UPS Seeks Appeal of Tax Ruling.

United Parcel Service is appealing a 1999 federal tax court ruling that said the shipping company had illegally used a Bermuda-based reinsurer to avoid paying taxes.

UPS spokesman Norman Black confirmed a report in Bermuda's Royal Gazette that the company has decided to appeal the decision, saying, "We believe there were various serious errors of fact and errors of law" that led to the ruling.

The Aug. 9, 1999 ruling by Tax Court Judge Robert P. Ruwe found that UPS, the world's largest delivery service, understated its tax liability by attempting to transfer its profits to a reinsurer in the form of so-called "excess-value charges" on each package that was insured for delivery.

The reinsurer, Overseas Partners Ltd. of Bermuda, was created by UPS in 1983 but later was spun off and became a separate entity owned by United Parcel stockholders.

In his ruling last year, Ruwe found UPS liable for $81.7 million in back taxes, additional taxes and interest. Black said United Parcel has since determined that its liability, when taking into account all the years between 1984 and 1999, could amount to as much as $1.8 billion.

Overseas Partners lost its shipper's risk business from UPS as a result of the tax court ruling, which resulted in a six-month net loss for the reinsurer.