Slip Op. 11-141
UNITED STATES COURT OF INTERNATIONAL TRADE
____________________________________
:
HORIZON LINES, LLC, :
:
Plaintiff, :
: Before: WALLACH, Judge
v. : Court No.: 08-00009
:
UNITED STATES, :
:
Defendant. :
:
[Defendant’s Motion for a Directed Verdict is DENIED]
Dated: November 18, 2011
Williams Mullen (Evelyn M. Suarez, George H. Bowles, Dean A. Barclay, and Julia Forbes
Thompson) for Plaintiff Horizon Lines, LLC; and Robert S. Zuckerman, Of Counsel, 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 Jason M. Kenner); and
Paula Smith, U.S. Customs and Border Protection, Of Counsel, for Defendant United States.
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND JUDGMENT
Wallach, Judge:
I
STANDARD OF REVIEW
Pursuant to the court’s jurisdiction under 28 U.S.C. § 1581(a), the statute provides for
judicial review of denied protests filed in accordance with 19 U.S.C. § 1514. Although Customs’
decisions are entitled to a presumption of correctness under 28 U.S.C. § 2639(a)(1), the Court
makes its determinations upon the basis of the record made before the Court, rather than that
developed by Customs. See United States v. Mead Corp., 533 U.S. 218, 233 n.16, 121 S. Ct.
2164, 150 L. Ed. 2d 292 (2001). Accordingly, the Court makes the following findings of fact and
conclusions of law as a result of the de novo trial. See 28 U.S.C. § 2640(a).
II
FINDINGS OF FACT
1. Plaintiff Horizon Lines, LLC (“Plaintiff”) owns the Horizon Crusader, a U.S.-flagged
vessel.
2. In January 12, 2006, to February 8, 2006 the Crusader was drydocked at Guangzhou
Wenchong Shipyard (“GWS”) in the People’s Republic of China.
3. On October 5, 2001, the International Maritime Organization (“IMO”) had adopted the
International Convention of the Control of Harmful Anti-Fouling Systems on Ships
(“Convention”) which banned tin-based anti-fouling coatings forbidding the application
of tin-based anti-fouling coatings after January 1, 2003 and requiring that the tin-based
anti-fouling coatings on existing vessels be removed or sealed by January 1, 2008.
4. At the previous drydocking of the Crusader in 2003, among other work, the entire
underwater portion of the hull was coated with Hempel’s Anti-fouling Oceanic Tin-Free
Paint.
5. When the Crusader entered GWS in China in 2006, it was approximately three years
since its last application of anti-fouling paint.
6. Anti-fouling paint works in two ways: 1) it contains a biocide active or chemical which
inhibits marine growth and 2) it physically polishes or sloughs off the hull if marine
growth attaches to the paint.
7. Following the Crusader’s return to the United States, Horizon Lines submitted Customs
Form 226, “Record of Vessel Foreign Repair or Equipment Purchase.”
8. This form, as subsequently supplemented by the Application for Relief and associated
documentation, identified the work performed on the Crusader.
9. Customs reviewed this entry and associated submission and determined that, pursuant to
19 U.S.C. § 1466, Horizon Lines “would owe $251,077.63 on the entire entry which
included duties on the charges associated with the application of tin-free antifouling
paint.”
10. Horizon Lines protested portions of this determination, and Customs denied the protest in
part. See Customs Headquarters Ruling (“HQ”) H0151615 (October 23, 2007).
11. During the 2006 drydocking, the shipyard performed work on the Crusader consisting of
the complete removal of all coatings from the vessel’s underwater hull.
12. Those coatings included tin-bearing anti-fouling coatings and epoxy coatings.
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13. The decision by Horizon to drydock the Crusader and to remove those coatings was made
without knowledge by the decision-makers whether there was any blistering or corrosion
on the vessel’s underwater hull.
14. The decision by Horizon, at the time it was made, was part of a “fleet-wide concept”
solely based on the intention of Horizon to comply with the IMO’s Convention.
15. Testimony at trial by Joseph Walla provided the only percipient evidence regarding the
condition of the Crusader’s hull during that drydocking.
16. Walla’s testimony and the six admitted photographic exhibits demonstrated that at the
time of drydocking the Crusader’s hull had suffered only minimal blistering and
corrosion in the total amount of approximately ten (10) square meters.
17. Walla specifically testified, and the court believes his testimony, that when he physically
examined the underwater hull in drydock, he photographed anything “out of the
ordinary.”
18. The court specifically finds that all other testimony on this issue was speculative and
made by non-percipient witnesses.
19. While the court permitted qualification as an expert of the Government’s witness, Erik
Roberts, the court commented at the time that there was considerable doubt as to whether
any weight should be accorded to his testimony.
20. In fact, the court found Mr. Roberts’ testimony to be internally contradictory and declines
to accord any weight to his opinion that as much as 25% of the underwater hull was
blistered.
21. Mr. Roberts conceded at trial that his conclusions were based on reports which could be
erroneous.
22. Mr. Roberts testified that he relied upon a report by Gary Watson and that he did not
know if that report was an accurate description of the actual condition of the underwater
hull.
23. Mr. Roberts admitted that he would have no reason to disbelieve Mr. Walla’s testimony
that each of the photographs admitted as evidence represented, at most, one to two square
meters.
24. Mr. Roberts conceded at trial that calculations in the report he prepared were, in fact,
incorrect.
25. Similarly, James Dolan and Pete Saliaris were non-percipient witnesses as to the actual
physical condition of the underwater hull.
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26. The court did find Mr. Dolan provided useful, competent, and accurate testimony about
the underlying intent of the Convention, but his opinion testimony regarding the
condition of the vessel was speculative and unreliable.
27. The Government called Pete Saliaris as an adverse expert witness. Given the convoluted
nature of the questioning of Mr. Saliaris, his testimony was less useful to the court than it
might have been in other circumstances.
28. Mr. Saliaris certainly has a considerable degree of practical expertise in marine hull
coating systems. However, his testimony about the physical condition of the Horizon
Crusader was speculative and lacked a competent foundational basis.
29. Mr. Saliaris conceded at trial that until he heard Mr. Walla’s testimony he did not know
the “approximate size” depicted in the photographic evidence.
30. Accordingly, the court finds that the testimony of Mr. Dolan and Mr. Saliaris provides no
useful evidence regarding the amount of blistering which actually existed on the
underwater hull of the Horizon Crusader.
31. The paint company data sheets offered in evidence showing the existence of a 36-month
system were general guidelines at best, designed to foster paint sales and to insulate the
manufacturer against possible claims for defects. They did not accurately forecast the life
of an underwater hull coating system.
32. The court finds that the paint system in place on the underwater hull of the Crusader was
in good order in 2006 and would have lasted for an indefinite time past the drydocking
date.
33. The Court concludes that when the Crusader was drydocked in 2006 all cognizable
evidence demonstrates that the work performed on it was necessitated only by a desire on
the part of Horizon to comply with the Convention, and that any “repair” of blisters or
corrosion was minimal and solely incidental to Horizon’s purpose of compliance.
34. If any of these Findings of Fact should more properly deemed a Conclusion of Law it is
so designated.
III
CONCLUSIONS OF LAW
1. This court has jurisdiction over this matter pursuant to 28 U.S.C. §1581(a) and no
jurisdictional defects exist.
2. The Government is entitled to a “presumption of correctness” under 28 U.S.C. §
2639(a)(1) that the work performed on the Horizon Crusader was dutiable repairs, but
that presumption has been overcome by the facts determined in this trial.
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3. Under 19 U.S.C. §1466 the court must determine the primary purpose of the work in
order to conclude whether or not the work is dutiable. See H.C. Gibbs v. United States, 28
Cust. Ct. 318 (1952), aff’d, 41 C.C.P.A. 57 (1953).
4. The work performed on the Horizon Crusader was solely undertaken to comply with the
Convention, and as a matter of law, any repairs effected were incidental and irrelevant to
the nature of the work.
5. If the work performed had been intended to repair underwater hull damage, or if it had
actually repaired more than minimal and inconsequential underwater hull damage, then
the amounts expended would have to be allocated to repair and non-repair categories.
6. Given the factual findings of the court, however, it is clear that the Horizon Crusader’s
hull was in “good working order.” Horizon Lines v. United States, 752 Fed. Supp. 2d
1305, 1314 (CIT 2010).
7. Horizon’s protest was sufficiently distinct for Customs to completely comprehend its
nature and character, and it was neither overbroad nor indefinite as to the invoice it was
protesting. The government’s Motion for a Directed Verdict is accordingly denied.
8. The expenses incurred by Horizon in connection with replacement of its anti-fouling
system are non-dutiable.
9. If any of these Conclusions of Law should more properly be deemed a Finding of Fact it
is so designated.
JUDGMENT
This case having been heard at trial and submitted for decision, and the court, after due
deliberation, having issued Findings of Fact and Conclusions of Law herein, now in
conformity therewith, it hereby
ORDERED, ADJUDGED and DECREED that judgment be, and hereby is, entered in
favor of Plaintiff; and it is further
ORDERED, ADJUDGED and DECREED that the vessel expenses at issue in this case are
non-dutiable; and it is further
ORDERED, ADJUDGED and DECREED that the appropriate United States Customs and
Border Protection officials shall reassess the duties at issue in accordance with the judgment
of the court; and it is further
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ORDERED, ADJUDGED and DECREED that the appropriate United States Customs and
Border Protection officials shall refund to Plaintiff all excess duties together with interest as
provided by law.
__/s/ Evan J. Wallach____
Evan J. Wallach, Judge
Dated: November 18, 2011
New York, New York
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