On August 4, 2009, the US Circuit Court of Appeals for the Federal Circuit (“CAFC”) issued its decision in Horizon Lines, LLC v. United States. The sole issue in this appeal was whether Horizon Lines raised genuine issues in the lower court related to whether lay-up expenses were “expenses of repairs” under the Vessel Repair Statute, 19 U.S.C. § 1466(a).
19 U.S.C. § 1466(a) provides that expenses of repairs made in a foreign country upon a vessel documented under the laws of the United States shall be dutiable at 50 percent of the value of the repair upon first arrival of such vessel in any port of the United States. In granting summary judgment, the lower court held that certain expenses incurred by Horizon Lines to lay up its US vessel in Indonesia prior to the commencement of repairs in Singapore were dutiable expenses of repair pursuant to 19 U.S.C. § 1466(a). The CAFC reversed the lower court’s grant of summary judgment finding that there were genuinely disputed issues of material fact regarding the causal connection, if any, between costs of the lay-up in Indonesia and costs of subsequent repair work that began 83 days later in Singapore. The CAFC explained that, in a prior decision, it had held that “expenses of repairs” include all expenses which, but for dutiable repair work, would not have been incurred. Horizon had argued that the lay-up in Indonesia occurred for a variety of reasons unrelated to repairs, including seasonal considerations and the company’s contractual obligations. The CAFC ultimately determined that the US Government had not conclusively established that the lay-up in Indonesia was necessary to, or facilitated, the repairs (i.e., a causal connection) in Singapore.