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HQ 226514

March 6, 1996

ENT-1-03/VES-5-08: RR:IT:EC 226514 GEV


Anthony M. Ryan
General Manager
American Auto Carriers, Inc.
188 Broadway
Post Office Box 210
Woodcliff Lake, New Jersey 07675

RE: Harbor Maintenance Fee; Cargo of the United States; Exemption; 26 U.S.C. §§ 4461, 4462

Dear Mr. Ryan:

This is in response to your letter of October 24, 1995, requesting a modification or, in the alternative, the revocation, of Headquarters Ruling 113546, dated September 21, 1995, issued in response to your request for a ruling regarding Customs assessment of the harbor maintenance fee (HMF). Enclosed with your letter is a memorandum from counsel in support of your request and a copy of page number B-1 of the contract between American Auto Carriers, Inc. ("AAC") and the United States Military Traffic Management Command ("MTMC"). Our decision on this matter is set forth below.


By letter dated August 18, 1995, AAC requested a ruling letter from the Carrier Rulings Branch of the U.S. Customs Service regarding the applicability of the HMF. The facts as presented to us in the aforementioned letter, and which are not in dispute, are as follows. Since October, 1994, AAC has been the prime contractor under a contract with MTMC for the movement of service members' privately-owned vehicles when those service members are transferred by the military under permanent change of station orders. The parties to the contract are AAC and MTMC. Under the terms of the contract, AAC is to transport the aforementioned vehicles on a point-to-point basis and is responsible for handling all arrangements regarding the movement of these vehicles, including customs entry. To that end AAC has hired a customhouse broker to make formal customs entry of these vehicles. All of the vehicles transported on a given vessel are entered as one entry and are consigned to AAC as the nominal consignee.

As a consequence of the above procedure, AAC has been assessed HMFs on these vehicles. AAC states that it has been advised by Customs that since it is the nominal consignee for whom the customhouse broker is making entry, and since the owner of the cargo is the service member, the cargo is subject to the HMF. It is the view of AAC that MTMC is an agency or instrumentality of the U.S. Government and AAC is the carrier for the movement of cargo for which MTMC is the shipper. AAC is therefore of the opinion that this cargo is moved by the U.S. Government as shipper, on behalf of its service members, and therefore is exempt from assessment of the HMF pursuant to 26 U.S.C. § 4462(e) and 19 CFR § 24.24(c)(7).

Upon consideration of the facts presented, Customs issued Ruling 113546, dated September 21, 1995, holding that the subject vehicles are not exempt from the HMF pursuant to 26 U.S.C. § 4462(e) and 19 CFR § 24.24(c)(7). The holding further stated that the customhouse broker, as the importer of record pursuant to 19 U.S.C. § 1484, is liable for payment of the fee pursuant to 19 CFR § 24.24(e)(3)(I).

AAC is of the opinion that Ruling 113546 is in error in that it addressed issues not raised and not material to the issue of applicability of the HMF in this case and is therefore not dispositive of the issue on which the ruling was initially requested. Consequently, AAC is requesting pursuant to 19 CFR § 177.9(d) a modification or, in that alternative, the revocation, of Ruling 113546. Specifically, AAC contends that Ruling 113546 is in error in that:

1. It determined the issue of applicability of the HMF on the basis of a portion of the provisions of 26 U.S.C. § 4462(e) which is not at issue.

2. It determined that AAC is not an agency or instrumentality of the United States Government and that the prohibition against imposing the HMF upon an agency or instrumentality of the Government, therefore, did not apply; and

3. That the customhouse broker was the importer of record and is liable for payment of the HMF; and

4. That on that basis, the HMF was properly applicable.

The relief sought by AAC is a revised set of holdings determining the following issue which is stated to have been originally raised but went "begging":

ISSUE: Is the cargo shipped by the United States Government, carried by an ocean common carrier who also arranges Customs entry through a licensed customhouse broker under a contract with the Government, U.S. cargo exempt from assessment of the HMF by reason of the terms of 26 U.S.C.§ 4462(e) and Customs regulations at 19 CFR § 24.24(c)(7) under the facts of this case?

The determinations sought by AAC to be made by Customs are as follow:

1. The cargo at issue is cargo transported by AAC under conditions and documentation in which MTMC is the shipper and AAC the carrier pursuant to AAC's contract with the United States Government in the person of the MTMC.

2. The contract price between MTMC and AAC is an Indefinite Quantity, Requirements type, Firm Fixed Price contract for the non-personal services of AAC consisting of point-to-point transportation of vehicles owned by members of the military being moved by MTMC as shipper on behalf of its service members under permanent change of station orders.

3. The cargo imported is transported by AAC under authorization and direction called a "Request for Transportation Services" issued by MTMC.

4. Under the terms of the contract between MTMC and AAC the need for the Government to enter into numerous subcontracts with various service providers is eliminated since AAC is responsible to handle obtaining necessary services such as inland carriers, truckers, stevedores, and so forth. Included in these duties is AAC's responsibility for customs clearance for the cargo. For this purpose, AAC has contracted with a licensed customhouse broker to make formal entry of the cargo.

5. The cargo is shipped by the U.S. Government and is, therefore, exempt from the imposition of the HMF under the terms of 26 U.S.C. § 4462(e) and the pertinent legislative history of that provision found at U.S.Code Cong. & Admin. News, 99th Cong., Second Sess. pp. 6740-6743 (1986).

6. That the cargo at issue is also within the exemption from the HMF set forth at 19 CFR § 24.24(c)(7) regarding "cargo of the U.S...".

7. For all the reasons above, the HMF is not accessible against the cargoes transported by AAC as carrier under its contract with MTMC as shipper.

The points raised really consist of two subissues: (1) whether by the terms of its contract with MTMC, AAC has become an agency or instrumentality of the Federal Government; and (2) whether the transportation of vehicles privately owned by members of the Armed Forces involves Government cargo.


Whether vehicles owned by members of the U.S. Armed Forces, shipped pursuant to a contract between AAC and MTMC, and entered by a customhouse broker engaged by AAC are exempt from the HFM pursuant to 26 U.S.C. § 4462(e) and § 24.24(c)(7).


Title 26, United States Code, §§ 4461 and 4462, provide for the imposition of the HMF, including special rules regarding its administration. Specifically, the applicable statutory authority, as amended, provides in pertinent part as follows:

Section 4461. Imposition of Tax
"(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,..." * * * Section 4462. Definitions and Special Rules. "(a) Definitions.--For purposes of this subchapter-- (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.
(3) Commercial Cargo.--
(A) In General.--The term ‘commercial cargo' means any cargo transported on a commercial vessel,..." (e) Exemption for United States.--No tax shall be imposed under this subchapter on the United States or any agency or instrumentality thereof."

The applicable regulatory authority promulgated by Customs pursuant to 26 U.S.C. § 4462(h) to implement the above statutory provisions is found in § 24.24, Customs Regulations (19 CFR § 24.24). Specifically, § 24.24(a) provides, in pertinent part:

"(a) Fee. Commercial cargo loaded on or unloaded from a com- mercial vessel is subject to a port use fee of 0.125 percent (.00125) of its value if the loading or unloading occurs at a port within the definition of this section, unless exempted under paragraph (c) of this section..." (emphasis added)
"(b) Definitions. For the purpose of this section: (2) Commercial cargo means...,merchandise transported on a commercial vessel...Whenever the term ‘cargo' is used, it means merchandise, but not passengers. (c) Exemptions. The following are not subject to the fee: (7) Cargo...of the U.S. or any agency or instrumentality of the U.S." (e) Collections.--
(3) Import vessel movements--(i) Time and place of liability. Subject to the exemptions...of this section, when imported cargo is unloaded from a commercial vessel at a port...the importer of that cargo...is liable for the payment of the port use fee at the time of unloading...

Notwithstanding the seven enumerated determinations in counsel's memorandum stated to be dispositive of the issue under consideration, counsel proceeds to facilitate this circuitous agenda by stating, "The issue at hand is merely one of statutory and regulatory construction and should not be made more complex than it is." (memorandum at p. 5) We agree. As set forth below, however, it is clear that a proper statutory and regulatory construction does not yield the result counsel seeks.

With respect to statutory construction, it is a well-established legal principle that the first step in interpreting a statute is to examine its text. United States v. Alvarez-Sanchez, 114 S.Ct. 1599, 1603, 128 L.Ed.2d 319 (1994). Where the content of the statute is in "reasonably plain terms, that language must ordinarily be regarded as conclusive." Negonsott v. Samuels, 507 U.S. 99, 113 S.Ct. 1119, 1122-23, 122 L.Ed.2d 457 (1993) (quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564 570, 102 S.Ct. 3245, 3249, 73 L.Ed.2d 973 (1982). This is so in the absence of a "clearly expressed legislative intent to the contrary..." Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980).

Upon reviewing the applicable statutory authority, it is readily apparent that the language therein is clear and unambiguous. The privately-owned vehicles in question are "commercial cargo" as defined in 26 U.S.C. § 4462(a)(3)(A). The unloading of these vehicles from a vessel at a port subject to the HMF (see the list of ports set forth in 19 CFR § 24.24(b)(1)), constitutes "port use" as defined in 26 U.S.C. §§ 4462(a)(1)(B) for which the HMF is imposed pursuant to

26 U.S.C. §§ 4461(a) and (b). Such unloading at one of the aforementioned ports renders these vehicles "cargo entering the United States" within the meaning of 26 U.S.C. § 4461(c)(1)(A). Pursuant to the aforementioned statute, the importer is liable for payment of the HMF. The customhouse broker for AAC is the importer of record of these vehicles pursuant to 19 U.S.C. § 1484 and therefore is liable for payment of the HMF.

The statutory language allegedly exempting the subject vehicles from the HMF is equally clear and unambiguous. Section 4462(e) provides that the HMF shall not be imposed "...on the United States or any agency or instrumentality thereof." Since Ruling 113546 holds that the party liable for payment of the HMF under the facts of this case is the customhouse broker, the ruling is in full accord with the express language of § 4462(e).

As established by the above-cited decisions of the U.S. Supreme Court, the clarity of a statute's language renders superfluous any analysis of its legislative history. Consequently, there is no need to examine the legislative history of § 4462(e) in this case. However, assuming, arguendo, the ambiguity of the aforementioned statutory text, we acknowledge that legislative history is a legitimate and useful guide to reveal the purpose of a statute. Burlington N. R.R. v. Oklahoma Tax Commission, 481 U.S. 454, 461, 107 S.Ct. 1855, 1859, 95 L.Ed.2d 404 (1987). The aim of examining legislative history is to uncover the intent of Congress in enacting the statute thus "giv[ing] effect to the will of Congress." Negonsott v. Samuels, 507 U.S. 99, 113 S.Ct. 1119, 1122-23, 122 L.Ed.2d 457 (1933). In regard to legislative history, we note that a conference report "represents the final statement of terms agreed to by both houses, [and] next to the statute itself is the most persuasive evidence of congressional intent." Demby v. Schweiker, 671 F.2d 507, 510 (D.C.Cir.1981).

Congress' stated purpose in enacting the HMF was to have those parties benefitting from the use of U.S. harbors and ports provide the funding necessary for their maintenance. See S.Rep.No. 228, at 5, 1986 U.S.C.C.A.N. at 6709; S.Rep.No. 126, 99th Cong., 1st Sess. 7 (1985), reprinted in 1986 U.S.C.C.A.N. 6639, 6644. In regard to the statutory exemption at issue, counsel states that the original House bill did not impose the HMF with respect to, "cargo shipped by the U.S. Government or Federal agencies." Id. at p. 6741. He notes that with regard to the HMF, the Senate bill was virtually identical to the House version. Id. At p. 6742. The conference report "generally follows the Senate amendment with respect to the application of and exemptions from the [HMF]." Id. at p. 6743.

In view of the perceived ambiguity of the statute, counsel contends that the above legislative history mandates Customs to consider the subject vehicles as "cargo shipped by the U.S. Government." The crux of counsel's argument in this regard, and one of the two issues which he states Ruling 113546 fails to consider, is that MTMC is the "shipper" of the subject vehicles. (memorandum at p. 8) Counsel's argument, however well intentioned, is not legally tenable. Not only is his memorandum devoid of authority to support this bald allegation, more importantly, he has failed to submit shipping documentation from these transactions evidencing his assertion. Furthermore, it is significant to note that the term "shipper" is defined as, "One who
transports goods for a charge; a common carrier; e.g. motor carrier, railroad, air freight carrier, freight forwarder." Black's Law Dictionary, 5th Ed. (1979) at p. 1235. MTMC does not fall within this definition. Consequently, the argument falls. We therefore decline to adopt the position that privately-owned vehicles consigned to a private common carrier for transportation are "cargo of the U.S." within the meaning of 19 CFR § 24.24(c)(7).

Accordingly, the legislative history discussed above fails to support the result sought by AAC. As noted above, Congress' purpose in enacting the HMF was to have those who benefit from the use of U.S. harbors and ports fund their maintenance. In regard to the assessment of the HMF on the subject vehicles, the aforementioned House, Senate and conference reports do not evidence a "clearly expressed legislative intent to the contrary." Consumer Product Safety Commission, supra.

The remaining point on which counsel criticizes Ruling 113546 is its discussion of what he terms the "immaterial" issue of whether or not the HMF falls upon an agency or instrumentality of the United States. (memorandum at p. 8) This issue was addressed in Ruling 113546 because it was raised twice in AAC's original ruling request. (See AAC's letter of August 18, 1995, at pp. 2 and 3) Since the vehicles in question are clearly not "cargo shipped by the U.S. Government" nor "cargo of the U.S." as discussed above, this issue is anything but "immaterial" to AAC's request. However, the present letter focuses on what is perceived to be Customs confusion over liability for payment of the HMF with the incidence of its imposition. In support of this distinction, counsel cites to the following: James v. Dravo Contracting Co., 302 U.S. 134, 58 S.Ct. 208, 82 L.Ed. 155 (1937); U.S. v. Boyd, 378 U.S. 39, 84 S.Ct. 1518, 12 L.Ed.2d 713 (1964) and U.S. v. Mexico, 455 U.S. 720, 102 S.Ct. 1373, 71 L.Ed.2d 580 (1982; Fidelity & Deposit Co. v. Pennsylvania, 240 U.S. 319 (1916) and cases cited therein.

Upon reviewing the above-cited cases, however, it is readily apparent that they bolster Customs position in this matter rather than counsel's. Specifically, we refer to U.S. v. Boyd, supra., wherein the Court upheld the constitutionality of Tennessee sales and use taxes imposed on two contractors of the Atomic Energy Commission. The Court stated, "We cannot conclude that [the private contractors], both cost-plus contractors for profit, have been so incorporated into the government structure as to become instrumentalities of the United States and thus enjoy government immunity." (378 U.S. at 48) It also recognized that, "constitutional immunity does not extend to cost-plus-fixed-fee contractors of the Federal Government, but is limited to taxes imposed directly upon the United States." (emphasis added, 378 U.S. at 50) This rationale is applicable to AAC (a fixed price contractor of the Federal Government as set forth in § B.1(c) of the contract between AAC and MTMC). In addition, the Court in U.S. v. New Mexico, supra, further examined the parameters of Federal immunity to contractors of the Federal Government. In upholding a New Mexico use tax, the Court stated, "immunity may not be conferred simply because the tax has an effect on the United States, or even because the Federal Government shoulders the entire economic burden of the levy." (455 U.S. at 734)

Since the imposition of the HMF on the cargo in question has clearly been established as discussed above, the statute consequently mandates that liability for payment be borne by the importer. (26 U.S.C. § 4461(c)(1)(A)) In this regard we note that, "AAC does not dispute these allocations of payment responsibility." (memorandum at p. 7) Further in regard to HMF payment, there is apparent agreement that, "...the importer making entry of cargo under 19 U.S.C. Sec. 1484 is ostensibly liable..." (memorandum at p. 10)


Vehicles owned by members of the U.S. Armed Forces, shipped pursuant to a contract between AAC and MTMC, and entered by a customhouse broker engaged by AAC are not exempt from the HMF pursuant to 26 U.S.C. § 4462(e) and 19 CFR § 24.24(c)(7). The customhouse broker as the importer of record pursuant to 19 U.S.C. § 1484 is liable for payment of the fee pursuant to 19 CFR § 24.24(e)(3)(i).

Parenthetically, we note that further objections to the payment of the HMF under the circumstances of this case may be registered in the form of timely protests filed pursuant to 19 U.S.C. § 1514. Since, pursuant to 26 U.S.C.§ 4462(f)(1) and (2) the HMF is to be treated as if it were a customs duty, further review of the denial of any such protests must be before the U.S. Court of International Trade pursuant to 19 U.S.C. § 1582(3).


William G. Rosoff

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