[Federal Register Volume 59, Number 75 (Tuesday, April 19, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-9282]


[[Page Unknown]]

[Federal Register: April 19, 1994]


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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