Court Opinion

ID: 817660
Source: CourtListenerOpinion
Date Created: 2013-02-01 01:56:40.454267+00
Date Added: 2024-06-11T09:03:06.131631
License: Public Domain

Slip Op. 09-38

            UNITED STATES COURT OF INTERNATIONAL TRADE

 CORMORANT SHIPHOLDING CORPORATION,

                  Plaintiff,

                                             Before: Pogue, Judge
                     v.
                                             Court No. 08-00235

 UNITED STATES,

                  Defendant.

                               OPINION

[Plaintiff’s motion to dismiss Defendant’s Counterclaims, for lack
of jurisdiction, denied.]

                                            Dated: May 12, 2009

     Williams Mullen, PC (Evelyn M. Suarez, Dean A. Barclay, and
George H. Bowles) for the Plaintiff.

     Michael F. Hertz, Acting Assistant Attorney General; Barbara
S. Williams, Attorney in Charge, International Trade Field Office,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice (Edward F. Kenny) for the Defendant.

     Pogue, Judge: In this action, Cormorant Shipholding Corporation

(“CSC”) challenges ship repair duties assessed on CSC’s U.S.-flagged

vessel, M/V American Cormorant (the “Cormorant”) by Defendant U.S.

Customs and Border Protection (“Customs” or “the government”).

Customs assessed duties on the Cormorant’s repairs in accordance
08-00235                                                              Page 2

with section 466 of the Tariff Act of 1930 (the “Vessel Repair

Statute”),    as   amended,    19     U.S.C.   §   1466.1   The   court   has

jurisdiction over Plaintiff’s protest action pursuant to 28 U.S.C.

§ 1581(a).2

     In     response   to     CSC’s    complaint,     Customs   asserts   two

counterclaims.     CSC now moves, pursuant to USCIT R. 12(b)(1), to

dismiss Customs’ counterclaims, asserting that the court lacks

subject matter jurisdiction to hear those claims.           The court denies

Plaintiff’s motion because Customs’ counterclaims involve the same

imported merchandise that is the subject of Plaintiff’s protest

action, giving the court jurisdiction to entertain the counterclaims

under 28 U.S.C. § 1583.3

                                BACKGROUND

     First enacted by Congress in 1866, the Vessel Repair Statute

     1
      Unless otherwise stated, further citations to the Tariff
Act of 1930 are to the relevant provisions of Title 19 of the
U.S. Code, 2000 edition.
     2
       28 U.S.C. § 1581(a) provides: “The Court of International
Trade shall have exclusive jurisdiction of any civil action
commenced to contest the denial of a protest, in whole or in
part, under section 515 of the Tariff Act of 1930.”
     3
         28 U.S.C. § 1583 provides:
     In any civil action in the Court of International
     Trade, the court shall have exclusive jurisdiction to
     render judgment upon any counterclaim, cross-claim, or
     third-party action of any party, if (1) such claim or
     action involves the imported merchandise that is the
     subject matter of such civil action, or (2) such claim
     or action is to recover upon a bond or customs duties
     relating to such merchandise.
08-00235                                                      Page 3

imposes a 50% tariff on the value of repairs performed abroad.4 See

Texaco Marine Servs., Inc. v. United States, 44 F.3d 1539, 1540

(Fed. Cir. 1994).

     Certain exclusions apply to these ad valorem duties.   Relevant

to this litigation, a vessel that “arrives in a port of the United

States two years or more after its last departure from a port in the

United States” is subject to the duties only on those repairs   made

“during the first six months after the last departure of such vessel

from a port of the United States.” 19 U.S.C. § 1466(e)(1)(B).   This

exclusion, however, generally will not apply “if the vessel departed

from the United States for the sole purpose of obtaining” the

repairs. Id. § 1466(e)(2).

     The Cormorant left a U.S. port on March 21, 1992.      The ship

returned to a U.S. port, in September, 2001, after a continuous

nine-and-one-half-year voyage outside the United States.    Upon the

Cormorant’s return, CSC timely filed a vessel repair entry and an

     4
         The statutory text states:

     The equipments, or any part thereof, including boats,
     purchased for, or the repair parts or materials to be
     used, or the expenses of repairs made in a foreign
     country upon a vessel documented under the laws of the
     United States to engage in the foreign or coasting
     trade, or a vessel intended to be employed in such
     trade, shall, on the first arrival of such vessel in
     any port of the United States, be liable to entry and
     the payment of an ad valorem duty of 50 per centum on
     the cost thereof in such foreign country. . . .

19 U.S.C. § 1466(a).
08-00235                                                                Page 4

application for relief.       In 2006, Customs made a duty assessment on

the Cormorant’s foreign repairs in the amount of $5,231,610.88. CSC

timely    protested    the   assessed    duties   in    accordance    with   the

statutory and regulatory protest provisions. See 19 U.S.C. § 1514;

19   C.F.R.   §    174.12.    In    particular,   CSC   challenged    Customs’

assessment    of    duties   on    invoices5   reflecting   certain    repairs

performed in Southampton, United Kingdom;6 Gothenberg, Sweden;7 and

the Blohm & Voss Shipyard in Hamburg, Germany.8

      Customs denied the protest.         See HQ H008155 (Apr. 16, 2008),

available at 2008 WL 5568232.9 First, Customs noted that “[b]ecause

the vessel was overseas for more than two years, work undertaken

after the first six months from the [Cormorant’s] departure from the

U.S. is exempted from vessel repair duties.” Id. 2.             As a result,

      5
       Invoices submitted to Customs to account for the foreign
vessel repairs are referenced as “Items.” In its protest, CSC
challenged Customs’ determination that Items 5, 7-8, 10-16, 24-
25, 29-30, 33, 35-36, 38 and 41 were dutiable.
      6
       Reported repair expenses in Southampton include, inter
alia, Items 5, 7 and 8.
      7
       Reported repair expenses in Gothenberg include, inter
alia, Items 10-16, 24-25 and 29-30.
      8
       Reported repair expenses in Hamburg include, inter alia,
Items 33, 35-36, 38 and 41.
      9
       CSC claims that Customs in fact denied the protest in part
and affirmed in part. The court notes that Customs ruled, in HQ
H008155, that it “determined that the protest should be denied.”
Id. 7. Further, every item protested by CSC in HQ H008155 was
found by Customs to be dutiable. Id. 3-7; see also supra notes 5-
7.
08-00235                                                      Page 5

Customs reasoned, “only repairs or expenses of repairs that took

place within the first six months from the date the vessel left the

last U.S. port on March 21, 1992 [i.e., before September 21, 1992]

are dutiable.” Id.     Second, in accordance with its previously-

articulated practice, Customs identified dutiable repairs in the

Cormorant’s entry.10   Of specific relevance to the motion to dismiss

at issue here,     Customs denied CSC’s protest as to Item 41,

generally, because CSC had failed to provide sufficient information

or documentation to qualify these expenditures as exempt from the

duty assessment.11 Id. 3-6.

     10
       In doing so, Customs applied the Texaco “but for” test
for identifying dutiable repairs. In Texaco, the Federal Circuit
held: “we interpret ‘expenses of repairs’ as covering all
expenses (not specifically excepted in the statute) which, but
for dutiable repair work, would not have been incurred.” Texaco
Marine Servs., 44 F.3d at 1544. Expanding upon Texaco, the
Federal Circuit also has sanctioned Customs’ apportionment of
expenses attributable to dutiable and nondutiable repairs so as
to assess ad valorem taxes “on only that portion of the expense
that is fairly attributable to the dutiable repairs.” SL Serv.,
Inc. v. United States, 357 F.3d 1358, 1362 (Fed. Cir. 2004).
     The Cormorant arrived at a U.S. port after the Federal
Circuit’s issuance of the Texaco decision in 1994.
     11
       Specifically, Customs denied CSC’s protest as to Item 41,
which, according to Customs, reflected $10,000,000 (i.e., the
total invoice minus a credit note) in repairs taking place
between September 1 and November 16, 1992 (66 days). See HQ
800815, 5. As the six-month dutiable period ended September 21,
it was incumbent upon CSC to demonstrate which repairs were
performed outside the statutory period. Id. The only
“independent” documents that CSC provided Customs were the
overall invoice and the first three weekly status reports, which
demonstrated that, as of September 25, 32% of the contracted work
had been completed. Id. As Customs had no other information,
Customs determined that “we must conclude that 32% of the work
that is the basis of the $10,000,000.00 invoice was completed
08-00235                                                                Page 6

      In response to Customs’ protest decision, CSC, in its complaint

here, claims that Customs erred in assessing ad valorem duties on

all previously-challenged invoices except Item 38. Answering CSC’s

complaint,   the   government      asserts   two   discrete    counterclaims,

claiming jurisdiction for each pursuant to 28 U.S.C. § 1583. First,

the   government   claims   that    CSC’s    “Application     for   Relief   and

Protest, specifically with regard to [Item 41] . . . was not

supported by the required evidentiary elements” specified by 19

C.F.R. § 4.14.12 Def.’s Ans. to Amended Compl. & Countercl. ¶ 37.

within the dutiable 6-month period, thus $3,200,000.00 of the
invoice costs were performed or incurred during the 6-month
dutiable period.” Id.
      12
       The government cites the current version of this
regulation, which requires each application for relief to contain
the following documentation:

      (i) Itemized bills, receipts, and invoices for
      [“foreign voyage expenditures for equipment, parts of
      equipment, repair parts, materials and labor”]. The
      cost of items for which a request for relief is made
      must be segregated from the cost of the other items
      listed in the vessel repair entry;

      (ii) Photocopies of relevant parts of vessel logs, as
      well as of any classification society reports which
      detail damage and remedies;

      (iii) A certification by the senior officer with
      personal knowledge of all relevant circumstances
      relating to casualty damage (time, place, cause, and
      nature of damage);

      (iv) A certification by the senior officer with
      personal knowledge of all relevant circumstances
      relating to foreign repair expenditures (time, place,
      and nature of purchases and work performed);
08-00235                                                                         Page 7

Because     CSC   did       not   provide    this    required     documentation,   the

government now claims that “the entire $12,745,125.00 Shipyard

invoice [presumably, the $10 million amount with the credit note

added back in] must therefore be considered fully dutiable.” Id. ¶¶

38-40.      Second, Customs alleges that CSC “failed to establish that

the relevant departure of [the Cormorant] was not for the sole

purpose of obtaining equipment, parts, materials or repairs” as

required for the section 1466(e) exemption to apply at all, and thus

“the   entirety        of    [CSC’s]      claim    for   relief    from   duties   [is]

invalid.”13 Id. ¶ 41.

                                   Standard of Review

       Like all federal courts, the Court of International Trade is

a court of limited jurisdiction. Norsk Hydro Can., Inc. v. United

States, 472 F.3d 1347, 1355 (Fed. Cir. 2006).                         Therefore, the

government,       as    the       party    attempting     to    invoke    the   court’s

       (v) A certification by the master that casualty-related
       expenditures were necessary to ensure the safety and
       seaworthiness of the vessel in reaching its United
       States port of destination; and

       (vi) Any permits or other documents filed with or
       issued by any United States Government agency other
       than CBP regarding the operation of the vessel that are
       relevant to the request for relief.

19 C.F.R. § 4.14(i)(1)(i)-(vi).                   The government avers that CSC’s
application lacked (i)-(iii).

       13
       The court notes that the government’s counterclaims are
not consistent with Customs determination of CSC’s protest.
08-00235                                                      Page 8

jurisdiction, bears the burden to establish that its counterclaim

lies within that jurisdiction. See id. (citing Kokkonen v. Guardian

Life Ins. Co., 511 U.S. 375, 377 (1994)).         Contrary to CSC’s

arguments, however, the government has adequately met its burden and

its counterclaims are properly brought under 28 U.S.C. § 1583.

                            DISCUSSION

     CSC’s motion to dismiss raises two issues:   (1) whether vessel

repairs may be viewed as “imported merchandise” for the purposes of

establishing jurisdiction pursuant to section 1583, and, if so, (2)

whether the repairs identified in the government’s counterclaim may

be viewed as involving the same “subject matter” as CSC’s action.14

     The court addresses each issue in turn.

I. The Vessel Repairs Constitute “Imported Merchandise”

     A. Common Meaning of Section 1583's Text

     The court’s interpretation of section 1583 begins with the

     14
       CSC also argues that the court should dismiss the
government’s counterclaim as it fails to explicitly state any
grounds for subject matter jurisdiction. In this regard, CSC is
correct. According to USCIT R. 8(a):

     [a] pleading that states a claim for relief must
     contain . . . a short and plain statement of the
     grounds for the court’s jurisdiction, unless the court
     already has jurisdiction and the claim needs no new
     jurisdictional support. . . .

The original ground for jurisdiction asserted in CSC’s complaint,
i.e., 28 U.S.C. § 1581(a), is limited to actions to contest the
denial of a protest and neither extends to counterclaims nor to
actions commenced by the government. However, as the government
has amended its counterclaims to assert jurisdiction pursuant to
28 U.S.C. § 1583, CSC’s first argument has become moot.
08-00235                                                     Page 9

words of the statute. Exxon Mobil Corp. v. Allapattah Servs., Inc.,

545 U.S. 546, 568 (2005) (“[T]he authoritative statement is the

statutory text, not the legislative history or any other extrinsic

material.”); Timex V.I., Inc. v. United States, 157 F.3d 879, 882

(Fed. Cir. 1998) (“To ascertain . . . Congress[‘s] . . . intention

. . ., [the Court] employ[s] the ‘traditional tools of statutory

construction.’” (citing Chevron U.S.A. Inc. v. Natural Res. Def.

Council, Inc., 467 U.S. 837, 843 n. 9 (1984))); id. (“The first and

foremost ‘tool’ to be used is the statute’s text, giving it its

plain meaning . . . .”) (citing VE Holding Corp. v. Johnson Gas

Appliance Co., 917 F.2d 1574, 1579 (Fed. Cir. 1990))).

      By its terms, however, neither section 1583 nor any other of

the   court’s   jurisdictional   statutes   define   “merchandise.”

Accordingly, when a term is not defined in a statute, the court

looks to the term’s common meaning. See Witex, U.S.A., Inc. v.

United States, 577 F. Supp. 2d 1353, 1356 (CIT 2008) (citing

Bentkamp v. United States, 40 CCPA 70, 78, C.A.D. 500 (1952)).   In

discerning this common meaning, federal courts, including the

Federal Circuit and this Court, rely on dictionary definitions of

the statute’s words. See Archer Daniels v. United States, No. 2008-

1342, 2009 WL 777459, at *2 (Fed. Cir. Mar. 26, 2009) (“When, as

here, ‘a tariff term is not defined in [the statute] or its

legislative history, the term’s correct meaning is its common or

dictionary meaning in the absence of evidence to the contrary.’”
08-00235                                                                     Page 10

(quoting Airflow Tech., Inc. v. United States, 524 F.3d 1287, 1291

(Fed. Cir. 2008))); Pesquera Mares Australes Ltda. v. United States,

266 F.3d 1372, 1382 (Fed. Cir. 2001) (in determining the common or

“established” meaning of a term, “it is appropriate to consult

dictionaries.”); Outer Circle Prods. v. United States, No. 05-00678,

2009 Ct. Intl. Trade LEXIS 3, at *27 (CIT Jan. 9, 2009); Witex, 577

F. Supp. 2d at 1356.

       Common definitions of “merchandise” include vessel repairs.

See, e.g., American Heritage Dictionary of the English Language

1099, 1939 (4th ed., Houghton Mifflin Co. 2000) (“merchandise” are

“goods bought and sold in business; commercial wares”; further, a

“ware” is “an article of commerce” or “an immaterial asset or

benefit, such as a service or personal accomplishment, regarded as

an article of commerce”); 1 Shorter Oxford English Dictionary 1754,

464 (6th ed., Oxford University Press 2007) (“merchandise” are

“[t]he commodities of commerce; goods to be bought and sold”);

Webster’s Third New International Dictionary of the English Language

1413    (Merriam-Webster,       Inc.      2002)     (“merchandise”     means   “the

commodities or goods that are bought or sold in business: the wares

of commerce”); 3 Oxford English Dictionary 563-64 (2d ed., Clarendon

Press   1989)    (in   turn,    a    “commodity,”        especially   in   commerce,

constitutes “[a] kind of thing produced for use or sale, an article

of   commerce,    an   object       of   trade”);    1   Shorter   Oxford   English

Dictionary, supra, 464 (a “commodity” is “[a] thing of use or value
08-00235                                                               Page 11

. . . a thing that is an object of trade”).              Vessel repairs, as

goods and services with commercial benefits, are plainly “commercial

wares” and constitute things “produced for use or sale” in that they

restore vessel parts to their previous state of operation.

     In addition, the vessel repairs at issue here were clearly

“imported.” 1 Shorter Oxford English Dictionary, supra, at 1339

(“import” is defined as “[t]o bring in; to introduce from an

external   source;   .   .   .   bring   in   (goods,   etc.)   from   another

country”).15   Thus, section 1583(1) includes vessel repairs when

those repairs are brought into the country from a foreign or

external source.16

      15
       CSC points to United States v. Shabahang Persian Carpets,
Ltd., 21 CIT 360, 361, 963 F. Supp. 1207, 1209-10 (1997) to
support its statement that a counterclaim not involving “imported
merchandise” is not within section 1583 jurisdiction. However,
Shabahang is inapposite. In Shabahang, the court did not inquire
into the definition of “merchandise” under section 1583 because
the items under scrutiny were not “imported” in the first place.
Id.
      16
       CSC cites 19 U.S.C. § 1401(c) which defines “merchandise”
for purposes of the Tariff Act of 1930 as “goods, wares, and
chattels of every description, and includes merchandise the
importation of which is prohibited, and monetary instruments as
defined in section 5312 of title 31.” 19 U.S.C. § 1401(c). As
demonstrated above, however, dictionary definitions of “wares”
include CSC’s vessel repairs. CSC further argues that 19 U.S.C.
§ 1401(c) purposely distinguishes “monetary instruments” to
denote their inclusion because the ordinary meaning of
“merchandise” fails to do so. However, unlike vessel repairs,
money or currency is not considered “merchandise,” but rather the
means by which that merchandise is acquired. See generally 31
U.S.C. §§ 5312(a)(3)(c), 5316, 5331. Thus, CSC’s use of section
1401(c) to show a limited statutory circumscription of
“merchandise” is unpersuasive.
08-00235                                                           Page 12

     B. Section 1583’s Interpretation

     The court’s plain language reading of “imported merchandise”

to   include   CSC’s   vessel   repairs   also   comports   with    prior

interpretation of section 1583.       First, the court interprets

section 1583 broadly. See, e.g., United States v. Mecca Export Co.,

10 CIT 644, 645-47, 647 F. Supp. 924, 925-27 (1986); M&M/Mars

Snackmaster, Div. of Mars, Inc. v United States, 5 CIT 43, 44

(1983).    The prudential reasons for broadly exercising federal

district courts’ ancillary jurisdiction are similar to those the

court should use in applying its own jurisdiction under § 1583:

     The same considerations enunciated by numerous Federal
     Courts   supporting   liberal   exercise  of   ancillary
     jurisdiction in Federal District Courts apply with even
     greater force in this case. . . . Just as with ancillary
     jurisdiction questions, this Court as a matter of sound
     judicial administration and to insure consistent results
     should, in considering § 1583, endeavor to avoid
     multiplicity of actions.    If the Court were to accept
     plaintiff's arguments, the result would discourage the
     proper settlement of cases by sureties with the
     government.

Mecca Export Corp., 10 CIT at 647.

     Moreover, this broad interpretation reflects Congress’s intent

that related actions be consolidated.       In adopting section 1583,

Congress recognized the need to allow all claims arising out of an

underlying import transaction to be adjudicated fully and completely

in one action before this Court. See H.R. Rep. No. 96-1235, at 37-38

(1980), reprinted in 1980 U.S.C.C.A.N. 3729, 3748-49; see also Tikal

Distrib. Corp. v. United States, 24 CIT 149, 156 n.4, 93 F. Supp.
08-00235                                                     Page 13

2d 1269, 1275 n.4 (2000).17     Thus, to exclude vessel repairs from

the statutory term “imported merchandise,” as CSC requests, would

frustrate congressional intent in adopting the statute. See Texaco

Marine Servs., Inc. v. United States, 44 F.3d 1539, 1544 (Fed. Cir.

1994) (“To interpret the statute any more restrictively would thwart

the broad, general language which we presume was deliberately used

by Congress.”).

     C. Sections 1581 and 1582

     The statutory structure of the Court’s other jurisdictional

statutes also supports the use of the common meaning of “imported

merchandise” to include vessel repairs. See Fin. Planning Ass’n v.

SEC, 482 F.3d 481, 487 (D.C. Cir. 2007) (“Applying the ‘traditional

tools of statutory construction,’ the court looks to the text,

structure, and the overall statutory scheme, as well as the problem

Congress sought to solve.” (quoting Chevron, 467 U.S. at 843 n. 9)

(internal citation omitted)).

     Arguing against the court’s plain language reading, CSC evokes

the doctrine of expressio unius est exclusio alterius, see Int’l

Trading Co. v. United States, 28 CIT 1, 7, 306 F. Supp. 2d 1265,

     17
       Prior to the adoption of section 1583, if the court found
Customs’ appraisement to be incorrect, the court could not uphold
a different appraised value claimed by the Government. Rather,
the court could only dismiss the action, without requiring the
plaintiff to pay any additional duties. Section 1583 remedied
this problem and permits the government to “assert[] a claim that
would allow the court to make the proper determination and
accordingly would enable the Government to collect the full
amount of duties.” H.R. Rep. No. 96-1235, at 36.
08-00235                                                                            Page 14

1270 (2004), to claim that the explicit listing, in 28 U.S.C. §

1581(h), of “vessel              repairs,” necessarily precludes a broader

reading       of    that    phrase      in    other   sections    of     this       Court’s

jurisdictional statutes.               But the language of Section 1581(h) of

title        28    of    the     United      States   Code   provides         otherwise.

Specifically, Section 1581(h) gives the court

       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 . . . .

Id.   The enumeration of “vessel repairs” refers back to the phrase

“importation of the goods involved.”                    As such, subsection (h)

supports rather than controverts the conclusion that these repairs

are considered imported merchandise for purposes of jurisdiction.

In    addition,         merely    because     “vessel   repairs”       are    listed    in

subsection (h), does not preclude the inclusion of “vessel repairs”

elsewhere in the jurisdictional statutes, even when not specifically

enumerated         there.        For   example,   plaintiffs     filed       this    action

originally pursuant to section 1581(a), although this subsection

says nothing specific about “vessel repairs.”18

        18
       See also Bar Bea Truck Leasing Co. v. United States, 4
CIT 104, 106-08 (1982) (the doctrine of expressio unius est
exclusio alterius does not preclude the court’s jurisdiction to
review the revocation of cartage licenses pursuant to the
residual grant of jurisdiction in section 1581(i)); Di Jub
Leasing Corp. v. United States, 1 CIT 42, 47, 505 F. Supp. 1113,
1117 (1980) (“the legislative history of the residual
08-00235                                                                  Page 15

        Moreover, 28 U.S.C. § 1582 uses similarly broad language,

referring to jurisdiction “of any civil action which arises out of

an import transaction and which is commenced by the United States-

.   .   .   (3)    to   recover   custom    duties.”     Yet,    CSC   could   not

successfully argue that expressio unius est exclusio alterius would

prevent the United States from filing an action to recover duties

under § 1582.

        D. 19 U.S.C. § 1498

        Further,    vessel    repairs      have   been   found   to    constitute

“merchandise” in related statutory contexts. For example, 19 U.S.C.

§ 1498, a sister statute to section 1466, defines “merchandise” as

including “vessel repairs.”             Through 19 U.S.C. § 1498(a)(10),

Congress granted the Secretary of the Treasury broad authority to

promulgate rules and regulations with respect to “merchandise,”

including specifically 19 U.S.C. § 1466, stating, in relevant part,

that:

        The Secretary of the Treasury is authorized to prescribe
        rules and regulations for the declaration and entry of -
        . . .

             (10) Merchandise within the provisions of sections
             1465 and 1466 of this title (relating to supplies,
             repairs, and equipment on vessels and railway cars)
             at the first port of arrival . . . .

jurisdictional provisions in section 1581(i) obviously evinces
congressional intent that these special provisions shall be
accorded a broad construction” (citing H.R. Rep. No. 96-1235, at
33-34.)).
08-00235                                                              Page 16

Id.    Interpreting this provision, the Federal Circuit has concluded

that    section   1466   “vessel   repairs”   come   within   the   scope    of

“imported merchandise.”       Specifically, based on the language of §

1498(a)(10),      the    Federal   Circuit    held   that     19    U.S.C.    §

1315(d)(1988)19 applies to the Vessel Repair Statute. See Texaco

Marine Servs., Inc. v. United States, 44 F.3d 1539, 1547-48 (Fed.

Cir. 1994).       The Federal Circuit Court noted that 19 U.S.C. §

1498(a)(10) (1988) “indicates an intention by the Congress that

expenses within the vessel repair statute shall be regarded as

merchandise imported into the United States.” Id. at 1547 (citing

Int’l Navigation Co. v. United States, 38 Cust. Ct. 5, 9, C.D. 1836,

148 F. Supp. 448, 453 (1957); Pac. Transp. Lines, Inc. v. United

States, 29 Cust. Ct. 21, 27, C.D. 1439 (1952));             accord Sea-Land

Serv., Inc. v. United States, 69 F. Supp. 2d 1371, 1378 n.6 (CIT

1999).

       CSC asserts that Congress deliberately used the two terms

“merchandise” and “repairs . . . on vessels” in § 1498(a)(10) to

clarify its reference to both, as the former does not typically

       19
            Currently, section 1315(d) provides in relevant part:

       No administrative ruling resulting in the imposition of
       a higher rate of duty or charge than the Secretary of
       the Treasury shall find to have been applicable to
       imported merchandise under an established and uniform
       practice shall be effective with respect to articles
       entered for consumption or withdrawn from warehouse for
       consumption prior to the expiration of thirty days
       after the date of publication in the Federal Register
       of notice of such ruling....
08-00235                                                        Page 17

comprise       the   latter.      But   Congress   used   “merchandise”

interchangeably with “supplies, repairs, and equipment on vessels

and railway cars,” as is denoted by the parentheses, further

specifying the type of merchandise to which Congress referred, and

thus intended for “merchandise” to comprise “repairs” within section

1466.20      Consequently, CSC’s position conflicts with clearly-stated

Federal Circuit case law. See Texaco Marine Servs., 44 F.3d at 1547-

48.     While Congress did not define “imported merchandise” for the

specific purpose of section 1583, there is no indication that it

intended for vessel repair expenses to be merchandise under §

1498(a)(10) but not under section 1583.

      E. CSC’s Remaining Arguments

      Finally, CSC unpersuasively cites to various parts of Title 19

in isolation, as well as to certain regulations to allege that

Congress intended to distinguish vessel repairs from merchandise.

None of these statutory or regulatory provisions, however, when read

in context, supports CSC’s position.       The court addresses each in

turn.

      CSC first alleges that the fact that the word “merchandise”

        20
       CSC additionally asserts that the government’s reliance
on 19 U.S.C. § 1498(a)(10) as expressly using “merchandise” to
refer to vessel repair expenses, is moot, as it relates only to
the Secretary’s authority to promulgate “rules and regulations”
for “declaration and entry,” rather than for jurisdiction under
28 U.S.C. § 1583. Reply to Government’s Opp. to Mot. to Dismiss
Countercl. 8. Reading the provision in context, however, the
court cannot agree with this limited interpretation.
08-00235                                                            Page 18

does not appear anywhere in 19 U.S.C. § 1466 dictates that Congress

did not intend to treat vessel repairs as such.           However, section

1466 simply separates “merchandise” into more specific terms; for

instance, section 1466 regularly refers to “equipments,” “parts,”

“materials” and/or “repairs” collectively, thus indicating its

intent to treat them similarly. See 19 U.S.C. § 1466(a); (d)(2)-(3);

(e)(1)(B),(2); (f); (g); (h).             Just as equipment, parts, and

materials are all considered “merchandise,” the more general term

“repairs” must also be included within this reading.

      Second, CSC asserts that General Note 1 to the Harmonized

Tariff Schedule of the United States (“HTSUS”) handling “Tariff

Treatment of Imported Goods and of Vessel Equipments, Parts and

Repairs,” demonstrates congressional intent to distinguish vessel

repairs from other goods, because “imported goods” and “vessel . .

.   repairs”   are   separated   by   a   conjunction,   instead   of   being

presented as one and the same.        The narrow view, that “and” is used

in a conjunctive sense in every statutory provision and that its

existence is conclusive in determining which terms Congress intended

to group together, conflicts with established jurisprudence. See,

e.g., Doughten Seed Co. v. United States, 24 CCPA 258, 260 (1936)

(It is a “well-settled principle that courts may construe the words

‘and’ and ‘or’ to have a meaning different from that arrived at by

a strict grammatical construction, if by so doing the different

provisions of the paragraph or act under consideration can be
08-00235                                                     Page 19

harmonized, and anomalous results avoided.”); see also Noss Co. v.

United States, 7 CIT 111, 116, 588 F. Supp. 1408, 1413 (1984).

Moreover, the word choice in this specialized statute reflects the

need for precision in describing which goods are subject to a duty.

As already noted, this in no way contradicts the broad reading of

the court’s jurisdictional statutes. See Di Jub Leasing Corp., 1 CIT

at 47.

     CSC finally claims that Customs itself has stated that it

“believes that vessel repair entries do not involve entries of

imported merchandise as provided in 19 U.S.C. § 1500(d)”21 and

argues that Customs cannot now claim that the two are the same in

     21
          28 U.S.C. § 1500 provides:

     The Customs Service shall, under rules and regulations
     prescribed by the Secretary--
     (a) fix the final appraisement of merchandise by
     ascertaining or estimating the value thereof, under
     section 1401a of this title, by all reasonable ways and
     means in his power, any statement of cost or costs of
     production in any invoice, affidavit, declaration,
     other document to the contrary notwithstanding;
     (b) fix the final classification and rate of duty
     applicable to such merchandise;
     (c) fix the final amount of duty to be paid on such
     merchandise and determine any increased or additional
     duties, taxes, and fees due or any excess of duties,
     taxes, and fees deposited;
     (d) liquidate the entry and reconciliation, if any, of
     such merchandise; and
     (e) give or transmit, pursuant to an electronic data
     interchange system, notice of such liquidation to the
     importer, his consignee, or agent in such form and
     manner as the Secretary shall by regulation prescribe.
08-00235                                                    Page 20

order to assert section 1583 jurisdiction. Foreign Repairs to

American Vessels, 66 Fed. Reg. 16,392, 16,396 (Dep’t Treas. Mar. 26,

2001) (final rule).    However, through this regulatory language,

Customs simply emphasized the distinction between, and the need to

keep separate, the liquidation procedures for goods imported into

the United States and the duty assessment process under the Vessel

Repair Statute; section 1466 “is self-contained and sets a parallel

procedure for making a final determination of the duty due on such

repairs.” Id.   Moreover, Customs added, “[a]lthough vessel repair

entries will not be liquidated, any duties assessed on such entries

will still be subject to protest under 19 U.S.C. § 1514(a)(2).” Id.

The court finds no indication that Customs implied that vessel

repair duty assessment restricts the scope of the protest process;

as such, Customs regulatory language concerning duty assessment

certainly does not restrict the court’s jurisdiction.22

     22
       In one sense, certainly, “vessels [themselves] have been
treated as sui generis, and subject to an entirely different set
of laws and regulations from those applied to imported articles.”
The Conqueror, 166 U.S. 110, 118 (1897) (holding that a 272-ton
pleasure yacht sailed into New York is not, itself, a dutiable
article). At the same time, however, as the Court noted, there
is a difference between tonnage duties on vessels themselves and
the duty rates for “dutiable articles.” Id. (explaining that
“boats . . . imported or brought upon the decks of other vessels,
[which] are mere manufactures of other ‘articles,’ are within the
description of the tariff acts.”) As explained above, the Vessel
Repair Statute places repairs in the latter category.
08-00235                                                               Page 21

II. The Government’s Counterclaim Involves the “Subject” Merchandise

     The government’s counterclaim also involves the “subject”

merchandise of CSC’s action. CSC argues to the contrary, citing

Export Packers Co. v. United States, 16 CIT 394, 398, 795 F. Supp.

422, 426 (1992) (holding that the Court of International Trade did

not have jurisdiction over a government counterclaim).

     But   Export   Packers    is    inapposite.        In   Export   Packers,

Plaintiff, an importer of frozen egg yolks, challenged Customs’

classification, under HTSUS 119.65 and 119.70, of 67.5% of its

products - resulting in duty rates of 27 and 5.5 cents per pound,

respectively;   the   remaining      32.5%   of   its    products     had   been

classified under HTSUS 800, and thus had entered duty-free. Id. at

394-95.    The government counterclaimed to reclassify the 32.5%

remaining imports and obtain duty thereon. Id.           The court dismissed

the counterclaim, as it involved the liquidation of merchandise that

were “separate and distinct” from those put at issue by plaintiff’s

complaint,   “evidenced   by        the   distinguishable     classification

treatment assessed by Customs when the entries were liquidated.” Id.

at 398; see also id. (“the genesis of Export Packers’ complaint

concerns 67.5% of the imported frozen salted liquid egg yolks which

were derived from shell eggs and assessed with duty under TSUS Items

119.65 and 119.70. Export Packers, maintaining that said merchandise

was properly subject to classification in accordance with Item

806.20, protested Customs’ liquidation and commenced this civil
08-00235                                                            Page 22

action for purposes of obtaining judicial review of Customs’ denial

respecting said protests. . . . Plainly, the remainder of the

subject entries, representing 32.5% of the frozen salted liquid egg

yolks derived from liquid egg yolk, were liquidated in compliance

with   Item   800.00.   But   Export   Packers   has   not   contested   that

liquidation.” (emphasis in original)).

       In contrast, the vessel repairs originally contested by CSC

here cannot be said to constitute “separate and distinct” entries

or duty assessments that are different from those potentially added

in the government’s counterclaims.        The vessel repairs referenced

in CSC’s complaint and the government’s counterclaims all involve

the same vessel repair entry, the same Customs duty assessment, and

indeed even the very same invoices referenced in CSC’s complaint.23

       Furthermore, nothing from the record demonstrates that the Item

       23
       Compare Am. Permac, Inc. v. United States, 24 CIT 933,
937, 116 F. Supp. 2d 1317, 1322 (2000) (finding jurisdiction when
“there appears to be no dispute among the parties that
defendant’s counterclaims involve those entries at issue in
plaintiff’s claim”), amended by, 24 CIT 1158 (2000), with United
States v. UPS Customhouse Brokerage, Inc., 442 F. Supp. 2d 1290,
1303-04 (CIT 2006) (finding the court did not have jurisdiction
over the counterclaim because “it lacks jurisdiction over the
underlying entries.”) and United States v. Lun May Co., 11 CIT
18, 21, 652 F. Supp. 721, 723-24 (1987) (“The Court holds that
Lun May may only raise claims relating to the six entries which
are the subject of this civil action,” rejecting Lun May’s
attempt to file a counter claim regarding all entries covered by
the bond beyond the government’s complaint’s six entries). This
does not mean, however, that the fact that the government’s
counterclaims involve repairs covered by the same entry put at
issue by CSC’s complaint is necessarily sufficient to demonstrate
that the counterclaims involve the same subject matter as the
complaint.
08-00235                                                                    Page 23

41 repairs themselves are different in type or kind so as to be

“separate and distinct” from one another, Export Packers, 16 CIT at

398, or involve “different stream[s] of goods.”                    United States v.

Shabahang Persian Carpets, Ltd., 21 CIT 360, 361, 963 F. Supp. 1207,

1210 (1997).          Rather, the repairs referenced in Item 41, to which

the government’s first counterclaim exclusively pertains, spanned

several days at the Hamburg port, and the duties assessed on some

of those repairs depended solely upon the date on which the repairs

were assumed to have taken place.           CSC challenges the dates Customs

applied    to    the     repairs   in   Item     41,   and   the    government   now

counterclaims on the dates applied to the same repairs.                           In

addition,       the    government’s     second    counterclaim       addresses   the

entirety of CSC’s protest claim, citing CSC’s alleged failure to

document that the Cormorant’s trip was             not for the sole purpose of

obtaining repairs.         This second counterclaim asserts only that CSC

is not entitled to any relief with regard to the items put at issue

by the complaint.         Thus, both counterclaims involve the merchandise

that is the subject of CSC’s action.
08-00235                                                 Page 24

                            CONCLUSION

     Therefore, upon consideration of Defendant United States’

Counterclaim, and the Motion to Dismiss Counterclaim filed by

Plaintiff Cormorant Shipholding   Corp., CSC’s motion is hereby

DENIED.

                                           /s/ Donald C. Pogue
                                          Donald C. Pogue, Judge

Dated: May 12, 2009
       New York, New York
                             ERRATA

               Slip Op. 09-38, issued May 12, 2009

       Cormorant Shipholding Corporation v. United States

Please add after (Edward F. Kenny)in the preliminary paragraph
identifying the counsel for the Defendant:

and, of counsel, Paula Smith, Office of the Assistant Chief
Counsel, International Trade Litigation, U.S. Customs and Border
Protection