4) and the relevant specific authority citation for

Sec. 4.14 (19 CFR 4.14) continue to read as follows:

Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1431, 1433, 1434, 1624;

46 U.S.C. App. 3, 91;

* * * * *

Section 4.14 also issued under 19 U.S.C. 1466, 1498;

* * * * *

Sec. 4.14 [Amended]

2. Section 4.14(b)(1) is amended by removing the reference to

``Sec. 113.14(m)'' and adding in its place ``Sec. 113.13''.

3. Section 4.14(b)(2)(ii) introductory text, (b)(2)(ii)(B), and

(d)(1)(ii) are amended by removing the references to ``60'' where they

appear, and adding in their places references to ``90.''

4. Section 4.14(b)(2)(ii) introductory text is amended by adding

after the word ``arrival'' in the second sentence, the following new

language: ``, except that evidence of estimated foreign shipyard cost

in the possession of or known to the vessel operator must be submitted

at the time entry is made.''

Samuel H. Banks,

Acting Commissioner of Customs.

Approved: March 31, 1994.

John P. Simpson,

Deputy Assistant Secretary of the Treasury.

[FR Doc. 94-9282 Filed 4-18-94; 8:45 am]

BILLING CODE 4820-02-P