Internal Advice; Harbor Maintenance Fee; 26 U.S.C. § 4462; “ferry” definition

HQ 228682 February 5, 2002 LIQ-15 RR:CR:DR 228682 LLB Category: Liquidation Director, Regulatory Audit Division 6.3 1300 Pennsylvania Avenue, N.W. Washington, D.C. 20229 RE: Internal Advice; Harbor Maintenance Fee; 26 U.S.C. § 4462; “ferry” definition Dear Sir or Madam: We have reviewed your internal advice request of December 10, 1999, initiated pursuant to 19 C.F.R. § 177.11, by Barnes, Richardson, and Colburn on behalf of their client, BASF Corporation. Our decision follows. FACTS The following facts were stipulated by BASF. The BASF Corporation (BASF) imports paints from its Windsor, Ontario facility to the United States through the Port of Detroit. Since solvent-based paints are prohibited from being transported via the Ambassador Bridge or the Detroit/Windsor Tunnel, the paint must be transported across the Detroit River to the Port of Detroit. To effect the foregoing, BASF transports the paint by truck to the Detroit River where it boards a flat barge called a “truck ferry,” which carries the truck and passenger across the river to the Port of Detroit. The barge makes a minimum of five trips each way across the Detroit River daily. The vessel company submitted two inspection certificates issued by the Canada Coast Guard. The first certificate, which was sent to this office on December 19, 2001, states that the ship was operating as a non-passenger ship. The second inspection certificate, which was sent to this office on January 7, 2002, indicates that the ship is operating as a passenger ship. Both certificates indicate that the watercraft in issue consists of a tugboat and barge combination and that the vessel complies with the provisions of the Canada Shipping Act The vessel company also provided material advertising the advantages of using the vessel. The material states that the barge can accommodate 6-8 standard tractor-trailer units up to 200 feet long and 21 feet wide and that there are neither height nor weight restrictions. Further, over 350 transport companies use the services of the vessel. In addition, the advertisement states that Customs papers are faxed to Customs brokers before crossing and that clearances are faxed by the brokers to the Customs Service so as to effect the entry of the goods. During the Regulatory Audit Division’s NAFTA verification of BASF Canada, it came to their attention that BASF was shipping paint, as described by BASF above, without paying Harbor Maintenance Fees (HMF). ISSUE Whether a barge, which transports a truck loaded with cargo and its driver, falls within the definition of a “commercial vessel” or “ferry” as defined by 26 U.S.C. § 4462(a) LAW AND ANALYSIS In general, harbor maintenance tax is imposed, inter alia, on importers and shippers “on any port use.” See 26 U.S.C. § 4461(a) and (c). In pertinent part 26 U.S.C. § 4462 provides: (a) Definitions- For purposes of this subchapter— . . . (1) Port use.- . . .means- (A)the loading of commercial cargo on, or (B) the unloading of commercial cargo from, a commercial vessel at a port. . . (3) Commercial cargo (A) In general . . . “commercial cargo” means any cargo transported on a commercial vessel, including passengers transported for compensation or for hire. . . . (4)Commercial vessel (A) In general The term “commercial vessel” means any vessel used— (i) in transporting the cargo by water for compensation or hire, or (ii) in transporting cargo by water in the business of the owner, lessee, or operator of the vessel. (B) Exclusion of ferries (i) In general The term “commercial vessel” does not include any ferry engaged primarily in the ferrying of passengers (including their vehicles) between points within the United States, or between the United States and contiguous countries. (ii) Ferry The term “ferry” means any vessel which arrives in the United States on a regular schedule during its operating season at intervals of at least once each business day . . . BASF argues that because the barge in question makes a minimum of five trips each way across the Detroit River, it falls within the ferry exception pursuant to 19 C.F.R. § 24.24(b)(4), the interim regulation promulgated under the authority of 26 U.S.C. § 4462, which tracks the language of the statute. BASF argues that the barge also qualifies as a ferry because the truck driver that boards the barge is a “passenger” and the truck is a “vehicle” within the meaning of the statute.  Regulatory Audit’s position is that the truck drivers are not passengers of the barge, rather, their presence is merely incidental to the movement of the paint. Further, the barge only carries tractor-trailers and their drivers and is not designed for passengers and their vehicles, e.g. cars and their drivers; hence, the barge is a commercial vessel, and therefore subject to the HMT. “The first step in interpreting a statute is to examine the text of the statute.” United States v. Alvarez-Sanchez, 311 U.S. 350, 356 (1994). “Where the content of the statute is clear and unambiguous, that language must ordinarily be regarded as conclusive.” Norfolk and Western Railway, Co. v. United States, 869 F. Supp. 974, 979(Ct. Int’l Trade 1994)(internal citation and quotation omitted). “When the text of a statute is ambiguous, the statute must be interpreted to conform to the goals and purposes Congress intended the statute to address.” Id. Pursuant to 26 U.S.C. § 4462(a)(4)(A), a commercial vessel “means any vessel used --(i) in transporting cargo by water for compensation . . .” (emphasis added). Insofar as the barge in question is being used to transport the truck, which is carrying the paint, the barge falls within the definition commercial vessel. Pursuant to 26 U.S.C. § 4462(a)(4)(B)(ii) a ferry is “any vessel which arrives in the United States on a regular schedule during its operating season at intervals of at least once each business day.” (emphasis added). Insofar as the barge schedule submitted indicates that barge makes five daily trips across the Detroit River, the definition of ferry has also been met. However, since a commercial vessel may be any vessel used in the transportation of cargo for compensation, a ferry may fall within the definition of commercial vessel unless it is the type of ferry that is “engaged primarily in the ferrying of passengers (including their vehicles) . . .” 26 U.S.C. § 4462(a)(4)(B)(i)(emphasis added). Since the statute does not define the term “vehicles”or the term “passengers,” the truck that boards the barge could arguably be a “vehicle” and the truck driver a “passenger” within the plain meaning of the statute. Nevertheless, the word “primarily” appears to be a critical factor in determining how the ferry is engaged. If all ferries were to be exempt from the Act, the use of the qualification "primarily" when coupled with the definition of “ferry” in paragraph (a)(4)(B)(ii), is incongruous. The use of the qualifying language shows that Congress did not intend for all ferries to be exempt. Establishing status as a ferry under paragraph (a)(4)(B)(ii) does not, by itself, establish entitlement to the exemption. Further, based on the plain reading of the statute, whether a vessel qualifies as a commercial vessel or a ferry depends on how the vessel is “used” or “engaged”. See 26 U.S.C. § 4462(a)(4)(A) & (B)(i); see also, 1986 U.S.S.C.A.N. 6639, 6685(stating that “the term “commercial vessel” means a vessel engaged in waterborne commerce, but does not mean any vessel engaged primarily in the short-haul ferrying of passengers or vehicles . . .”)(emphasis added). The HMT is on the importer of the cargo, not the vessel operator. See 26 U.S.C. § 4461(a) & (c), infra; see also, 1986 U.S.C.C.A.N. 6639, 6646-47 (stating that “[t]he tax in title 8 is not on the harbor, nor is it on the vessel’s operator or owner. The tax is set on the value of the cargo, and is to be paid by the owner of the cargo, or his agent.”) . Therefore, using the foregoing analysis, we need to examine how the importer primarily “uses” or “engages” the subject vessel, not how the vessel is operated. At the time this request for internal advice was pending, the tug and barge in question was operating under a Canadian Coast Guard certificate, which indicated that it was a non-passenger ship. The certificate also indicated that the drivers were considered part of the crew. The foregoing statement is consistent with the statement on the certificate that the ship is to operate as a non-passenger ship. The terms of the certificate indicated that it would be invalid if passengers were carried. On January 7, 2002, the vessel company submitted a new inspection certificate which allows the transportation of up to 12 passengers and one crew member. The certificate does not indicate the status of drivers. Nevertheless, although, the Canadian Coast Guard certificate states that the ship is authorized to carry passengers, the vessel company’s advertising material solicits the business of transport companies carrying merchandise in tractor-trailers. The vessel company advertises that it provides merchandise information to Customs brokers, who, in turn, contact the Customs Service to expedite Customs clearance of that merchandise. The Customs clearance service provided by the vessel company solely applies to merchandise entering the country. Such a commercial document indicates commercial intent of the parties. Premier Graining Co. v. United States, 57 Cust. Ct. 32,35(1966) (“We can imagine no more convincing demonstration of commercial usage than that emanating from the language of billings, price lists ...and the like.”). The lack of any provision for foot passengers indicates the lack of an intention to ferry such passengers. The entire focus of the advertising material is to cover merchandise-carrying trucks. In Norfolk and Western Railway Co., 869 F.Supp. at 980, the court noted that the definitions between a ferry and a barge in 19 U.S.C. § 58c were not mutually exclusive. In the present case, the definitions for commercial vessel and ferry overlap. However, the plain words of the statute exempt only a ferry that is primarily engaged in the ferrying of passengers (and their vehicles) rather than all vessels that meet the statutory definition of ferry. A ferrying operation for which its advertisement lacks any reference to passengers, per se, does not fit within the statutory exemption. Based on our review, the evidence, namely the vessel company’s advertising material, does not support a conclusion that the vessel is a ferry engaged primarily in the ferrying of passengers (including their vehicles). Insofar as the subject barge is used to transport cargo for compensation and is not primarily engaged in ferrying of passengers and their vehicles, it does not fall within the ferry exception of 26 U.S.C. 4462(a)(4)(B) and therefore BASF is subject to the HMF. HOLDING: The barge indicated herein is a commercial vessel and is therefore, subject to the HMF. Sixty days from the date of the decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, John Durant, Director Commercial Rulings Division