LIQ:15:OT:RR:BSTC:CCI H161155 WRB
Mr. Ronald A. Klempner
Jersey Harborside Railroad, LLC
46 Grand Cove
Edgewater, NJ 07020-7245
RE: Harbor Maintenance Tax; 19 CFR 24.24
Dear Mr. Klempner:
This letter is in response to your request dated April 18, 2011, with respect to the various issues concerning the harbor maintenance tax. Our ruling is set forth below.
FACTS:
You state that Jersey Harborside Railroad, LLC (hereinafter “JHR”) is considering a business venture which will combine railroad float bridge/barge operations (also known as “car floats”) and short-sea-shipping activities. You state that JHR envisions moving various types of freight between five different marine destinations, along five different routes. The five destinations are (1) Greenville Yard, Jersey City, New Jersey; (2) 65th Street, Brooklyn, New York; (3) South Amboy, New Jersey; (4) New Haven, Connecticut; and, New Bedford, Massachusetts. The routes, as you describe them, are (a) Greenville Yard, Jersey City, New Jersey (on Upper New York Bay, which is part of the Port of New York and New Jersey) to 65th Street, Brooklyn, New York (via Upper New York Harbor); (b) Greenville Yard to South Amboy, NJ (via Upper and Lower New York Harbor and Raritan Bay); (c) Greenville Yard to New Haven, Connecticut (via Upper New York Harbor, East River and Long Island Sound); (d) Greenville Yard to New Bedford, Massachusetts(via Upper New York Harbor, East River, Long Island Sound, and Buzzards Bay); and, (e) South Amboy, New Jersey to 65th Street, Brooklyn (via Lower New York Harbor and Raritan Bay).
JHR envisions a number of different types of operations. International Container Cargo: International imported containers unloading from deep-water ocean going vessels within various locations in the Port of New York and New Jersey, operated by the Port Authority of New York and New Jersey, will be placed on rail cars within the respective port area and hauled by rail to JHR's facility in Greenville Yard, also within the Port of New York and New Jersey (and owned by PANYNJ). At Greenville Yard, the rail cars will be moved by an engine and “rolled” via a float bridge onto a rail float barge (i.e. a barge with rails mounted on the deck of the barge). This type of operation is known as a “Roll-on/Roll-off”(“Ro-Ro”) operation. The barge will then be pushed by a tug to its determined destination. At each of the destinations, the rail cars will be pulled by an engineer and “rolled” off the barge via a float bridge into a rail yard. After the container has been unloaded and emptied by its consignee, it will be returned to the respective destination and shipped through Greenville Yard using the same methodology as the outbound shipment described in clauses.
Domestic truck trailers will be driven or lifted onto a flat bed rail car and hauled by rail to JHR’s facility in Greenville Yard. In Greenville Yard it will be transported to its destination using the same methodology as described above. Similarly, domestic truck trailers will be driven or lifted onto a flat bed rail car and hauled by rail to JHR’s facility in South Amboy. At South Amboy the rail cars will be pushed by an engine and “rolled” via a float barge onto a rail float barge. The rail float barge will be pushed by tug either to
Greenville Yard or 65th Street, Brooklyn, using the same methodology as described above. After the trailer has been emptied by its consignee, it will be returned to the respective destination and transported through Greenville Yard using the same methodology as the outbound shipment described above.
Domestic merchant rail freight will be hauled by rail to Greenville Yard. In Greenville Yard it will be transported to its destination using the same methodology as described above. Domestic intermodal rail freight will be hauled by rail to Greenville Yard. In Greenville Yard it will be transported to its destination using the same methodology as described above. After the rail car has been emptied by its consignee, it will be returned to the respective destination and transported through Greenville Yard using the same methodology as the outbound shipment described above.
The tugs and barges will form a single articulated vessel by custom designing the stern of the barge and bow of the tug to allow the bow of the tug to nest into a form fitted notch at the stern of each barge and being secured by interlocking mechanism to be operated as a unified unit. The fuels for all tug/barge pairings will be subject to the tax imposed by Section 4042 of the Internal Revenue Code, based on the analysis that follows.
The ultimate destinations and routes are as follows. Regarding cargo transiting 65th Street, Brooklyn, for cargo destined for Brooklyn and Queens, after being rolled off the barge and hauled by locomotive to the rail yard located several hundred yards from the float bridge it will be unloaded from the rail car and driven to its destination. For cargo destined for Nassau and Suffolk Counties, it will be carried by rail to inland terminal(s) and unloaded from the rail cars at that destination. Regarding cargo transiting New Haven, Connecticut, the rail cars will be rolled off the float and hauled by locomotive via rail to a nearby rail yard. For cargo destined for Southern Connecticut, it will be unloaded from the rail car in the rail yard and driven to its destination; and for cargo destined for Central Connecticut, it will be carried by rail to inland terminal(s) and unloaded from the rail cars at that destination. Regarding cargo transiting New Bedford, Massachusetts, the rail cars will be rolled off the float barge and hauled by locomotive via rail to a nearby rail yard. For cargo destined for Southeastern Massachusetts and Rhode Island, it will be unloaded from the rail car in the rail yard and driven to its destination; and for cargo destined for East Central, Massachusetts, it will be carried by rail to inland terminal(s) and unloaded from the rail cars at that destination.
ISSUE:
Are the activities described in the Facts section above subject to the tax imposed under Title 26 United States Code § 4461, the Harbor Maintenance Tax (“HMT”)?
LAW AND ANALYSIS:
The statutory authority for the Harbor Maintenance Tax is found in the Water Resources Development Act of 1986 (Pub. L. 99-662; 100 Stat. 4082, 4266; 26 U.S.C. § 4461 et seq.). Under this statute, a tax is imposed for the use of a port, defined as any channel or harbor or 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. Pursuant to 26 U.S.C. § 4462(g)(2), intra-port movements are exempt from imposition of the tax imposed under 26 U.S.C. § 4461. See also 19 CFR 24.24(d)(1). The Customs Regulations implementing these statutory provisions are found at 19 CFR Part 24.
INTRAPORT MOVEMENTS:
A list of the ports subject to the HMT is provided under 19 CFR 24.24(b)(1). Under the heading “New York,” “New York Harbor” includes all points in New York and New Jersey within the Port of New York on the waters inshore of a line between Sandy Hook and Rockaway Point and south of Tappan Zee Bridge on the Hudson and west of the Throgs Neck Bridge of the East River. Movements between these and all points within the New York Port District boundaries described in New York Code (Chapter 154, Laws of New York, 1921) are intraport. The New York Harbor port specifically includes Port Code 1001, New York; Port Code 1003, Newark; and, Port Code 1004, Perth Amboy. As South Amboy, New Jersey, is located near Perth Amboy, New Jersey, and on the waters inshore of the line between Sandy Hook and Rockaway Point, we consider it to be located within the geographical confines of the New York Harbor port. Thus, for HMT purposes, any of the following movements described by you are considered intraport:
Greenville Yard, Jersey City, New Jersey, to 65th Street, Brooklyn, New York;
Greenville Yard, Jersey City, New Jersey, to South Amboy, New Jersey; and,
South Amboy, New Jersey to 65th Street, Brooklyn, New York.
Therefore, any movement between Greenville Yard, Jersey City, New Jersey; 65th Street, Brooklyn, New York; and, South Amboy, New Jersey (as provided in the definition of New York Harbor in 19 CFR 24.24(b)(1)), is intraport and consequently not subject to the HMT. See, e.g., CBP Ruling HQ 229202 (September 24, 2002).
However, New Haven, Connecticut; and, New Bedford, Massachusetts, are not part of the New York Harbor port. The eastern boundary of New York Harbor is defined in 19 CFR 24.24(b)(1) as the “Throgs Neck Bridge of the East River.” Both New Haven and New Bedford are considerably east of the Throgs Neck Bridge. Additionally, New Haven, Connecticut, is defined in 19 CFR 24.24(b)(1) as having its own Port Code, 0412. Accordingly, for HMT purposes, any of the following movements are not considered intraport:
Greenville Yard, Jersey City, New Jersey, to New Haven, Connecticut; and,
Greenville Yard, Jersey City, New Jersey, to New Bedford, Massachusetts.
Therefore, any movement between points located within the New York Harbor port and New Haven, Connecticut, or New Bedford, Massachusetts, as those ports are defined under 19 CFR 24.24(b)(1), is not intraport and consequently subject to the HMT.
MARINE FUEL TAX EXCLUSION:
You also assert that the marine fuel tax exclusion of 26 U.S.C. 4462(c) should exempt JHR from paying the HMT on its proposed movements between Greenville Yard, Jersey City, New Jersey, to New Haven, Connecticut; and, Greenville Yard, Jersey City, New Jersey, to New Bedford, Massachusetts. Title 26 U.S.C. § 4462(c) provides, in pertinent part, “[n]o tax shall be imposed under this subchapter [26 U.S.C. §§ 4461 et seq.] 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 [26 U.S.C. § 4042] (relating to tax on fuel used in commercial transportation on inland waterways).” 26 USCS § 4462(c).
Title 26 U.S.C. § 4462 is implemented by 19 CFR 24.24(c)(5), which exempts commercial vessels from payment of the HMT, if any fuel used to move 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, codified at 26 U.S.C. § 4042)(hereafter referred to as “IWFT”). Title 26 U.S.C. § 4042(d), in pertinent part, defines commercial waterway transportation as, “…any use of a vessel on any inland or intracoastal waterway of the United States-- (A) in the business of transporting property for compensation or hire, or (B) in transporting property in the business of the owner, lessee, or operator of the
vessel (other than fish or other aquatic animal life caught on the voyage).”
26 USCS § 4042(d)(1).
Also, the term inland or intracoastal waterway of the United States is defined as, “…any inland or intracoastal waterway of the United States which is described in section 206 of the Inland Waterways Revenue Act of 1978 (33 U.S.C. § 1804). 26 U.S.C. § 4042(d)(2). Title 33 U.S.C. § 1804 specifically enumerates the waterways covered by the marine fuel tax exclusion saying, in pertinent part, “[f]or purposes of section 4042 of the Internal Revenue Code of 1954 [26 USCS § 4042] (relating to tax on fuel used in commercial transportation on inland waterways) and for purposes of section 204 of this Act [33 USCS § 1802], the following inland and intracoastal waterways of the United States are described in this section: …(6) Atlantic Intracoastal Waterway: Two inland water routes approximately paralleling the Atlantic coast between Norfolk, Virginia, and Miami, Florida, for 1,192 miles via both Albermarle [Albemarle] and Chesapeake Canal and Great Dismal Swamp Canal routes.” 33 USCS § 1804. As defined in the Inland Waterways Revenue Act of 1978, the Atlantic Intracoastal Waterway extends no farther north than Norfolk, Virginia. Therefore, the ports of New York Harbor, New Haven, Connecticut; and, New Bedford, Massachusetts, are not part of the Atlantic Intracoastal Waterway for the purposes of 26 U.S.C. § 4042. Accordingly, JHR’s proposed movements between Greenville Yard, Jersey City, New Jersey, to New Haven, Connecticut; and, Greenville Yard, Jersey City, New Jersey, to New Bedford, Massachusetts, would not be exempted from payment of the HMT by the provisions of 26 U.S.C. § 4462(c). CARGO UNLOADING:
You further argue that JHR’s proposed operations should be exempted from payment of the HMT because they do not entail unloading of a vessel. The HMT is imposed by 26 U.S.C. § 4461. Title 26 U.S.C. § 4461(c)(1) states that “[t]he tax imposed by subsection (a) shall be paid by (A) in the case of cargo entering the United States, the importer, ... (C) in any other case, the shipper.” Title 26 U.S.C. § 4461(c)(2) states that “[e]xcept 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.”
Jersey Harborside Railroad asserts that its proposed operations should be exempt from the HMT because they do not constitute unloading cargo from a vessel. You state that, to be liable for the HMT, cargo must be “unloaded’ from a ‘vessel.” The argument is that “unloading” of marine freight entails two distinct aspects: (i) if packaged or containerized merchandise, it is either lifted off vessels by means of a crane, or if bulk material, it is pumped or dug off or onto a vessel into a pipe, chute or conveyor; (this type of operation is known as a ‘Lift-on/Lift-off’ operation (“Lo-Lo”) as compared to a Ro-Ro operation); and (ii) more importantly, it is moving from one mode of transportation (the vessel) to another mode of transportation (a truck chassis, rail car, pipeline or smaller vessel) or to a storage area (warehouse, tank or pile). Thus, there is a break in the flow of freight transport from one transport mode to another transport mode or to storage.
By contrast, JHR argues that a rail float bridge/barge operation does not entail a change in modes of transportation. When a rail car is “unloaded,” the cargo is moved from the rail car to either another mode of transportation (truck, vessel or pipeline) (commonly referred to as “transloading”) or to storage. JHR asserts that rolling rail cars off of a float barge does not entail this type of transloading activity. Moving cargo which has been loaded onto a rail car off of a float barge does not change the cargo’s mode of transportation, which continues to be the rail car itself. The cargo at all times remains on the railcar.
As an alternative to the concept of loading and unloading a vessel, JHR argues that the rolling of rail cars from a rail barge to a rail yard is analogous to “classification” of rail cars from one train to make up another train or the “interchange” of rail cars between railroads. “Classification” of rail cars occurs when a train of cars is pulled into a rail yard with a set of locomotives. The cars are then broken down and classified based on their destinations. These cars are then joined up with cars from other trains, which other cars are also going to the same destination, to make up a new train. A new set of locomotives then pulls this new train to its destination. A rail car may be classified in this manner several times between its origin and final destination. Classification involves a change in transport power sources (locomotives) but does not entail a change in modes of transportation, and the cargo loaded on the cars does not change its mode of transportation. An “interchange” of rail cars occurs when one railroad hands off a set of cars to another rail road. Again, it involves a change in transport power sources, but does not entail a change in modes of transportation.
JHR analogizes the carriage of railcars aboard its car float barges to railroad “classification” or “interchange” activities. JHR states that rolling rail cars from a barge to a rail yard entails a change in power sources from a tug/barge to a locomotive, but does not entail a change in modes of transportation. A rail float operation involves the pulling of strings of cars from one track (in a yard) to another track (on a barge) and visa versa, which results in switching from one power source (a locomotive engine) to another power source (a barge/tug). JHR asserts that “unloading of commercial cargo” from the rail cars does not occur from a commercial vessel at a port, but occurs at a rail yard located, in some cases, near the port, and, in other cases, many miles inland.
We disagree. JHR’s argument that its proposed operations do not constitute unloading cargo from a vessel, supra, concentrates on the merchandise contained in the rail cars and neglects the rail cars themselves. The argument proceeds from the unstated assumption that only the contents of the rail cars are cargo, which we believe is fallacious. The fallacy of this argument is most clearly demonstrated by the carriage of empty rail cars. It is well established in American maritime law that a car float for the carriage of rail cars is a vessel. The Supreme Court has held that, “[a] car float in navigable waters is subject to the maritime law like any other vessel.” (emphasis supplied) Nogueira v. New York, N. H. & H. R. Co., 281 U.S. 128, 134 (U.S. 1930),and, “The float was a vessel used in the transportation of railroad cars….” 281 U.S. at 129. Cargo has a broad meaning in maritime law; “The word ‘cargo,’ ex vi termini, means goods on board of the vessel…” Seamans v. Loring, 21 F. Cas. 920, 924 (Circuit Court, District of Massassachusetts 1816); and, “…cargo signifies all the merchandise and effects (emphasis supplied) which are laden on board a ship….” Thwing v. Great Western Ins. Co., 103 Mass. 401, 406 (Supreme Court of Massachusetts, Suffolk, 1869). Accordingly, rail cars themselves must be considered cargo loaded aboard a vessel, in this case, a car float. Also, since a rail car can be sold, it can also be considered merchandise.
It is noteworthy that at least two cases have discussed that rail cars were considered “loaded” aboard car floats, as well as the goods contained inside them. In The Priscilla, 1926 AMC 927, the U.S. District Court, Southern District of New York, specifically referred to the rail cars as having been loaded aboard the car float, not merely the goods within, saying, “...[t]he float was loaded with ten gondola cars, filled with coal. Six of them were on the port track, and four on the starboard.” 1926 AMC at 928. The concept that the rail cars themselves can be considered vessel cargo is illustrated most strongly in the case of empty rail cars loaded aboard a car float. In New York, New Haven and Hartford Railroad Company, vs. Stanger, the U.S. District Court, Southern District of New York, found that empty empty rail cars were “loaded” aboard a car float, “[o]n the carfloat were fastened thirteen empty gondola cars, five on the starboard side, five on the portside and three in the middle track.” 1956 AMC 1396. Clearly, the rail cars are cargo which may be loaded aboard a car float.
Of course, that which may be loaded aboard a vessel may be unloaded as well. Unloading is understood as “…the act of discharging a cargo, taking the load from, to disburden, to remove from….” American Oil & Supply Co. v. United States Casualty Co., 19 N.J. Misc. 7, 11 (Sup. Ct. 1940). Unloading “…as commonly understood it is the removing of the load or the part that is being unloaded, from the time that that operation is started until that operation is finished.” 19 N.J. Misc. 7 at 13. The act of taking the rail cars themselves from the car float disburdens or removes the rail cars from the car float. Consequently, we are of the opinion that the removal of rail cars from a car float constitutes unloading a vessel for the purposes of the Harbor Maintenance Tax.
We disagree with your characterization of Justice Brandeis’ opinion in United States v. Brooklyn Eastern District Terminal, 249 U.S. 296; 39 S.Ct. 283; (1919), and its applicability to the present matter. The Brooklyn Eastern District Terminal case examined the status of the terminal as a common carrier and did not involve a discussion of whether the use of car floats to transport rail cars as part of the terminal’s operations changed their status as vessels. While Justice Brandeis did say that car floats were used as an integral part of each railroad line, 249 U.S. at 304, he did not hold that their use in railroad operations meant that they were not vessels or that the railroad cars onboard, whether loaded or not, were not cargo. The argument that the use of a car float as an adjunct to railroad transportation deprived it of its maritime character, Nogueira, 281 U.S. at 130, was specifically dismissed by the U.S. Supreme Court, when it held that the definition of an employer under the Longshoremen's and Harbor Workers' Compensation Act, “…is manifestly broad enough to embrace a railroad company, provided it has employees who ‘are employed in maritime employment, in whole or in part, upon the navigable waters of the United States.’” Id., 281 U.S. at 132. Accordingly, we are of the opinion that the HMT may be imposed on JHR’s operations as described herein because they involve the unloading of cargo from a vessel.
HOLDING:
Transportation from Greenville Yard, Jersey City, New Jersey, to 65th Street, Brooklyn, New York , as described in the Facts section above, is intraport for HMT purposes, and consequently not subject to the HMT.
Transportation from Greenville Yard, Jersey City, New Jersey, to South Amboy, New Jersey, as described in the Facts section above, is considered intraport for HMT purposes, and consequently not subject to the HMT.
Transportation from South Amboy, New Jersey to 65th Street, Brooklyn, New York, as described in the Facts section above, is considered intraport for HMT purposes and consequently not subject to the HMT.
Transportation from Greenville Yard, Jersey City, New Jersey, to New Haven, Connecticut, as described in the Facts section above, is subject to the HMT.
Transportation from Greenville Yard, Jersey City, New Jersey, to New Bedford, Massachusetts, as described in the Facts section above, is subject to the HMT.
Should you have any questions regarding this matter, please contact W. Richmond Beevers, of my staff, at (202) 325-0084.
Sincerely,
George Frederick McCray
Supervisory Attorney-Advisor/Chief
Cargo Security, Carriers and Immigration Branch
Office of International Trade, Regulations & Rulings
U.S. Customs and Border Protection