LIQ-15 OT:RR:CTF:ER H086062 RFA
Mr. Bruce A. Armbruster
JE Compliance Services, Inc.
12505 North Mainstreet
Suite 212
Rancho Cucamonga, CA 91739
RE: Harbor Maintenance Fee (HMF); Bunker Fuel; 26 U.S.C. §§ 4461 and 4462; 19 C.F.R. § 24.24
Dear Mr. Armbruster:
This is in response to your letter, dated November 20, 2009, requesting a binding ruling on behalf of Jankovich Company, as to the applicability of the harbor maintenance fee ("HMF") under section 24.24 of the Customs and Border Protection ("CBP") Regulations [19 C.F.R. § 24.24]. In reaching our decision, we also considered the information contained in your submissions of February 1 and 17, 2010. Our ruling in this matter follows.
FACTS:
The Jankovich Company distributes bulk petroleum products for the propulsion and operation of ships. The bulk petroleum products, typically in the form of bunker fuel,1 are delivered to the ships via barges and similar tank vessels. The deliveries are made to the ships that are docked using harbor anchorages. The ships use the harbor anchorages as a docking point for fueling because it is not practical for them to come to the Jankovich facility to pick-up the fuel directly.
According to the information provided, the barge will deliver bunker fuel to ships in San Diego, which use the fuel during their cruise or transit to their next destination.
The barges are loaded with fuel in the Jankovich Los Angeles facilities and transported to the Port of San Diego for delivery directly to ships.2 Some fuel from the Jankovich Los Angeles facilities is loaded onto trucks for delivery to the Jankovich San Diego location. If a barge has any leftover fuel after supplying ships inside the Port of San Diego, the barge will store the excess fuel at the Jankovich San Diego location. If a barge needs additional fuel to fill an order while at the Port of San Diego, it fills up its tanks at the Jankovich San Diego location.
ISSUES:
Whether the movement of bunker fuel from one port to another port is subject to the HMF under 26 U.S.C. §§ 4461 and 4462 and 19 C.F.R. §24.24?
Whether the delivery of fuel via a barge or similar tank vessel to ships docked at harbor anchorages all within the same port limits is subject to the HMF under 19 C.F.R. §24.24?
LAW AND ANALYSIS:
The statutory authority for the HMF is found under 26 U.S.C. §§ 4461 and 4462, which states that a fee is imposed on any use of a port, defined as any channel or harbor or any component thereof in the United States, which is not an inland waterway, is open to public navigation, and at which Federal funds have been used since 1977 for construction, maintenance, or operation. See 26 U.S.C. § 4462(a)(2). This fee is imposed at the time of unloading of commercial cargo. See 26 U.S.C. § 4461(c)(2). However, the statute provides in relevant part that the term "commercial cargo" does not include "bunker fuel, ship's stores, sea stores, or the legitimate equipment necessary to the operation of a vessel". See 26 U.S.C. § 4462(a)(3)(B)(i).
The CBP Regulations promulgated under the authority of the statute, 19 C.F.R. § 24.24, list the ports subject to the HMF. Jankovich Company states that it is operating within the port limits of Los Angeles (which includes Long Beach and the Jankovich San Pedro facility), and San Diego. All of the fueling of ships occurs within the port limits of San Diego. According to 19 C.F.R. § 24.24(a), "[c]ommercial cargo loaded on or unloaded from a commercial 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 exempt under paragraph (c) of this section or one of the special rules in paragraph (d) of this section is applicable." Section 24.24(c)(1) of CBP Regulations (19 C.F.R. § 24.24(c)(1)) states that bunker fuel, ship's stores, sea stores and vessel equipment are not subject to HMF.
The first question to be addressed is whether the loading of bunker fuel onto a barge in the Port of Los Angeles and transporting the bunker fuel to the San Diego location is subject to the HMF. In this situation, the bunker fuel being transported from the Port of Los Angeles to the Port of San Diego is "commercial cargo" and the barge is a "commercial vessel" as defined in 26 U.S.C. §§ 4461 and 4462 as well as 19 C.F.R. § 24.24(b)(2) and (3). See, e.g., Aker Gulf Marine v. United States, 138 F. Supp. 2d 1304, 1307 (Ct. of Intl. Trade 2000), in which the court found "the term 'commercial cargo' is broadly defined as anything (with exceptions not applicable here) transported on a commercial vessel." Based on Aker Gulf Marine, we find that the movement of the bunker fuel from one port to another port on a barge is a commercial shipment. The fuel is being transported by the barge for commercial purposes and is not necessary to the operation of the vessel. See 26 U.S.C. § 4462(a)(3)(B)(i). Therefore, that exemption does not apply.
The only limitation to the application of the HMF that is relevant to the shipment of bunker fuel from the Port of Los Angeles to the Port of San Diego is that the statute prevents the double taxation at time of loading and unloading where domestic ports are at both ends of the shipping transaction provided that it is the "same vessel" with the "same cargo". See 26 U.S.C. § 4462(g)(1). This limitation is further supported by section 24.24(d)(2) of the CBP Regulations [19 C.F.R. § 24.24(d)(2)] which states that: "[i]f a fee is assessed when cargo is loaded on a vessel, the unloading of the same cargo from that vessel is not subject to the fee. If a fee is assessed when cargo is unloaded from a vessel, the reloading of the same cargo on that vessel is not subject to the fee." Therefore, to the extent that HMF was already paid on the bunker fuel when it is loaded onto the barge at the Port of Los Angeles, it would not need to be paid again simply because it was unloaded at the Port of San Diego. However, to the extent that this limitation does not apply, under the statute and regulations, the shipment of the fuel from the Jankovich facility located at the Port of Los Angeles to Jankovich's facility located at the Port of San Diego port is subject to the HMF.
According to the information provided, bunker fuel located at the Port of San Diego is also used to fuel ships located within the Port of San Diego. The issue in these circumstances is whether the loading of bunker fuel from the San Diego facility onto the barges and delivering the fuel to the ship as bunker fuel is subject to HMF. The HMF statute and the corresponding CBP Regulation exclude the "mere movement of cargo within a port". See 26 U.S.C. § 4462(g)(2) and 19 C.F.R. § 24.24(d)(1). Based on these statutory and regulatory exemptions, we find that the loading of fuel onto a barge and delivering it to a ship as bunker fuel all within the same port limits is not subject to the HMF.
HOLDING:
The shipment of the fuel from the Jankovich facility located at the Port of Los Angeles to the Port of San Diego is subject to the HMF as limited by the terms of 26
U.S.C. § 4462(g)(1) and 19 C.F.R. § 24.24(d)(2). Under 26 U.S.C. § 4462(g)(2) and 19 C.F.R. § 24.24(d)(1), the movement of bunker fuel loaded from facilities located inside the port area of San Diego via barges is not subject to HMF.
Sincerely,
Myles B. Harmon, Director
Commercial & Trade Facilitation Division