us-cbp-cross-rulings-hq-108700•HQ 108700: Applicability of tonnage tax to vessels arriving in the United States from a foreign port in the coastwise trade or in ballast (see also Customs Service Decision (C.S.D.) 87-16)
HQ 108700: Applicability of tonnage tax to vessels arriving in the United States from a foreign port in the coastwise trade or in ballast (see also Customs Service Decision (C.S.D.) 87-16)
us-cbp-cross-rulings-hq-108700HQ 108700: Applicability of tonnage tax to vessels arriving in the United States from a foreign port in the coastwise trade or in ballast (see also Customs Service Decision (C.S.D.) 87-16)Guidance
Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.
HQ 108700
April 1, 1988
VES-11-05 CO:R:P:C 108700/109303 PH
CATEGORY: Carriers
Russell W. MacKechnie, Jr., Esq.
Joseph F. Donohue, Esq.
Donohue & Donohue
26 Broadway
New York, New York 10004
RE: Applicability of tonnage tax to vessels arriving in the
United States from a foreign port in the coastwise trade or in
ballast (see also Customs Service Decision (C.S.D.) 87-16)
Dear Messrs. MacKechnie and Donohue:
This in further regard to our ruling dated May 22, 1987
(File: VES-11-05/VES-5-29/VES-3 CO:R:CD:C 108700 PH), which was
published as C.S.D. 87-16. We stated in our letter to you of
March 17, 1988, that we planned to review the aspects of this
C.S.D. concerning the applicability of tonnage tax to the vessels
under consideration. We are having this ruling published in the
Customs Bulletin.
FACTS:
In C.S.D. 87-16, we ruled, among other things, that vessels
considered in the C.S.D. are subject to tonnage tax when they
arrive in ballast in the United States after transporting Alaska
North Slope oil from Alaska to Panama and when they arrive in
United States Gulf or East Coast ports with Alaska North Slope
oil from Panama. The relevant facts upon which we ruled in
C.S.D. 87-16 are as follows:
... [A] number of coastwise-qualified vessels are
used to transport Alaska North Slope oil from Valdez,
Alaska, to United States Gulf and East Coast ports.
The vessels are documented with registry and coastwise
license endorsements. In Valdez, the vessels load the
oil and obtain clearance to the Panamanian port of
Puerto Armuelles on the Pacific Ocean. There the ves-
sels discharge the oil and obtain Panamanian clearance
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to Long Beach, California. At Long Beach, or
occasionally at the port of San Francisco, California,
the vessels make formal entry and pay tonnage duties.
The vessels are replenished with bunkers and stores and
change crews. They then proceed to Valdez for the next
load of oil.
The oil is transferred by an 80 mile pipeline from
Puerto Armuelles to the port of Chiriqui Grande,
Panama, on the Caribbean Sea. There, vessels of the
company represented by the inquirer load the oil and
transport it to United States Gulf or East Coast ports.
These vessels arrive in Chiriqui Grande in ballast from
United States ports and make entry with Panamanian
officials. They discharge dirty ballast at a terminal
in Panama for treatment before loading the oil which
came through the pipeline. After loading, the vessels
obtain Panamanian clearance to a United States Gulf or
East Coast port. Upon arrival at the latter port, the
vessels make entry with United States Customs and pay
tonnage duties.
In a ruling dated March 21, 1988 (file number 109303), to
Paul G. Kirchner, Esq., of Kurrus & Kirchner, we ruled on several
questions Mr. Kirchner had raised with regard to C.S.D. 87-16.
At the same time, we undertook to reconsider other aspects of the
C.S.D., including the applicability of tonnage taxes to the
vessels under consideration.
ISSUE:
Are the vessels described in the FACTS portion of this ruling
subject to tonnage tax when they arrive in ballast in the United
States after transporting the oil from Alaska to Panama or when
they arrive in the United States Gulf or East Coast ports with
the oil from Panama?
LAW AND ANALYSIS:
Section 4219, Revised Statutes (1878 Edition), as amended (46
U.S.C. App. 121), provides, in pertinent part, that:
... A tonnage duty of 2 cents per ton, not to exceed in
the aggregate 10 cents per ton in any one year, is
imposed at each entry on all vessels which shall be
entered in any port of the United States from any
foreign port or place in North America, Central
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America, the West India Islands, the Bahama Islands,
the Bermuda Islands, or the coast of South America
bordering on the Caribbean Sea, or Newfoundland ...
not, however, to include vessels in distress or not
engaged in trade.
Section 4220, Revised Statutes (46 U.S.C. App. 122), provides
that:
No vessel belonging to any citizen of the United
States, trading from one port within the United States
to another port within the United States, or employed
in the bank, whale, or other fisheries, shall be
subject to tonnage tax or duty, if such vessel be
licensed, registered or enrolled.
In order to determine whether this provision exempts from the
payment of tonnage tax vessels belonging to citizens of the
United States engaged in transportation subject to the coastwise
laws and properly documented for such transportation under those
laws, we have reviewed the historical development of the laws
related to tonnage taxes, the legal history of 46 U.S.C. App.
122, the historical development of the pertinent Customs
Regulations, and any Court decisions or other such precedents
concerning this issue.
Virtually since the founding of the Republic, laws pertaining
to tonnage taxes have given favorable treatment to vessels
engaged in coastwise transportation or the fisheries. Chapter 3,
Act of July 20, 1789 (1 Stat. 27), and Chapter 30, Act of July
20, 1790 (1 Stat. 135), provided for a 6 cents per ton tax on any
vessel having a license to trade between the different districts
of the United States or to carry on the bank or whale fisheries,
while employed therein, once per year for such vessels (while
other vessels were charged from 6 to 50 cents per ton per entry).
This yearly tonnage duty for vessels engaged in coastwise trade
or the fisheries remained in effect until 1830 when all tonnage
duties were abolished for United States vessels all officers and
at least two-thirds of the crew of which were United States
citizens and for foreign vessels on a reciprocal basis (Chapter
119, Act of May 31, 1830, 4 Stat. 425). In 1862 tonnage duties
were reinstituted with favorable treatment for vessels licensed
for and employed in the coastwise trade or fisheries, along with
vessels arriving from Mexico, any of the West India Islands, and
the British provinces of North America, which were subject to a
duty of 10 cents per ton once per year (chapter 163, section 15,
Act of July 14, 1862, 12 Stat. 558). This annual duty of 10
cents per ton was raised to 30 cents per ton in 1865 (chapter 80,
section 4, March 3, 1865, 13 Stat. 493).
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In the Act of July 14, 1870 (chapter 255, section 25, 16
Stat. 269), the 1862 Act (see above) was amended so that:
... no ship, vessel, steamer, boat, barge, or flat
belonging to any citizen of the United States, trading
from one port or point within the United States, to an-
other port or point within the United States, or
employed in the bank, whale, or other fisheries, shall
hereafter be subject to the tonnage tax or duty provid-
ed for in [the 1862 Act) ....
Thus, this provision, which was enacted in the Revised
Statutes as section 4220, is substantively the same as 46 U.S.C.
App. 122. The 1862 Act, which this provision amended, provided
that:
... upon all ships, vessels, or steamers, which ...
shall be entered at any custom-house in the United
States from any foreign port or place, or from any port
or place in the United States, whether ships or vessels
of the United States, or belonging wholly or in part to
subjects of foreign powers, there shall be paid a tax
or tonnage duty of ten cents per ton of the measurement
of said vessel, in addition to any tonnage duty now
imposed by law ....
Although at the time of the enactment of the predecessor of
46 U.S.C. App. 122, vessels entering United States ports from
ports or places in the United States were subject to tonnage
duty, this has not been so since 1884 (Act of June 26, 1884,
chapter 121, section 14, 36 Stat. 111). Because the 1870 Act
remained in effect after the 1884 removal of the provision for a
tonnage duty on vessels entered in the United States from another
port or place in the United States, the only possible application
for that provision of the 1870 Act which exempts from tonnage tax
properly documented vessels belonging to United States citizens
trading from one United States port to another was, and remains
under 46 U.S.C. App. 122, to exempt from tonnage tax such vessels
engaging in coastwise transportation arriving from a foreign port
or place.
The provision which became the tonnage tax provision in the
1870 Act was introduced as an amendment to a tax bill in the
House of Representatives by Representative Schenck. This
provision provided, in pertinent part, that:
... no ship, vessel, steamer, boat, barge, or flat
belonging to any vessel of the United States, trading
and arriving from a port of the United States, although
touching or stopping at a foreign port on the voyage,
or trading from one port or point within the United
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States to another port or point within the United
States, or employed in the bank, whale, or other
fisheries, shall hereafter be subject to the tonnage
tax or duty .... [Congressional Globe 4107 (1870).]
[Emphasis added.]
Thus, the amendment was in approximately the same form as
that of the 1870 Act, except for the language "although touching
or stopping at a foreign port on the voyage." This language was
removed from the bill in the Senate by the substitution of a new
amendment without the language (Congressional Globe 4997 (1870)).
Senator Williams, in commenting on the stricken language, stated:
I know that [i.e., the stricken language] is stricken
out, and other language has been substituted; but it is
the understanding of the committee that the language of
the substitute is equivalent to the language stricken
out. My attention has been called to this, and several
questions have been asked me about that subject, and I
agreed to indicate in the Senate that that was the
understanding of the committee.
Senator Edmunds asked: "Is that the fair construction of the
law" and Senator Williams responded, "Yes, sir." (Congressional
Globe 4997 (1870).)
The legislative history to the 1870 Act is not completely
clear with regard to this issue (e.g., see the comments of
Senators Corbett and Sherman indicating that they believed that
the provision was intended to relieve from tonnage tax vessels in
the inland and coasting trade and not "boats or vessels sailing
to foreign ports"). We believe, however, that this legislative
history does indicate an intent by the Congress to exempt from
tonnage tax vessels engaged in the coastwise transportation,
including vessels engaged in such transportation arriving from a
foreign port or place.
The Customs Regulations issued after the 1870 Act through the
1923 edition of the Customs Regulations exempted from the payment
of tonnage tax vessels engaged in the coastwise trade (Article
296, 1874 Customs Regulations; Article 277, 1884 Regulations;
Article 183, 1892 Regulations; Article 193, 1899 Regulations;
Article 176, 1908 Regulations; Article 119, 1915 Regulations; and
Article 118, 1923 Regulations). In the 1931 Customs Regulations,
the provisions on tonnage tax and light money (Articles 129-136)
were substantially revised and the provision exempting vessels of
the United States engaged in the coastwise trade from tonnage tax
was omitted, without explanation. The provision exempting ves-
sels engaged in the whale or other fisheries (Article 130(2)(f)),
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was included, citing 46 U.S.C. App. 122, and section 122 was
cited as authority for the general provision on exemptions from
tonnage tax or duty (Article 130). Since the 1923 Regulations,
there has been no provision in the Customs Regulations exempting
United States vessels engaged in the coastwise trade from tonnage
tax.
At least one Federal Court has stated that vessels licensed
to engage in the coastwise trade are exempt from tonnage tax
(Pacific Shrimp Co. v. United States, 375 F. Supp. 1036, 1039
(W.D. Wash., 1974). The Attorney General of the United States
has also stated that vessels documented for the coastwise trade
and fisheries are exempt from tonnage duty, citing section 4220
of the Revised Statutes (46 U.S.C. App. 122) (17 Op. Att. Gen.
388, 389 (1882)). Although this court decision and the Opinion
of the Attorney General may be considered as dicta, as was stated
in C.S.D. 87-16, they are the only such precedent opinions of
which we are aware addressing this issue.
On the basis of the foregoing (the general development of the
tonnage tax laws, the evidence of Congressional intent with
regard to the predecessor of 46 U.S.C. App. 122, the Customs
Regulations issued under 46 U.S.C. App. 122 and its predecessors,
and the only Federal Court or Attorney General opinions on the
matter of which we are aware), we conclude that a United States-
owned vessel documented for the coastwise trade is not subject to
tonnage tax when engaged in transportation subject to the coast-
wise laws. The vessels under consideration, when they arrive in
a Gulf or East Coast United States port with Alaska North Slope
oil, are not subject to tonnage tax.
The vessels arriving in ballast in a United States port,
after delivering the Alaska North Slope oil to Panama, are
subject to tonnage tax. Such vessels are not considered to be
engaged in coastwise transportation subject to the coastwise laws
(see our ruling of March 21, 1988, file number 109303, referred
to above) and enter the United States from a foreign port or
place (see 46 U.S.C. App. 121 and 19 CFR 4.20(a)). This is
consistent with our previous rulings on this subject (see, e.g.,
ruling letter dated June 18, 1958, to the Collector of Customs,
New York, New York; telex ruling dated May 18, 1979, file number
103994; and ruling dated March 5, 1984, file number 106474,
copies enclosed).
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HOLDING:
The vessels described in the FACTS portion of this ruling are
not subject to tonnage tax when they arrive in a Gulf or East
Coast United States port with Alaska North Slope oil transported
from Panama in the coastwise trade. Such vessels are subject to
tonnage tax when they arrive in ballast in a United States port
after delivering the Alaska North Slope oil to Panama.
EFFECT ON OTHER RULINGS:
C.S.D. 87-16 is MODIFIED in part.
Sincerely,
Edward T. Rosse
Acting Director, Regulatory
Procedures and Penalties Division
Enclosures
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