Customs Service:

Administration of Tariff on Foreign Repairs to United States Flag Vessels

RCED-89-152: Published: May 26, 1989. Publicly Released: Jun 13, 1989.

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Pursuant to a congressional request, GAO reviewed the U.S. Customs Service's administration of the 50-percent tariff on the cost of repairs to U.S.-flag vessels in foreign shipyards, focusing on: (1) how much revenue the tariff has raised in recent years; (2) how Customs interpretations of legislative and court exemptions have affected the scope and application of the tariff; (3) vessel operator compliance with the tariff; and (4) Customs' efforts to improve its tariff management.

GAO found that: (1) vessel repair tariff collections increased from $700,000 in fiscal year (FY) 1969 to $14.6 million in FY 1988; (2) in constant 1969 dollars, the average annual collections since 1980 was $3.2 million, compared with $1.4 million from 1970 to 1979; (3) Customs believes that legislative exemptions of specific categories of repair work, court rulings narrowing the definition of repair, and the logical extensions of these legislative exemptions and court rulings by Customs have reduced the applicability of the tariff; (4) of 67 cases decided in 1988, about 48.5 percent, or $7.1 million, of the potential duty was not collectible because of the exemptions; (5) limited Customs audits of vessel operators have found no significant instances of failure to report foreign repairs; and (6) Customs was clarifying operational procedures and increasing the audit surveillance of vessel operators to ensure complete and accurate reporting.

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