Protest and Application for Further Review 5301-08-100301

HQ H043241 December 7, 2009 LIQ-15 OT:RR:CTF:ER H043241 DCC Port Director Port of Houston 2350 N. Sam Houston Parkway E. Houston, TX 77032 RE: Protest and Application for Further Review 5301-08-100301 Dear Port Director: This is our decision on the application for further review (“AFR”) of Protest No. 5301-08-100301, filed against the assessment of Harbor Maintenance Taxes (“HMT”) on the transport of a truss spar known as the Holstein Spar. We have considered the evidence provided and the points raised by your office and the protestant. Our decision follows. FACTS: BP America Production Company (“BP”) protests the assessment of HMT on the domestic movement of the Holstein Spar, from the Gulf Marine Fabricators, Inc. (“GMF”) South Yard in Ingleside, Texas, located on the Corpus Christi Bay, to open seas for installation in Green Canyon area of the Gulf of Mexico. The GMF South Yard is located near the intersection of the Gulf Intracoastal Waterway (“GIWW”) and the Corpus Christi Ship Channel. A spar is a deep-draft floating caisson, which consists of a large-diameter, single vertical cylinder, or caisson, that supports the oil production facilities and crew quarters located on the drilling platform. Truss spars differ from the conventional spars in that the lower section of the caisson hull is replaced with a truss framework. Truss spars may be divided into three distinct sections. The cylindrical upper section, known as the “hard tank,” provides most of the buoyancy for the structure. The middle truss section supports heave plates for increased stability, and provides separation between the keel tank and hard tank. The keel tank, also known as the “soft tank,” contains the fixed ballast that keeps the structure upright. The entire structure is secured to the seabed by a lateral catenary system, a network of taut cables and lines that trail out from the hard tank. At the time it was constructed, the Holstein Spar was the largest spar ever built, measuring 746 feet in length and 150 feet in diameter. BP ordered the Holstein Spar from Technip Offshore Inc. (“Technip”) with a contract delivery date for the hard tank of September 13, 2003. Because of its large size, the Holstein Spar exceeded the capacity of the largest heavy lift dry transport vessels, which are used to transport smaller spars as a single unit. Consequently, Technip assembled the spar from the two largest components—the hard tank, which was fabricated at Technip’s Mantyluoto Works Oy Yard located in Pori, Finland, and the truss section, which was built at the GMF South Yard in Ingleside, Texas. Upon completion in Finland, Technip dry shipped the hard tank to the GMF South Yard in Ingleside where it was offloaded for mating with the truss section in October of 2003. The hard tank arrived at the GMF South Yard on October 23, 2003, and was admitted into the Foreign Trade Zone (“FTZ”) under CBP Form 214 with HMT paid on the FTZ admission. Upon completion on land, the truss section and soft tank were loaded out into adjacent water from the North Quay of the GMF South Yard. BP contracted with Heerema Marine Contractors U.S., Inc. (“Heerema”) to transport the truss from the North Quay to the GMF bulkhead parallel to Corpus Christi Ship Channel (the “Ship Channel Quay”). Due to the weight and size of the truss section, Heerema needed a water depth of at least 75 to 80 feet to launch the truss. Because the water depth at quayside was not deep enough for the launch, Heerema used a launch barge to create essentially a floating bridge across which it conveyed the truss to a dredged deep water offloading basin located approximately 200 yards from the North Quay. Based on BP’s schematic drawing, the deep water basin is located in the GIWW near the Lower East Quay of the GMF South Yard. For the launch of the truss section, Heerema sought to use the H-627, a foreign-built, foreign-flagged barge from the company’s vessel fleet. In order to ensure that the use of a foreign-built barge would not violate section 27 of the Jones Act, Heerema requested a ruling from this office on May 7, 2003. On May 21, 2003, this office issued a ruling letter, HRL 115985, which held that the use of a foreign launch barge would not violate the Jones Act provided that after loading, the barge would only rotate on its central axis, but would otherwise remain stationary. Based on that ruling, HMC used the H-627 to carry the truss from the North Quay to the deep-water offloading basin. HMC modified the launch barge to allow the truss to be on loaded at the bow of the barge. After it was loaded, the barge was rotated around its central axis so that the truss was aligned with the deep water basin. The truss was then offloaded into the deep water basin from the stern of the barge. Aside from the rotation, the barge did not move during the launch and it was not used to wet tow the truss. After offloading, the truss section was transferred to the control of tugs that maneuvered the truss to the mating site alongside the Ship Channel Quay. Between October 2003 and March 2004, the hard tank and truss sections were joined together. This mating operation included: welding structural truss members below and above the water line; and outfitting riser pipes, riser containment tubes, fixed ballast lines and sea chest feed caisson. After completion of the mating operation, the assembled spar was towed from the Ship Channel Quay to the Gulf of Mexico on April 1, 2004. In support of its protest, BP submitted a schematic drawing and tow plan prepared by Heerema. BP claims that the two charts show that the spar was “floated into the intercoastal [sic] waterway.” That tow plan describes the towing operation as follows: Position harbour tugs at designated areas. Using towing tugs 1, 2, 3, 4 to line up spar in Corpus Christi ship channel. Connect tow tug no. 5 on bridge. Orientate tow tugs in preparation for channel tow. Commence channel tow to open sea. In April 2004, the Galveston District of the U.S. Army Corps of Engineers issued its monthly Hydrographic Bulletin, which reported the depths available for navigation in various Federal water projects. According to that report, the surveyed depth of the main channel of the GIWW in Texas from Aransas Bay to the Corpus Christi Ship Channel was twelve feet. This segment of the GIWW includes the area adjacent to the GMF South Yard. On April 2, 2004, BP filed CBP Form 7501 to withdraw, and enter for consumption, the assembled spar from the FTZ under entry C53-XXXX965-4. CBP liquidated that entry on February 11, 2005. On July 30, 2004, BP filed a Quarterly Summary Report (CBP Form 349), for the second quarter of 2004, claiming an exemption from HMT under the intraport exemption for cargo shipped within a single port. According to its report, the value of the shipment was $272,523,555. On September 21, 2007, CBP issued Bill No. 902461169 for HMT owed in the amount of $419,852.10—consisting of $340,779.57 for HMT, and $79,072.53 for interest—which BP paid on October 15, 2007. The bill references “2NDQTR04” for miscellaneous charges incurred during the second quarter of 2004. On March 4, 2008, pursuant to 19 C.F.R. § 24.24, BP filed an HMT Amended Quarterly Summary Report (CBP Form 350) for the second quarter of 2004. According to its amended report, BP claimed that the shipment qualified for an exemption for the value of its shipment, i.e., $272,623,655, for use of a vessel subject to the Inland Waterway Fuel Tax (“IWT”). On line 13 of its amended report, BP reported that the amount of HMT previously paid for the same movement, which was eligible for refund, was $340,779.57. The port did not act on BP’s refund request. On May 15, 2008, BP filed this protest to challenge CBP’s denial of a refund for HMT paid. In its protest, BP claims that Holstein Spar movement was subject to the IWT, and is therefore exempt from HMT on the value of the shipment. BP asserts that because the spar was floated into the GIWW, “the vessel used to make the movement would have been subject to the Inland Waterway Fuel Tax . . . provided for under § 4042 of the Internal Revenue Code.” BP further claims that the regulations implementing section 4042, “only require that the fuel consumed be subject to the IWT, and do not require that the IWT actually be paid, in order to get the exemption from the HMF.” Because it contracted with a third party to arrange towing of the spar, BP claims that it cannot provide evidence that the IWT was in fact paid. On October 17, 2008, the Port of Houston referred the protest to this office for further review and indicated that the claim was not protestable. The port did not make a determination on the substantive issues of BP’s claim. On February 2, 2009, a staff person of the Waterborne Commerce Statistics Center, U.S. Army Corps of Engineers reported that Heerema did not file a Vessel Operation Report (ENG Form 3925) to report movement of the Holstein Spar on or about April 1, 2004. ISSUE: Whether BP timely protested the CBP’s decision to deny its HMT exemption claim and assess a charge or exaction by billing BP for the HMT. Whether the movement of the Holstein Spar from the GMF South Yard in Ingleside, Texas to the Gulf of Mexico on April 1, 2004, was exempt from the Harbor Maintenance Tax pursuant to the exemption for movements by vessels that use fuel subject to the IWT, as provided under 26 U.S.C. § 4462(c). LAW & ANALYSIS: 1. The Protest Filing Initially, we note that although CBP’s regulations establish procedures for claiming refunds of HMT for various types of vessel movements (codified at 19 C.F.R. § 24.24(e)), those procedures do not supersede the standard procedures for protesting CBP decisions pursuant to 19 U.S.C. § 1514(a), or allow refund claimants to restart the protest filing clock by filing a HMT refund request. In this case, because CBP thoroughly considered BP’s claim, made a determination to deny the claim, calculated the amount of HMT due, and gave notice of its decision to BP by issuing the bill on September 21, 2007, CBP’s denial of BP’s initial claim constitutes a protestable customs decision subject to the protest filing requirements of 19 U.S.C. § 1514(a). Before determining whether the protest was timely filed we must determine the applicable protest filing period. In 2004, Congress extended the protest filing period from 90 to 180 days after—but not before—the date of the decision being protested. See 19 U.S.C. § 1514(c)(3), as amended by the Miscellaneous Trade and Technical Corrections Act of 2004 (the “2004 Act”), Pub. L. No. 108-429, § 2103(2)(B)(iii), 118 Stat. 2434, 2598 (2004). In order to ensure the amended protest statute was not applied retroactively, Congress included an effective date provision in section 2108 of the 2004 Act. According to the effective date provision, the amended statute only applies to merchandise entered or withdrawn from a warehouse for consumption 15 days after the date of enactment. Specifically, section 2108 states: “The amendments made by this subtitle [subtitle B (§§ 2101 to 2108) of Title II of Public Law 108-429] shall apply to merchandise entered, or withdrawn from warehouse for consumption, on or after the 15th day after the date of the enactment of this Act.” President George W. Bush signed the 2004 Act on December 3, 2004. Therefore, the 2004 Act became effective for merchandise entered or withdrawn from warehouse for consumption on or after December 18, 2004, which was the fifteenth day following the date of enactment. In this case, however, the protest is related to the assessment of HMT on a domestic movement of merchandise. There was no entry or warehouse withdrawal event that may be used to determine whether the protest statute as amended by the 2004 Act should apply. Consequently, it is necessary to establish the most appropriate alternative event for purposes of the effective date provision of the 2004 Act. Although the instant protest does not involve an entry or withdrawal from warehouse for consumption, it is it is useful to note that these events involve well-established transactions that require the filing of particular CBP forms within certain timeframes. In the case of merchandise subject to entry, the entry must be reported to CBP on CBP Form 3461 within 15 calendar days of the landing of the vessel, aircraft or vehicle. See 19 C.F.R. § 141.5. For merchandise withdrawn from a warehouse for consumption, the regulations require CBP Form 7501 to be filed at the time of withdrawal. See 19 C.F.R. § 141.68(b)(1). In the absence of an entry or warehouse withdrawal for consumption, the most appropriate event for applying the effective date provision of the 2004 Act in this case is the filing of CBP Form 3461. For foreign merchandise transferred from a foreign trade zone, the CBP Form 3461 must be filed within ten business days of the time of entry. See 19 C.F.R. § 146.62(a). Here, BP filed the Entry/Immediate Delivery (CBP Form 3461) on April 1, 2004. Based on the date of the Entry/Immediate Delivery filed when the spar was removed from the foreign trade zone, the movement preceded the effective date of the 2004 Act. Pursuant to 19 U.S.C. § 1514(a) (2004), “decisions of the Customs Service, including the legality of all orders and findings entering into the same, as to . . . the liquidation or reliquidation of an entry . . . shall be final and conclusive . . . unless a protest is filed in accordance with this section.” For merchandise entered before December 18, 2004, section 1514(c)(3) provides as follows: A protest of a decision, order, or finding described in subsection (a) of this section shall be filed with the Customs Service within ninety days after but not before— notice of liquidation or reliquidation, or in circumstances where subparagraph (A) is inapplicable, the date of the decision as to which protest is made. 19 U.S.C. § 1514(c)(3) (2004). Because the CBP Form 3461 was filed before December 18, 2004, the 2004 Act does not apply and the protest is therefore subject to the ninety-day filing deadline. In this case, the issue presented, i.e., whether HMT is owed on the spar movement, is not related to the liquidation or reliquidation of the entry, and therefore, subparagraph (A) of section 1514(c)(3) is inapplicable. Pursuant to section 1514(c)(3)(B), the protest will be considered timely if it was filed within ninety days after, but not before, the date of the decision that is the subject of the protest. The next issue regarding the timeliness of the protest depends on the date of the decision that started the ninety-day protest filing period under section 1514(c)(3)(B). The issue of whether the assessment of HMT constitutes a protestable customs decision has been considered by the courts. In United States Shoe Corp. v. United States, 523 U.S. 360 (1998), aff’g 114 F.3d 1564, (Fed. Cir. 1997), aff’g 907 F. Supp. 408 (Ct. Int’l Trade 1995), this question arose when the courts reviewed the interpretation of the jurisdictional statute of the U.S. Court of International Trade (“CIT”). In U.S. Shoe, the plaintiff challenged the application of HMT to an export shipment as a violation of the Export Clause of the Constitution, which prohibits the imposition of taxes on exported goods. As a court of exclusive jurisdiction, the CIT must have specific authority within the court’s jurisdictional statute, codified at 28 U.S.C. § 1581, in order to hear the dispute presented by U.S. Shoe. At trial, the CIT determined that its jurisdiction to hear the case resided in 28 U.S.C. § 1581(i) rather than 1581(a), in part, because there was no decision by CBP for the plaintiff exporter to protest. The CIT found that because there was no “decision” regarding the payment of HMT, 28 U.S.C. § 1581(i) was the appropriate basis of jurisdiction. In reaching its conclusion, the court reasoned that in its administration of the HMT, CBP served a mere ministerial function and had no discretion to review the issue of whether the HMT was constitutional. “Customs does not determine the application, policies, or rates of the [HMT], but merely serves to implement its provisions.” 907 F. Supp. at 420. In affirming the CIT’s conclusion that section 1581(a) was inapplicable as a basis of jurisdiction, the Court of Appeals for the Federal Circuit (“CAFC”) noted the requirement that CBP must be a “decision” issued by CBP. The CAFC rejected the government’s contention that the acceptance of the exporter’s HMT payment was a protestable decision. In discussing whether the collection of HMT involved a protestable decision, the CAFC explained as follows: Decisions can refer to, for example, “the classification and rate and amount of duties chargeable” or “all charges or exactions of whatever character within the jurisdiction of the Secretary of the Treasury.” [19 U.S.C. § 1514(a) (1994)]. While the HMT is likely a charge or exaction, we do not believe that the actual payment or receipt of the HMT can be a “decision” of Customs, as Customs has not made any decision -- it merely passively collects money in the amount required by the statute. Customs doesn’t even notify exporters of the need to pay the HMT; rather, the exporter pays all accumulated fees on a quarterly basis by simply mailing a check or money order to Customs along with appropriate forms. See 19 C.F.R. § 24.24(e)(2)(ii) (1996). Typically, “decisions” of Customs are substantive determinations involving the application of pertinent law and precedent to a set of facts, such as tariff classification and applicable rate of duty. Indeed, prior case law indicates that Customs must engage in some sort of decision-making process in order for there to be a protestable decision. Thus, for example, in Dart Export Corp. v. United States, 43 C.C.P.A. 64 (1956), one of our predecessor courts held that Customs’ acceptance of estimated duties paid by an importer upon entry did not constitute a final, protestable decision which would deprive the government of the right to liquidate the entry at a later date, because the payment was based entirely on information provided by the importer, rather than after analysis and adjudication by Customs. Id. at 69 - 70, 74. . . . Thus, Customs merely passively collects payments calculated by the exporters pursuant to statutes and regulations and performs no active role whatsoever. It performs no analysis; it issues no directives or decisions; it imposes no liabilities. 114 F.3d at 1569. The Supreme Court’s analysis regarding the applicability of section 28 U.S.C. § 1581(a) mirrored the reasoning in the two lower court rulings. The Court noted: Section 1581(a) surely concerns customs duties. It confers exclusive original jurisdiction on the Court of International Trade in “any civil action commenced to contest the [Customs Service’s] denial of a protest.” A protest, as indicated in 19 U.S.C. § 1514, is an essential prerequisite when one challenges an actual Customs decision. As to the HMT, however, the Federal Circuit correctly noted that protests are not pivotal, for Customs “performs no active role,” it undertakes “no analysis [or adjudication],” “issues no directives,” “imposes no liabilities”; instead, Customs “merely passively collects” HMT payments. 114 F.3d at 1569. 523 U.S. at 365-66. In another case involving a challenge to the application of HMT to exported goods, the CAFC considered whether CBP’s denial of an exporter’s HMT refund request was a “protestable” decision for purposes of 19 U.S.C. § 1514(a), such that subsequent CIT jurisdiction would be available under 28 U.S.C. § 1581(a). See Swisher International, Inc. v. United States, 205 F.3d 1358 (Fed. Cir. 2000), cert. denied, 531 U.S. 1036 (2000). In Swisher, the exporter initially filed a refund request, and later a protest to challenge CBP’s denial of its request. The CAFC found CBP’s decision to deny a refund claim for HMT to be subject to protest. The CIT held that because Customs’ decision to deny a refund request on the basis of a constitutional challenge was not a decision subject to the protest procedures under 19 U.S.C. § 1514(a), there was no jurisdiction to hear the appeal under section 1581(a). Rather the CIT found that 28 U.S.C. § 1581(i), the CIT’s “residual” jurisdiction provision, was the exclusive jurisdictional basis for Swisher’s appeal, and consequently, denied all of the exporter’s claims that were barred by the two-year statute of limitation under that subsection. On appeal, the CAFC held that Customs’ denial of a refund request is a decision regarding a charge or exaction and thus a protestable decision pursuant to section 1514(a), and therefore, the CIT had protest jurisdiction under section 1581(a). Unlike the procedural posture presented in U.S. Shoe and Swisher, the present case involves the denial of an HMT refund claim following an active decision-making process by the CBP. Here, CBP carefully reviewed BP’s claim, as represented in its Harbor Maintenance Fee Quarterly Summary Report, that the movement was exempt from HMT under the intraport exemption. After thoroughly analyzing BP’s intraport exemption claim, CBP determined that the claimed exemption should be denied. CBP subsequently calculated the HMT and interest due, and gave notice of its decision by issuing a bill to BP. Based on the fact that the rejection of BP’s intraport exemption claim was a substantive determination, we find that assessment of HMT to the spar movement constituted a customs decision for purposes of 19 U.S.C. § 1514. Pursuant to section 1514(c)(3)(B), the protest of a customs decision is timely when filed within ninety days after but not before the date of the decision which is protested. In this case, the effective date of the customs decision was the date BP received notice that CBP rejected its claim. That is, September 21, 2007, which is the date CBP issued Bill No. 902461169. Because BP filed Protest 5301-08-100301 on May 15, 2008, which was more than ninety days after the date CBP gave notice of its decision, the protest was not timely under section 1514, and should therefore be denied. Finally, we note that even if the protest filing period were subject to the 2004 Act, BP’s protest would still be untimely. The event subject to protest was CBP’s denial of BP’s claim that the movement was exempt from HMT. Notice of that decision occurred when CBP issued the bill on September 21, 2007. Because BP’s protest, dated May 15, 2008, was more than 180 days after the date of the bill, the protest was untimely under the extended protest filing period of the protest statute as amended by the 2004 Act. Although we determine that BP’s protest was not timely under either the 90- or 180-day protest filing deadline, and should be denied on that basis, we review below the substance of BP’s claim that the movement was exempt from HMT 2. The HMT Exemption Congress established the statutory authority for the Harbor Maintenance Tax (“HMT”) in the Water Resources Development Act of 1986 (“WRDA”), Pub. L. 99-662, 100 Stat. 4082, 4266, codified at 26 U.S.C. §§ 4461 - 4462. In addition to the HMT, Congress redesignated a previously enacted inland waterways tax and trust fund as part of the revenue provisions of the WRDA. The HMT and the IWT, together with their corresponding trust funds, comprise Title XIV of the WRDA. The HMT provides federal funding for the maintenance of any channel or harbor in the United States. As amended by section 11214 of the Omnibus Budget Reconciliation Act of 1990, Pub. L. 101-508, the HMT imposes a charge of 0.125 percent of the total value of the commercial cargo that involves use of a port. The statute defines “port use” as the loading or unloading of commercial cargo at a port. 26 U.S.C. § 4462(a)(1). We note initially that BP abandons its claim that the movement was exempt from the HMT based on the intraport exemption as provided for by 19 U.S.C. § 4462(g)(2). Although BP initially claimed the movement qualified for the intraport exemption as provided by 26 U.S.C. § 4462(g)(2), that claim was rejected when CBP issued a bill for HMT and interest owed on September 21, 2007. BP subsequently changed the basis for its claim that the movement was exempt from the HMT by filing an Amended Quarterly Summary Report on March 4, 2008. BP’s amended HMT report and the instant protest only identify the HMT exemption for movements by vessels subject to the IWT, as provided under 26 U.S.C. § 4462(c). Because BP amended its HMT report and because it did not raise the intraport movement exemption in its protest, we determine that BP abandoned its claim that the movement was not subject to the HMT as the result of an intraport movement. The CBP regulations implementing the HMT are codified in 19 C.F.R. Part 24. Subparagraph 24.24(e)(4)(iii), describes the procedure for claiming refunds of the HMT. That subparagraph provides that when a refund is requested, a Harbor Maintenance Fee Amended Quarterly Summary Report (CBP Form 350), must be mailed to CBP, along with a copy of the Harbor Maintenance Fee Quarterly Summary Report (CBP Form 349), for the quarter or quarters in which the refund is requested or a supplemental payment is made. In the case of refund, the request must specify the grounds for the refund. The WRDA provides for the collection of HMT on commercial shipments unless otherwise exempted. As codified at 26 U.S.C. § 4461, the WRDA reads as follows: (a) General rule. There is hereby imposed a tax on any port use. (b) Amount of tax. The amount of the tax imposed by subsection (a) on any port use shall be an amount equal to 0.125 percent of the value of the commercial cargo involved. (c) Liability and time of imposition of tax. (1) Liability. The tax imposed by subsection (a) shall be paid by  (A) in the case of cargo entering the United States, the importer, (B) in the case of cargo to be exported from the United States, the exporter, or (C) in any other case, the shipper. (2) Time of imposition. Except as provided by regulations, the tax imposed by subsection (a) shall be imposed -- (A) in the case of cargo to be exported from the United States, at the time of loading, and (B) in any other case, at the time of unloading. 26 U.S.C. § 4462(a) reads in relevant part: (1) Port use. The term “port use” means -- (A) the loading of commercial cargo on, or (B) the unloading of commercial cargo from, a commercial vessel at a port. (2) Port. (A) In general. The term ‘port’ means any channel or harbor (or component thereof) in the United States, which— (i) is not an inland waterway, and (ii) is open to public navigation. * * * (3) Commercial cargo. (A) In general. The term “commercial cargo” means any cargo transported on a commercial vessel, including passengers transported for compensation or hire. * * * (4) Commercial vessel. (A) In general. The term “commercial vessel” means any vessel used -- (i) in transporting 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. Based on the WRDA, the shipment of the hard tank from Finland to the GMF South Yard, the movement of the truss section about the waters adjacent to the GMF South Yard, and the towing of the assembled spar from the GMF South Yard to the Gulf of Mexico involves five separate “port use” vessel movements. As defined in 26 U.S.C. § 4462(a), the term “port use” includes the loading of commercial cargo on, and the unloading of commercial from, a commercial vessel at a port. Each loading or unloading of commercial cargo is a distinct port use movement. The first movement occurred when the hard tank from Finland was offloaded at the GMF South Yard. The second movement was the loading of the truss from the North Quay onto the launch barge. The third movement occurred when the truss was offloaded from the barge into the deep water basin near the GMF South Yard. Towing the truss from the deep water basin to the Ship Channel Quay constituted the fourth movement. The fifth movement occurred when the spar, assembled from the hard tank and truss sections, was towed from the Ship Channel Quay to the Gulf of Mexico. When Congress enacted the WRDA it included various exemptions from the HMT. Before addressing the IWT exception under 26 U.S.C. § 4462(c), we note that section 4462 contains a special rule that excludes intraport movements. Section 4462(g) provides as follows: Special rules. Except as provided by regulations— * * * (2) Exception for intraport movements. Under regulations, no tax shall be imposed under section 4461(a) on the mere movement of cargo within a port. Based on the exception section 4462(g)(2), three of the movements of the truss section in the waters immediately surrounding the GMF South Yard may be considered intraport movements. Specifically, we find that the movement of the truss from the North Quay onto the launch barge, from the launch barge into the deep water basin, and from the deep water basin to the Ship Channel Quay are intraport movements, and therefore, these three movements are exempt from the HMT. Section 4461 also provides an exemption to ensure that cargo shippers will not be subject to the HMT when fuel used for the vessel carrying the cargo is subject to the IWT for transportation along certain inland waterways. As codified in 26 U.S.C. § 4462, the WRDA provides as follows: (c) Coordination of tax where transportation subject to tax imposed by section 4042. No tax shall be imposed under this subchapter with respect to the loading or unloading of any cargo on or from a vessel if any fuel of such vessel has been (or will be) subject to the tax imposed by section 4042 (relating to tax on fuel used in commercial transportation on inland waterways). 26 U.S.C. § 4462(c) (emphasis added). The CBP regulations implementing section 4462(c) are codified at 19 C.F.R. § 24.24(c)(5), which provide as follows: Exemptions. The following are not subject to the [harbor maintenance] fee: * * * (5) Commercial vessels, if any fuel used to move the cargo is subject to the Inland Waterway Fuel Tax (See section 4042, Internal Revenue Code of 1954, as amended by Pub. L. 95-502 and Pub. L. 99-662). Section 4042 of the Internal Revenue Code, codified at 26 U.S.C. § 4042, provides: § 4042 Tax on fuel used in commercial transportation on inland waterways (a) In general. There is hereby imposed a tax on any liquid used during any calendar quarter by any person as a fuel in a vessel in commercial waterway transportation. Significantly, however, the WRDA exempts several types of vessels from the IWT. These exemptions are contained in Section 4042(c), which provides as follows: (c) Exemptions. (1) Deep-draft ocean-going vessels. The tax imposed by subsection (a) shall not apply with respect to any vessel designed primarily for use on the high seas which has a draft of more than 12 feet. (2) Passenger vessels. The tax imposed by subsection (a) shall not apply with respect to any vessel used primarily for the transportation of persons. (3) Use by State or local government in transporting property in a State or local business. Subparagraph (B) of subsection (d)(1) shall not apply with respect to use by a State or political subdivision thereof. (4) Use in moving LASH and SEABEE ocean-going barges. The tax imposed by subsection (a) shall not apply with respect to use for movement by tug of exclusively LASH (Lighter-aboard-ship) and SEABEE ocean-going barges released by their ocean-going carriers solely to pick up or deliver international cargoes. Section 206 of the Inland Waterways Revenue Act of 1978 (“IWRA”), Pub. L. 95-502, 92 Stat. 1696, codified at 33 U.S.C. § 1804, describes the inland waterways subject to the IWT. That section provides as follows: For purposes of section 4042 of the Internal Revenue Code of 1954 (relating to tax on fuel used in commercial transportation on inland waterways) and for purposes of section 204 of this Act, the following inland and intracoastal waterways of the United States are described in this section: * * * (11) Gulf Intracoastal Waterway: From St. Mark’s River, Florida, to Brownsville, Texas, 1,134.5 miles. We find that the movement is not exempt from the HMT. In order to be exempt from the HMT, a claimant must demonstrate each of the following requirements: a) that the vessels traveled along one of the inland waterways described in 33 U.S.C. § 1804; b) that the vessels were exempt from the IWT; c) that the fuel used for the movement was “subject to” the IWT; and d) that the vessel operator paid, or will pay, the IWT. As discussed below, we find that BP failed to demonstrate that Holstein Spar traveled along the GIWW; that the fuel used to transport the spar was subject to the IWT; and that the vessel operator paid the IWT. a. Whether the Spar Traveled Along the GIWW BP claims that the two schematic drawings show that, “the Holstein Spar was manufactured and floated into the intercoastal [sic] waterway.” The first drawing shows the assembled spar in the middle of the Corpus Christi Ship Channel near the GMF South Yard. The second drawing shows the waterways from Port Ingleside to Port Aransas, including Corpus Christi Bay, Aransas Bay, the Corpus Christi Ship Channel, the GIWW, and the Gulf of Mexico. The second drawing does not indicate the position or route of the spar. We find that the available information indicates that the GIWW was used only to transport the truss section from the North Quay to the Ship Channel Quay, but it was not used to transport the completed spar from the Ship Channel Quay to the Gulf of Mexico. As noted above, the three movements of the truss section in the waters immediately surrounding the GMF South Yard are intraport movements, and therefore not at issue. The Ship Channel Quay is located on the inland side of the GIWW. Consequently, it was necessary for the spar to cross the GIWW where that waterway intersects the Corpus Christi Ship Channel. The question of whether a vessel using a ship channel and simply crosses the GIWW—but does not travel along the GIWW—is subject to the IWT has been addressed clearly in the Internal Revenue Code (“IRC”), which provides that vessels merely crossing the GIWW will not be treated as traveling along the waterway, and therefore, will not be subject to the IWT. Section 48 of the IRC provides as follows: § 48.4042-1 Tax on fuel used in commercial waterway transportation. (a) In general. Section 4042(a) imposes an excise tax on the use of liquid fuel in the propulsion system of commercial transportation vessels while traveling on certain inland and intracoastal waterways ( see §48.4042–1 (f)). The tax applies generally to all types of vessels, including ships, barges, and tugboats. It is in addition to all other taxes imposed on the sale or use of fuel. * * * (f) Commercial waterway transportation —(1) In general. For purposes of section 4042(a) and §48.4042–2(c)(1), the term “commercial waterway transportation” means the use of a vessel on the waterways specified in paragraphs (g) (1) through (27) . . . * * * (g) Specified waterways. Only fuel used on those waterways specified in section 206 of the Inland Waterways Revenue Act of 1978 (specified waterways) is taxable. The specified waterways are as follows: * * * (11) Gulf Intracoastal Waterway (G.I.W.W.) From the mouth of St. Mark's River, Florida, to Brownsville, Texas, 1,134.5 miles. For vessels traveling along the G.I.W.W. no matter how short the distance, the G.I.W.W. includes the main channel, all alternate channels, and all adjoining bays and sounds, regardless of depth. However, vessels merely crossing the G.I.W.W. on route either to a coastal port or to a nonspecified waterway will not be treated as traveling on the G.I.W.W. 26 C.F.R. § 48.4042-1 (emphasis added). Furthermore, the same issue was answered consistent with the IRC in an revenue ruling letter issued by the Internal Revenue Bureau (the “IRB,” predecessor to the IRS). In Revenue Ruling 84-8, 1984-1 C.B. 207, dated January 1984, the IRB reviewed whether ships using the Houston Ship Channel to travel between the Port of Houston and the Gulf of Mexico were subject to the IWT because that channel intersects the GIWW, and vessels using the ship channel necessarily cross the GIWW. In determining that the Houston Ship Channel is not part of the GIWW, the ruling states: “A channel which merely crosses the G.I.W.W., and which could not be used as an alternate waterway by those vessels traveling along the G.I.W.W., was not intended to fall within the regulatory definition of the G.I.W.W.” In this case, the Holstein Spar merely crossed the GIWW while traveling along the Corpus Christi Ship Channel en route to the Gulf of Mexico. Based on 26 C.F.R. § 48.4042-1 and Revenue Ruling 84-8, it is clear that the tow boats used to move the spar from the Ship Channel Quay to the Corpus Christi Ship Channel, and ultimately to the Gulf of Mexico were not intended to fall within the scope of the IWT. Finally, information about the GMF fabrication facilities on the company’s website does not support BP’s claim that the spar was required to use the GIWW to access the Gulf of Mexico. According to the GMF website, the GMF South Yard features, “Direct Access to Gulf of Mexico, via [the Corpus Christi] Ship Channel.” The description of GMF’s North Yard, by contrast, notes that the GMF facilities at that location feature, “1000’ Bulkhead on the [Gulf] Intercoastal [sic] Waterway (16’ water depth).” Based on GMF’s description of the waterways serving its North and South Yards it is apparent the company that built the truss section did not believe it was necessary for shippers to use the GIWW to access the open seas from GMF’s South Yard. b. Whether the Tow Vessels were Exempt from the IWT BP claims that because the spar used the GIWW, the fuel used by the towing vessels for the movement was necessarily subject to the IWT. Consequently, BP asserts, the movement qualifies for the exemption from the HMT pursuant to 26 U.S.C. § 4462(c). As noted above, several types of vessels that use the inland and intracoastal waterways are exempt from the IWT under the Water Resources Development Act. The WRDA exempts fuels used by the following types of vessels from the IWT: 1) vessels designed primarily for use on the high seas which have a draft of more than twelve feet; 2) passenger vessels; 3) vessels used by State or local government; and 4) vessels used in moving LASH and SEABEE ocean-going barges. See 26 U.S.C. § 4042(c). When an exempted vessel uses the GIWW, the fuel used by that vessel is not subject to the IWT. Consequently, the mere use of an inland or intracoastal waterway by a vessel operator is not sufficient, on its own, to prove that the fuel used for a particular movement was subject to the IWT. In that case, the movement would not qualify for the exemption from the HMT pursuant to section 4462(c). Because BP failed to show that the towing vessels were not exempt from the IWT, BP cannot allege that the fuel used for the towing operation was subject to the IWT. Consequently, BP’s use of the GIWW is insufficient to indicate that the fuel used by the towing vessels was subject to the IWT and the spar movement was exempt under section 4462(c). Assuming, arguendo, that the fuel used by the towing vessels was subject to the IWT, we review BP’s argument that the IWT exemption is applicable regardless of whether the applicable IWT was paid. c. Whether the Fuel was “Subject to” the IWT BP argues that the fuel used by the vessels for the towing operation was subject to the IWT, and the movement is therefore exempt from the HMT under 26 U.S.C. § 4462(c). BP states that it does not know whether Heerema, the company contracted to tow the spar, in fact paid the IWT on the fuel used for the towing operation. BP claims, however, that in order to qualify for section 4462(c) exemption, CBP’s regulations only require that “the fuel consumed [for the movement] be subject to the IWT, and do not require that the IWT actually be paid.” In essence, BP asserts that, for purposes of the exemption under section 4462(c), fuel is “subject to” the IWT even if that tax is never paid on the fuel. Stated in another way, sections 4042 and 4462(c) provide that when a liquid fuel is used by a commercial vessel to transport cargo on an inland waterway, and that fuel is “subject to” the IWT, the shipper is not liable for HMT on the cargo. The question, therefore, is whether the fuel at issue is subject to the IWT. The meaning of the phrase “subject to” was addressed in Houston Street Corp. v. Commissioner of IRS, 84 F.2d 821 (5th Cir. 1936). In Houston Street, the appellate court considered whether an agent who was obligated to withhold taxes on compensation paid to non-resident aliens could be considered a “taxpayer,” and therefore file a petition with the Board of Tax Appeals, because he was liable for payment of the withheld taxes. In analyzing whether a person is a taxpayer, the court considered the meaning of the phrase “subject to,” as used in the 1926 Revenue Act. The court noted that: The 1926 Revenue Act (section 2 [26 U.S.C. § 1696]) and all subsequent acts have this definition of taxpayer: “The term ‘taxpayer’ means any person subject to a tax imposed by this act.” By the provisions of the Revenue Acts petitioner [withholding agent] was made liable for the tax imposed upon the nonresident aliens. We see no distinction between the phrases “liable for such tax” and “subject to a tax.” Both connote payment of the tax. We consider the terms interchangeable. * * * A person liable for a tax is a person subject to a tax and comes squarely within the definition of a taxpayer in the statute. The conclusion we reach is that the Board of Tax Appeals had jurisdiction to entertain the petition in this case and the reasons given for denying jurisdiction are wholly without substantial foundation. 84 F.2d at 822. As discussed in Houston Street, the phrases “subject to a tax” and “liable for such tax” are synonymous. Consequently, the requirement that fuel used by a vessel be subject to the IWT means the vessel operator is liable for payment of the IWT. Such an understanding of the phrase “subject to” is supported by the legal definition of the term. According to Black’s Law Dictionary (6th ed. 1990), the phrase “subject to” is defined as follows: “Liable, subordinate, subservient, inferior, obedient to; governed or affected by; provided that; provided; answerable for.” Id. at 1425 (emphasis added). Based on this definition, use of the phrase “subject to” in section 4462(c) means that the fuel used for the transportation is “governed by” the IWT. That is, the fuel at issue must be used for the transportation of commercial cargo on the inland waterway system and assessed IWT pursuant to 26 U.S.C. § 4042. BP asserts that once the fuel used by the vessel becomes “subject to” the IWT, i.e., the vessel operator incurs liability for payment of the IWT, and therefore the condition of section 4462(c)—that the vessel fuel has been, or will be, subject to the IWT—is satisfied regardless of whether the IWT is paid. Based on the statutory framework and legislative history for the IWT and HMT, it is apparent that Congress intended the exemption for the HMT, provided by section 4462(c), to apply only when the IWT owed on the fuel used for a particular movement has been, or will be, paid by the vessel operator. The statutory framework of the WRDA indicates that Congress intended to ensure that cargo shippers would not be liable for the HMT when vessel operators were liable for the IWT for fuel used for the same commercial shipment. As explained by the U.S. Court of International Trade in Thomson Multimedia, Inc. v. United States, 219 F. Supp. 2d 1322 (Ct. Int’l Trade 2002), the HMT and IWT are intended to be applied in a coordinated manner. In analyzing the constitutionality of the HMT under the Port Preference Clause, the court found that, “Making fuel on vessels at certain ports located along inland waterways subject to the [IWT], and cargo at certain deep-water ports subject to the HMT, is a rational attempt by Congress to avoid the adverse consequences of different laws operating on merchandise on the same vessel.” Id. at 1332. The first sentence of section 4462(c) describes the limited circumstance under which the IWT exemption applies. That section reads: “Coordination of tax where transportation subject to tax imposed by section 4042.” Based on this provision, Congress clearly intended for CBP and the Corps of Engineers to “coordinate” the collection of the HMT and IWT. Section 4462(c) further provides that, “No [harbor maintenance] tax shall be imposed under this subchapter with respect to the loading or unloading of any cargo on or from a vessel if any fuel of such vessel has been (or will be) subject to the [inland waterway fuel] tax imposed by section 4042.” The obvious purpose of the requirement to coordinate collection of the two taxes is to ensure that HMT is not assessed on cargo when the fuel used to transport that cargo is, or will be, “subject to” the IWT. If cargo shippers were exempt from the HMT anytime their conveyance transited an inland waterway, there would be no need to coordinate collection of the taxes because mere use of the waterway would be sufficient to exempt the movement from the HMT. Because the statute requires the Corps of Engineers and CBP to coordinate collection, however, Congress clearly intended the HMT exemption of section 4462(c) to apply only when the IWT was actually paid on the fuel used for a particular movement. Furthermore, the statute states that the exemption applies if the fuel used by the vessel, “has been (or will be) subject to the [inland waterway fuel] tax. . . .” By referring to both past and future transactions, Congress recognized that at the time a shipper seeks an exemption from the HMT under section 4462(c), the vessel operator may not have paid the IWT. Because the provision refers to both past and future transactions, the exemption from HMT applies when either the IWT was assessed and paid, or when the IWT was assessed but not yet paid, by the vessel operator. In either case, however, the IWT must be paid in order for the fuel to be considered “subject to” the IWT. The legislative history of the WRDA indicates the intent of Congress to coordinate collection of the IWT and HMT. As noted in Senate Report No. 99-126 (1985), reprinted in 1986 U.S.C.C.A.N. 6639, 6710, “In order to coordinate the imposition of user charges, no charge is imposed with respect to loading or unloading cargo on or from a vessel if any fuel of that vessel has been or will be subject to the inland waterways fuel excise tax.” Emphasis added. The intent of Congress to coordinate collection of the two taxes is also apparent from the IWT exemption for deep-draft ocean-going vessels. See 26 U.S.C. § 4042(c)(1). This provision exempts vessels designed primarily for use on the high seas that have a draft of more than twelve feet. Furthermore, because the stretch of the GIWW adjacent to the GMF South Yard was only maintained at a depth of twelve feet at the time of the movement, ocean-going vessels that had a draft of greater than twelve feet would have been necessarily unable to use the GIWW without grounding. In this case, BP reported that it dredged the basin next to the GMF South Yard in order to connect two sections of the spar. Because the depth of the GIWW was maintained at twelve feet, BP’s dredging operation presumably enabled deep-draft ocean-going vessels, which are exempt from the IWT under section 4042(c)(1), to use the offloading basin adjacent to the GMF South Yard. d. Whether the Vessel Operator Paid, or Will Pay, the IWT Under 26 U.S.C. § 4042(e), the statutory deadline for payment of the IWT was July 31, 2004, which was the last day of the first month following the second quarter of 2004. We therefore determine that in order for BP to claim that the movement was eligible for the exemption under section 4462(c), the IWT on the fuel used by the vessels for the towing operation must have been paid by that date. According to the Corps of Engineers, Heerema did not file a Vessel Operation Report to report the movement of the Holstein Spar. Pursuant to Corps of Engineers regulations implementing the waterborne commerce statistics provisions of the River and Harbor Act of 1922, as amended, codified at 33 C.F.R. § 207.800(b)(2)(i)(F), vessel operators are required to file monthly reports on domestic movements to the Corps of Engineers on ENG Form 3925. To coordinate proper payment of the IWT by vessel operators and HMT by shippers, the Corps of Engineers uses Form 3925 to collect information regarding the name and address of the vessel operator, location and date of the movement, actual draft of the vessel subject to the IWT, name and taxpayer identification number of the shipper, and HMT exemption claimed, if any. Item 7 of the instructions for Form 3925 provides the following guidance: 7. Vessel operating companies reporting domestic movements of commodities on vessels transiting channels in Customs ports subject to the Harbor Maintenance Fee (HMF) must also report the shipper information (name of shipper and the shipper’s IRS or social security number (SSN), or exemption code). This HMF information is required for commodities unloaded on or after 1 April 1987. Please reference the Water Resources Development Act of 1986, Public Law 99-662, Title 14; 19 CFR Parts 3, 24, 146, 178 (Customs). (Also see Corps Federal Register Announcement dated March 25, 1987; Customs Service Federal Register Announcement dated March 30, 1987 and amended in a Federal Register Announcement dated July 14, 1987. The HMF information must be provided for each commodity carried. If the commodity movement is exempt from the fee because of one of the exemptions listed below, the applicable exemption code must be entered in the last column of the form and the name of the shipper and the shipper’s IRS number (or SSN) may be omitted. If the commodity movement is not exempt, then the shipper’s name and IRS number (or SSN) must be entered on the form. Please indicate whether the number is an IRS number or social security number by prefixing the number with “SSN” or “IRS”. The “shipper” is defined as the company or person paying the freight charges to the vessel operating company. The shipper should provide the vessel operating company all the information necessary to fill in the user fee information items. ENG Form 3925 Reverse (emphasis added). BP identified Heerema as the towing contractor hired for the movement. Because Heerema did not file a Vessel Operation Report to report the movement of the spar or indicate that the movement was exempt from HMT, however, there is no evidence to indicate that Heerema paid IWT on the fuel used by the towing vessels to transport the spar from the GMF South Yard in Ingleside, Texas to the Gulf of Mexico, or indicate that the movement was not excluded from the IWT by Rev. Rul. 84-8. HOLDING: Protest 5301-08-100301 is DENIED IN FULL for the reasons set forth in Law and Analysis above. In accordance with the Protest/Petition Processing Handbook, you are to mail this decision, together with the CBP Form 19, to the Protestant no later than 60 days from the date of this letter. Any reliquidation of the claim in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division