SENATORS SCOLD CUSTOMS FOR NEW FOREIGN REPAIR RULES FOR U.S. SHIPS

SENATORS SCOLD CUSTOMS FOR NEW FOREIGN REPAIR RULES FOR U.S. SHIPS    In a letter to U.S. Customs last week, five ranking senators scolded the agency for its new rules covering foreign repairs to American vessels and want them rescinded.
   The letter was sent to Customs’ Acting Commissioner Charles Winwood by senators Ernest F. Hollings, D-S.C., chairman of the Commerce, Science and Transportation Committee; Daniel K. Inouye, D-Hawaii, chairman of the Defense Appropriations Subcommittee; John Breaux, D-La., chairman of the Surface Transportation and Merchant Marine Subcommittee; Republican Leader Trent Lott, D-Miss.; and Frank H. Murkowski, D-Ark., ranking member of the Energy and Natural Resources Committee.
   The senators said the agency has “chosen to enact independently these sweeping changes in absence of an appointed Customs commissioner, effectively circumventing the U.S. Congress, which at the time of the spare parts episode, expressed its strong disagreement with the actions, interpretations and authority of the Customs Service in these matters. Customs has thus deviated from all reasonable and prudent practices and has not sought guidance from the Congress.”
   Customs’ Final Rule requires that purchases for repairs made to U.S.-flag ships by the crews while outside the United States, including maintenance while on the seas by American seafarers, are subject to declaration, entry and payment of 50 percent ad valorem duty. In addition, equipment imported into the United States and duty paid on it will be subject to an additional ad valorem duty if the item is installed while underway and not installed in the United States.
   “These new measures … are a major departure from past industry practices and obligations, and whose financial and administrative burdens on the U.S. owner/operator are unfair, ill-conceived and impossible to meet,” the senators said.
   They also said Customs’ foreign repairs rules would “undercut” the Maritime Security Program and Voluntary Intermodal Sealift Agreement.
   “Intended or not, this rule severely penalizes U.S.-flag vessels,” the senators said. “Not only do U.S. interests and vessels compete against foreign interest that pay little or no taxes and are subject to minimum labor, environmental and health standards and regulations, but this rule provides an even greater advantage to U.S.-flag foreign competitors since they are not subject to such arbitrary duties and regulatory burdens.”
   The senators estimated in their letter that the annual minimum cost of these assessments are about $230,000 per ship, excluding collateral costs such as fines, penalties and productivity loss. “Costs of this magnitude, together with the other burdens of the rule, are so onerous as to make abandonment of the U.S. registry a realistic alternative,” the senators said.
   The senators said if they don’t receive a satisfactory explanation about why Customs enacted the rules, then they would find it necessary to convene oversight hearings to enact “corrective” legislation.