United States Court of Appeals 

for the Federal Circuit 

__________________________ 

HORIZON LINES, LLC, 

Plaintiff-Appellee, 

v. 

UNITED STATES, 

Defendant-Appellant. 

__________________________ 

2010-1138 

__________________________ 

Appeal from the United States Court of International 

Trade in Case No. 07-CV-0039, Judge Evan J. Wallach. 

___________________________ 

Decided: December 6, 2010 

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EVELYN M. SUAREZ, William Mullen PC, of Washington, DC, argued for plaintiff-appellee. With her on the 

brief were GEORGE J. BOWLES, DEAN A. BARCLAY and J.

FORBES THOMPSON. Of counsel was ROBERT ZUCKERMAN, 

Horizon Lines, LLC, of Charlotte, North Carolina. 

EDWARD F. KENNY, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department 

of Justice, of New York, New York, argued for defendantappellee. With him on the brief were TONY WEST, Assistant Attorney General, JEANNE E. DAVIDSON, Director, of 
HORIZON LINES v. US 2

Washington, DC; BARBARA S. WILLIAMS, Attorney in 

Charge, and JASON M. KENNER, Trial Attorney, of New 

York, New York. Of counsel on the brief was MICHAEL 

W. HEYDRICH, United States Customs and Border Protection, of New York, New York. 

__________________________ 

Before RADER, Chief Judge, LOURIE and MOORE, Circuit 

Judges. 

MOORE, Circuit Judge. 

The government appeals the decision of the Court of 

International Trade concluding that the government owed 

Horizon Lines, LLC (Horizon) a refund for duties imposed 

on certain work performed on the ocean carrier Horizon 

Hawaii (Hawaii) while the ship was overseas. See Horizon Lines, LLC v. United States, 659 F. Supp. 2d 1285, 

1290 (Ct. Int’l Trade 2009). We conclude that the Court of 

International Trade erred when it held that the prior 

condition of replaced parts is irrelevant to the determination of whether work constitutes a nondutiable modification or a dutiable repair. However, because the Court of 

International Trade determined that the replaced parts 

on the Hawaii were in proper working order prior to 

modification, this error was harmless. We thus conclude 

that the Court of International Trade did not clearly err 

when it determined that the work constituted a nondutiable modification, rather than a dutiable repair. We 

affirm. 

BACKGROUND

Horizon operates the Hawaii, a cargo ship that transports shipping containers. The shipping containers are 

stacked in columns (cells) in the ship’s hold, which is 

located below the main deck. Cell guides direct the 
3 HORIZON LINES v. US

containers vertically down into the hold’s cells. Entry 

guides sit at the top of the hold above the cell guides, 

receive containers lowered by a crane operated 80 feet 

above the deck, and direct the containers to the appropriate cell. 

In 2002, while at a shipyard in Lisnave, Mitrena Yard 

in Setubal, Portugal, Horizon had the Hawaii’s entry 

guides for cells 5, 6, and 7 (together with top portions of 

integrally connected cell guides) replaced with modified 

guides. The modified guides incorporated new design 

features, including a more pronounced funnel shape, 

which makes it easier for a crane operator to lower containers into the guides. 

When the Hawaii returned to the United States, U.S. 

Customs & Border Patrol (Customs) imposed duties on 

the modified guides under 19 U.S.C. § 1466(a), which 

requires Customs to assess duties on the expenses of 

repairs made in a foreign country.1 Horizon filed a protest, which Customs denied with respect to the modified 

guides. Horizon paid the assessed duties and filed a 

complaint in the Court of International Trade, alleging 

that the modified guides constituted a nondutiable modification, rather than a dutiable repair made in a foreign 

country. 

The Court of International Trade concluded that the 

modified guides constituted nondutiable modifications, 

rather than dutiable repairs. Horizon, 659 F. Supp. 2d at 

1290. The court found that the modified guides constituted a new design feature that substantially improved 

the speed and ease of container loading, substantially 

 1 Customs imposed duties on other work performed 

overseas on the Hawaii. This appeal concerns only the 

work performed on cell entry guides 5, 6, and 7. 
HORIZON LINES v. US 4

reduced the susceptibility of the cell guide system to 

damage, reduced the need for voyage repairs, and improved the safety of cargo operations. Id. at 1287. The 

court further found that the modified guides replaced cell 

and entry guides that were in full proper working order 

when the Hawaii arrived at Lisnave. Id. In support of 

these findings, the court found the testimony of Horizon’s 

port engineer, Mark Cianci, highly probative and credible. 

Id. The court credited Mr. Cianci’s testimony that he 

would have been informed if any of the prior cell entry 

guides were not in good working order at the time the 

vessel arrived in Lisnave, and that he was not so informed. Id. The court found that the government presented no evidence that the Hawaii needed the modified 

guides to correct deficient performance. Id. at 1288. 

Rather, the court found that the evidence was conclusive 

that the modified guides were intended to improve the 

performance of the original design. Id. The court noted 

that Horizon commissioned a naval architect and marine 

engineer to prepare drawings for the new guides. Id. The 

court found that if the work had been a repair, Horizon 

would have used the original design to restore the cell 

entry guides to their original condition. Id. The court 

found the expert testimony of Edwin T. Cangin that the 

work constituted a modification highly probative and 

credible. Id. The court noted that the government did not 

offer any testimony to rebut that of Mr. Cangin. Id. The 

court noted that the government’s witness, Peter D. Kahl, 

an experienced port engineer, considered the work to be a 

modification. Id. The court further found that the analysis relied on in Customs’ protest decision was unreliable 

because, among other things, the analysis was prepared 

by someone with limited experience in the area who, until 

the time of her deposition in this litigation, did not understand the difference between a cell guide and an entry 

guide. Id. 
5 HORIZON LINES v. US

The court determined that for purposes of 19 U.S.C. 

§ 1466(a), the term “repairs” describes “putting something 

that has sustained damage back into working condition 

whereas the term ‘modifications’ describes work addressing a systematic problematic feature.” Horizon, 659 F. 

Supp. 2d at 1289. The court distinguished Texaco Marine 

Services, Inc. v. United States, 44 F.3d 1539, 1544 (Fed. 

Cir. 1994), in which we stated that in the context of 19 

U.S.C. § 1466(a), “the language ‘expenses of repairs’ is 

broad and unqualified.” Horizon, 659 F. Supp. 2d at 1289. 

The court explained that in Texaco, we interpreted the 

language to cover all expenses (other than those excepted 

in the statute) that, but for the dutiable repairs, would 

not have accrued. Id. The court stated that Texaco did 

not address the distinction between a repair and a modification. Id. The court concluded that newly designed 

installations on a vessel are alteration of the ship design 

and not repairs, citing United States v. Admiral Oriental 

Line, 18 C.C.P.A. 137, 141 (1930). Horizon, 659 F. Supp. 

2d at 1289. The court determined that “[b]ecause the 

HAWAII’s cell entry guides, after the shipyard work, 

exhibited new design features that improved or enhanced 

the vessel’s operation or efficiency, the ‘good working 

order’ condition of the cell entry guides, before the shipyard work, is not a relevant consideration in determining 

whether the work constitutes a non-dutiable modification, 

for purposes of 19 U.S.C. § 1466(a).” Id. at 1289-90. The 

court further determined that the fact that the modified 

guides reduced the potential for future damage did not 

transform the work into a repair. Id. at 1290. The court 

thus concluded that Customs incorrectly assessed duties 

for the new guides and owed Horizon a refund of 

$104,560.00. Id. The government appeals, and we have 

jurisdiction pursuant to 28 U.S.C. § 1295(a)(5). 
HORIZON LINES v. US 6

DISCUSSION

We review legal determinations of the Court of International Trade de novo and findings of fact for clear error. 

Jazz Photo Corp. v. United States, 439 F.3d 1344, 1349 

(Fed. Cir. 2006). “The clear error standard requires us to 

accept the Court of International Trade’s findings of fact 

unless we are left with a definite and firm conviction that 

a mistake has been committed.” Id. (quotation marks 

omitted). We review evidentiary determinations for abuse 

of discretion, id., and will only interfere with such determinations if an erroneous ruling prejudiced substantial 

rights, see Applied Medical Resources Corp. v. U.S. Surgical Corp., 147 F.3d 1374, 1380 (Fed. Cir. 1998). 

The government argues that the Court of International Trade erred as a matter of law by interpreting 

“repairs” to exclude the modified guides. Specifically, the 

government asserts that the court erred by interpreting 

“repairs” to include work that puts something that has 

sustained damage back into working condition but to 

exclude work that addresses a systematic problematic 

feature. The government argues that the term “repair” 

should be broadly construed, citing Texaco, 44 F.3d at 

1544. The government also argues that we must interpret “repair” according to its plain meaning, citing E.E. 

Kelly & Co. v. United States, 17 C.C.P.A. 30 (1929), and 

American Mail Line, Ltd. v. United States, 24 C.C.P.A. 70 

(1936). 

The government further argues that the Court of International Trade erred as a matter of law when it determined that the condition of the old cell entry guides was 

irrelevant. The government explains that Customs considers the condition of a replaced part when determining 

whether work constitutes a repair or a modification. The 
7 HORIZON LINES v. US

government asserts that the term “repairs” includes an 

upgrade if the upgrade restores an old part to proper 

working order. 

The government also contends that the court erred 

when it concluded that the old cell entry guides were in 

proper working order. According to the government, the 

court erred by relying on Mr. Cianci’s testimony that 

Horizon routinely reported and repaired cell damage. The 

government asserts that because there was no direct 

evidence on point, the court must have relied on Federal 

Rule of Evidence (FRE) 406, which states that evidence of 

a habit or routine practice is relevant to prove that the 

person or business acted in conformity therewith. The 

government asserts that the testimony of Mr. Cianci was 

insufficient as a matter of law to establish a routine 

business practice under FRE 406 because he did not 

testify about specific instances of the business practice. 

The government asserts that other evidence belies any 

such business practice, noting that when the Hawaii 

arrived at the Lisnave shipyard, cell entry guides 5, 6, 

and 7 were not inspected, and all of the cell entry guides 

that were inspected exhibited damage. The government 

asserts that this shows that Horizon did not repair damage at port prior to arriving at the shipyard. The government also cites the testimony of Mr. Kahl, who 

explained that not all ship officers report damage, and 

port engineers might ignore some damage reports. The 

government further cites the testimony of Mr. Kahl that 

on one occasion, a damage report indicated that a cell was 

unusable but the cell was not repaired for two months. 

The government thus asserts that Mr. Cianci may not 

have known of damage to the cell entry guides. 

Horizon responds that the Court of International 

Trade correctly determined that the new guides consti-
HORIZON LINES v. US 8

tuted a nondutiable modification, citing Admiral Oriental, 

18 C.C.P.A. at 141. Horizon asserts that it installed the 

new guides to reduce the potential for future damage and 

to improve the speed and efficiency of container loading, 

not to repair old damage. Horizon further asserts that 

prior to the modification, the old cell entry guides were in 

proper working order in that they were able to accept 

cargo and were actually being used for that purpose. 

Horizon explains that because it is in the business of 

cargo transport, it routinely reports and immediately 

repairs any damage that would prevent container transport. 

Horizon further responds that the Court of International Trade correctly concluded that the condition of the 

old guides was irrelevant. Horizon asserts that evidence 

of prior good working order suffices to show that a repair 

did not take place, while evidence of prior disrepair is 

necessary but not sufficient to prove that a repair took 

place. Horizon asserts that the condition of the old cell 

entry guides was not relevant because Horizon planned to 

modify those guides regardless of their condition. 

As to the government’s evidentiary arguments, Horizon asserts that the court properly considered Mr. Cianci’s testimony. Horizon explains that FRE 406 gives 

courts discretion to consider evidence of business practice 

on a case-by-case basis. Horizon contends that FRE 406 

does not require specific instances of conduct, noting that 

Congress deleted a subsection of FRE 406 that identified 

“specific instances of conduct” as one of several ways to 

establish routine practice. Horizon asserts that the 

evidence that the old cell entry guides were in proper 

working order, including Mr. Cianci’s testimony, was 

probative and credible. Horizon contends that the testimony of Mr. Kahl does not undermine Mr. Cianci’s testi-
9 HORIZON LINES v. US

mony because when Mr. Kahl testified that not all damage was reported, he did not distinguish between damage 

that would prevent cargo transport and damage not 

affecting the carriage of cargo. Horizon also asserts that 

Mr. Cianci’s testimony was cumulative of other evidence 

that the cell entry guides were in good working order. 

We agree with the Court of International Trade that 

the term “repairs” in 19 U.S.C. § 1466 describes “putting 

something that has sustained damage back into working 

condition.” Horizon, 659 F. Supp. 2d at 1289. Nothing in 

the statute indicates that the term “repairs” has a special 

meaning within § 1466. Our predecessor court, the Court 

of Customs and Patent Appeals, determined that the term 

“repairs” in the context of § 1466 has its plain and ordinary meaning. Am. Mail Line, 24 C.C.P.A. at 73; see also

Admiral Oriental, 18 C.C.P.A. at 141 (citing E.E. Kelly & 

Co. v. United States, 17 C.C.P.A. 30, 32 (1929)). As indicated in these cases, repair means: 

Repair, n. 1. The process of repairing; restoration 

after decay, waste, injury, or partial destruction; 

supply of loss; reparation; as, the repair of a building; often in the plural; as, to make repairs on a 

roof. 2. Condition after use; especially, good condition; condition after repairing; as, in what repair

is the house? 

Repair, vt. 1. To mend, add to or make over; as, to 

repair a building. 2. To restore to a sound or good 

state; as, to repair health. 

E.g. Admiral Oriental, 18 C.C.P.A. at 141. 

The Court of International Trade erred, however, in 

concluding that the condition of the replaced part is 
HORIZON LINES v. US 10

irrelevant to a determination of whether such a replacement constitutes a repair. The plain meaning of “repair” 

describes putting something that has sustained damage 

back into working condition. It requires “restoration after 

decay, waste, injury, or partial destruction”—all of which 

indicates that the part being repaired was damaged—

which necessitated the repair. Thus, the prior condition 

of a part that is removed or replaced during work on a 

vessel is relevant to whether that work constitutes a 

repair. We do not conclude, however, that the prior 

condition is always dispositive of whether work constitutes a repair or modification. We note that there would 

be no need to repair a part that is in working order. It is 

unnecessary for us to decide in this case whether replacement of a defective part with an upgraded, different 

part constitutes a repair or modification. 

Section 1466 does not impose a duty upon alterations 

of ship design that constitute modifications rather than 

repairs. Admiral Oriental, 18 C.C.P.A. at 141. In Admiral Oriental, the court concluded that the installation of 

swimming tanks on steamships could not be regarded as 

repairs. The ships had previously been used to transport 

troops in wartime but were converted to first-class passenger ships after World War I. Id. at 137. The superintendent of the shipping line explained that the 

installation of the swimming tanks was made necessary 

in part by the change in routes of the ships through 

southern waters. Id. at 138. The court rejected the 

government’s argument that the installation constituted a 

repair, reasoning that “[t]he word ‘repair,’ as the word 

‘amend,’ contemplates an existing structure which has 

become imperfect by reason of the action of the elements, 

or otherwise.” Id. (quoting Gagnon v. United States, 193 

U.S. 451, 457 (1904)). Following this decision, Customs 

has held that modifications, alterations, or additions to 
11 HORIZON LINES v. US

the hull of a vessel are not subject to vessel repair duties. 

See, e.g., HQ 116627 (Mar. 16, 2006); HQ 112890 (Oct. 12, 

1993). 

Whether work constitutes a repair or a nondutiable 

modification is a factual inquiry to be determined on a 

case-by-case basis. We agree with the Court of International Trade that the term repairs “describes putting 

something that has sustained damage back into working 

condition whereas the term ‘modifications’ describes work 

addressing a systematic problematic feature.” Horizon, 

659 F. Supp. 2d at 1289. In light of this definition, we 

conclude that the court erred when it held that the condition of the old cell entry guides was irrelevant to the 

determination of whether work constitutes a nondutiable 

modification or a dutiable repair. 

In this case, however, the court went on to find that 

the old cell entry guides were in full proper working order 

when the Hawaii arrived in Lisnave, and because this 

finding is not clearly erroneous, we affirm. The court 

found the testimony of Horizon’s port engineer, Mr. 

Cianci, highly probative and credible. We see no error, 

evidentiary or otherwise, in the court’s consideration of 

this evidence. As the record reflects, Horizon prepared in 

advance of its arrival into Lisnave to have the cell entry 

guides at issue replaced with newly designed guides that 

would improve the speed and ease of container loading, 

reduce susceptibility to damage, and improve safety – in 

short it prepared to upgrade the cell entry guides. Because the cell entry guides were in full proper working 

order when they were replaced with the substantially 

upgraded guides, the facts of this case support the Court 

of International Trade’s conclusion that the replacement 

of the cell guides constituted a nondutiable modification. 
HORIZON LINES v. US 12

CONCLUSION

For the foregoing reasons, we affirm the judgment of 

the Court of International Trade. 

AFFIRMED