HQ 0111869 - Tonnage Taxes; Entry of vessels; Ontario, Canada; 46 U.S.C. App. 121 - United States International Trade Commision Rulings

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HQ 111869

March 4, 1992

VES-11-11 CO:R:IT:C 111869 BEW

CATEGORY: CARRIER

Mr. Dennis M. Mahoney
Manager
Fedmar International
20950 Center Ridge Road
Cleveland, Ohio 44116

RE: Tonnage Taxes; Entry of vessels; Ontario, Canada; 46 U.S.C. App. 121

Dear Mr. Mahoney:

This is in reference to your letter of August 12, 1991, concerning a request for a ruling regarding proper tonnage tax assessment for vessels arriving in ballast at U.S. ports after having performed cargo work in the Province of Ontario, Canada. Enclosed with your request is a letter dated July 21, 1991, addressed to the District Director of Customs, Cleveland, Ohio, and a letter dated August 7, 1991, from the District Director of Customs, Cleveland, Ohio, concerning this matter.

FACTS:

You state that the M.V. BARONIA arrived at the port of Cleveland in ballast from Toronto, Ontario, Canada, at 06:30 hours on April 24, 1991. You state that the vessel had completed discharge of the previous voyage's cargo at the port of Toronto, just prior to arrival at the port of Cleveland.

You state that you paid 27 cents tonnage tax for the vessel in the amount of $3,093.66. You state that no tonnage taxes should have been assessed since the vessel arrived from the Province of Ontario. You request a refund of the full amount of $3,093.66 assessed against the subject vessel.

ISSUE:

Whether a vessel which has proceeded from a foreign port to which the 27 cents tonnage tax rate is applicable, unladen all of the cargo at a port where the 9 cent rate is applicable and proceeds in ballast to the U.S. is subject to the assessment of tonnage at the higher rate of 27 cents.
LAW AND ANALYSIS:

The Omnibus Budget Reconciliation Act of 1990, amended 46 U.S.C. App. 121, to increase the tonnage taxes collected from vessels arriving in the United States from foreign ports. For all vessels entering a port of the United States from any foreign port or place in North America, Central American, the West Indies, the Bahamas Islands, the Bermuda Islands, Newfoundland, or the coast of South American bordering on the Caribbean Sea (considered to include the mouth of the Orinoco River), or the high seas adjacent to the United States or the above listed locations, to 9 cents per ton, not to exceed in the aggregate of 45 cents per ton in any one year. For vessels entering a port of the United States from any other foreign port or place, the amount of tonnage tax was increased to 27 cents per ton, not to exceed $1.35 per ton per year.

The Customs Regulations pertaining to tonnage taxes and light money are found in section 4.20-4.24, Customs Regulations (19 CFR 4.20-4.24). Section 4.20 (a)(2) provides that when a vessel transports cargo or passengers from a 27 cent port to a 9 cent port and all such cargo or passengers have been unladen at the 9 cent port, and the vessel proceeds in ballast to the United States, the rate is assessed at the 9 cent rate.

Under the foregoing section of the Customs Regulations, the tonnage taxes would be assessed against the subject vessel at the lower rate of 9 cent, unless exempted under section 4.21 of the Customs Regulations (19 CFR 4.21).

Section 4.21 of the Customs Regulations provides for certain exemptions from tonnage taxes. Section 4.21 (b)(13) provides that a vessel shall not be liable to the payment of tonnage taxes or light money because:

(13) It enters otherwise than by sea from a foreign port at which tonnage or lighthouse dues or equivalent taxes are not imposed on vessels of the United States.

Title 46 United States Code, Appendix, section 132 (46 U.S.C. App. 132) provides:

Vessel entering otherwise than by sea from a foreign port at which tonnage or lighthouse dues or other equivalent tax or taxes are not imposed on vessels of the United States shall be exempt from the tonnage duty of 9 cents per ton, not to exceed in the aggregate of 45 cents per ton in any one year, for fiscal years 1991, 1992, 1993, 1994, and 1995, and 2 cents per ton, not to exceed in the aggregate of 10 cents per ton in any one year, for each fiscal year thereafter. The Customs Regulations provide under section 4.21(13), footnote 44 (19 CFR 4.21(13) n. 44) that "... (46 U.S.C. 132) This section applies to a vessel arriving in the United States on a voyage otherwise than by sea from a port in the province of Ontario, Canada, only."

Based on the foregoing, under the above stated circumstances we find that the subject vessel is exempt under the provisions of 46 U.S.C. App. 132 and 19 CFR 4.21(13) from the payment of tonnage taxes.

The procedures and requirements for obtaining a refund of tonnage taxes and light money are in section 4.24 of the Customs Regulations (19 CFR 4.24) (copy enclosed). Under that section, an application for refund must be made within 1 year from the date of payment. The authority to make refunds has been delegated to the several Regional Commissioners of Customs. Paragraph (e) of section 4.24 provides that such an application must include:

... a certificate by the owner or ... agent that payment of tonnage tax at the applicable rate has been or will be made for each entry of the vessel on a voyage on which that rate is applicable before the end of the current tonnage year, exclusive of any payment which has been refunded or which may be refunded as a result of such application.

A copy of this letter is being sent to the District Director of Customs, Cleveland, Ohio, for information.

HOLDING:

A vessel which enters the U.S. otherwise than by sea from a foreign port at which tonnage or lighthouse dues or equivalent taxes are not imposed on vessels of the United States, is exempt from the payment of tonnage taxes under the provisions of 46 U.S.C. App. 132.
The subject vessel which arrived in ballast from Ontario, Canada is exempt from the payment of duty under the provisions of 46 U.S.C. App. 132 and 19 CFR 4.21(13).

Sincerely,

B. James Fritz

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