HQ 112844: Protest No. 3001-93-100481; Harbor Maintenance Fee; Public Law 99-662; 26 U.S.C. 4461, 4462

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 112844

                        October 28, 1993

VES-5-CO:R:IT:C 112844 GEV

CATEGORY:  Carriers

Daniel C. Holland
District Director
U.S. Customs Service
1000 Second Avenue 
Suite 2200
Seattle, Washington 98104-1049

RE:  Protest No. 3001-93-100481; Harbor Maintenance Fee;
     Public Law 99-662; 26 U.S.C.   4461, 4462

Dear Mr. Holland:

     This is in response to the above protest and related documents
forwarded to this office from your district.  Our ruling on the
issues raised therein is set forth below.

FACTS:

     The U.S. Customs Service's Regulatory Audit Division, Pacific
Region, conducted an audit of Holland America Line ("Holland
America") pertaining to harbor maintenance fees (HMF) during the
period of April 1, 1987 through December 31, 1991.  The purpose of
the audit was to determine whether Holland America had complied
with the provisions of  24.24, Customs Regulations (19 CFR  24.24)
regarding the assessment HMFs and remission of the correct amounts
to the Customs National Finance Center, and to determine the
adequacy of Holland America's recordkeeping system relative to the
computation and payment of HMFs.

     The results of the audit disclosed that Holland America
underpaid the HMF by $322,311.00 during the audit period.  By
letters dated May 22, 1992 and August 20, 1992, Customs Regulatory
Audit Division informed Holland America of the audit preliminary
findings and the proper method to be used in calculating the HMF. 
A letter dated April 6, 1993, from Customs District Director,
Seattle, informed Holland America that the audit was completed and
that underpayment was due and payable. A bill dated June 10, 1993,
from Customs National Finance Center was subsequently issued to
Holland America in the amount of $322,311.00.


                              - 2 -

     Counsel to Holland America filed a protest, dated July 6,
1993, addressing what are alleged to be two errors in the afore-
 mentioned Customs audit.  Specifically, the alleged errors are as
follows:  (1) Customs erroneously assessed HMFs when passengers
temporarily went ashore at layover ports subject to the HMF and
later returned to the vessel; and (2) Customs erroneously included
in the "value" of transportation on which the fee was assessed the
price of non-transportation services.  Included as Attachment A to
the protest is counsel's supporting letter, dated July 2, 1993,
detailing the claims of Holland America.  By letter dated October
6, 1993, counsel requested accelerated disposition of the protest
pursuant to 19 CFR  174.22(a).

ISSUES:

     1.  Whether, after boarding a vessel at a port exempt from
the assessment of HMFs, a passenger who proceeds with the vessel
to a port subject to the assessment of HMFs where he/she
temporarily goes ashore and subsequently gets back on the vessel
is considered to have "disembarked" or "boarded" at that port for
purposes of 19 CFR 24.24(e)(4) so as to incur liability on behalf
of the vessel operator for the payment of a port use fee.

     2.  What does Customs consider "transportation costs" for
purposes of 19 CFR 24.24(e)(4), and what can the cruise lines
subtract, if anything, from what the passengers paid?

LAW AND ANALYSIS:

                             ISSUE 1

     Title 19, Code of Federal Regulations,  24.24(e)(4) provides
in pertinent part:

          "Subject to the exemptions and special rules of this
          section, when a passenger boards or disembarks a
          commercial vessel at a port within the definition of
          this section, the operator of that vessel is liable
          for the payment of the port use fee."  (emphasis added) 

     Section 24.24(e)(4) was promulgated pursuant to the Water
Resources Development Act of 1986 (Public Law 99-662, 100 Stat.
4082) whose purpose includes the providing of Federal funds for
the maintenance of any channel or harbor in the United States which
is not an inland waterway and is open to public navigation
( 4462(a)(2)(A) of Public Law 99-662, 100 Stat. 4266).  

     In regard to  24.24(e)(4), neither the statute nor its
legislative history defines the terms "boards" or "disembarks"
cited therein for purposes of assessing the port use fee. (see 100
Stat. 4266-4267, and U.S. Code Congressional and Administrative
News, vol. 6, 99th Congress, Second Session, 1986 

                              - 3 -

at pp. 6706-6720).  It should be emphasized, however, that the fee
assessed pursuant to the aforementioned statute and regulation is
for the use of a port.  

     It is the position of Holland America that the terms "boards"
or "disembarks" apply only when passengers get on and off a vessel
at ports where a cruise originates and terminates and not when
passengers temporarily leave a vessel at layover ports.  In this
regard counsel for Holland America states that "[t]he cruise
vessel's use of port facilities during layover stops is minimal -
- in sharp contrast to its extensive use of port facilities at the
origination and termination ports."  (Attachment A at 3) 

     Counsel further contends that the above position is supported
by the language of the HMF statute and its legislative history. 
To that extent counsel states that to achieve the purpose of the
HMF statute (i.e., the providing of Federal funds for the operation
and maintenance of U.S. ports) as stated in U.S. Code Congressional
and Administrative News, vol. 6, 99th Congress, Second Session,
1986 at pp. 6705, 6709: 

     "...Congress contemplated two separate fee charges,
     differentiated in part by the particular nature of 
     the ship's port use.  While an HMF was assessed for    
'loading or unloading cargo' at designated ports, a 
     'port maintenance charge' was contemplated for purposes     
'other than loading, unloading, or transporting cargo.' Id.      at
6711 (emphasis added).  The activities that Congress
     specified do not constitute 'loading or unloading of
     cargo' are 'uses for burnishing (fueling), refitting,
     repair, convenience, or any other similar purpose.'
     Id.  (emphasis added).  A layover stop at a port for
     purposes of shopping or sight-seeing plainly falls
     within the category of 'convenience or any other 
     similar purpose,' and not 'loading or unloading of
     cargo' -- the only activity that triggers liability
     for a harbor maintenance fee."  (Attachment A at 4)

     Upon reviewing the aforementioned statutory language and its
legislative history, Customs is not in accord with this position.
Notwithstanding the discrepancy in the degree of port use between
stopover or layover ports and those ports where a voyage originates
and terminates, "port use" is defined in the HMF statute as either
the loading of commercial cargo on, or the unloading of commercial
cargo from, a commercial port within the purview of the statute
( 4462(a)(1)(A)(B) of Public Law 99-662, 100 Stat. 4266). 
Furthermore, the statute defines "commercial cargo" as "any cargo
transported on a commercial vessel, including passengers
transported for compensation or hire." (emphasis added)
( 4462(a)(3) of Public Law 99-662, 100 Stat. 4267).

                              - 4 -

     In addition, the statute specifically lists the following
items which are not to be included in the above definition of
commercial cargo:  bunker fuel, ship's stores, sea stores, or the
legitimate equipment necessary to the operation of a vessel, or
fish or other aquatic animal life caught and not previously landed
on shore.  ( 4462(a)(3)(B)(i) and (ii) of Public Law 99-662, 100
Stat. 4267).  It is these items, not the layover passengers in
question, that are commensurate with the activities to which
counsel refers do not constitute "loading or unloading of cargo"
(i.e., "uses for burnishing (fueling), refitting, repair,
convenience, or any other similar purpose").

     In view of the fact that passengers are not typically
characterized as being "loaded" on, or "unloaded" from, a vessel,
Customs, pursuant to its authority to promulgate regulations
necessary to implement the provisions of this statute ( 4462(h) of
Public Law 99-662, 100 Stat. 4269), drafted  24.24(e)(4) to include
the terms "boards" or "disembarks" commensurate with the provisions
for the assessment of HMFs regarding cargo set forth in  24.24(a).

     Accordingly, regardless of the fact that some or all of a
cruise vessel's passengers may go ashore and return to the vessel,
either by lighter or directly at dockside, a passenger temporarily
leaving a vessel upon its arrival at a port to which the port use
fee applies and returning to the vessel when it sails is
nonetheless considered to "disembark" and/or "embark" for purposes
of  24.24(e)(4) which constitutes "port use" within the meaning of
the statute as discussed above.  In fact, it may be noted that
allowing passengers to disembark is the express reason for use of
the port by the vessel.  We do not agree, as counsel suggests, that
a scheduled stop at a layover port on a commercial passenger
vessel's cruise itinerary is a "convenience or other similar
purpose" so as to render inapplicable the HMF.  Furthermore, the
clear language of the statute does not support such an
interpretation.  It is also important to note that although the
statute does provide exemptions from the payment of HMFs for the
transportation of various cargoes (  4462(a)(3)(B), 4462(b)(1)(2),
and 4462(d) of Public Law 99-662, 100 Stat. 4267, 4268), including
the transportation of passengers by ferry ( 4462(a)(4)(B) of Public
Law 99-662, 100 Stat. 4267), no exemption is provided for
passengers such as the layover passengers in question. 
Consequently, it is the opinion of the Customs Service that the
operator of the vessel is liable for the payment of port use fees
pursuant to  24.24(e). 

     Customs quarterly accounting procedures are also cited in
support of Holland America's position that the HMF only applies
where the cruise begins and ends at an HMF port.  These procedures
are reflected in 19 CFR 24.24(e)(4)(ii), which provides for
quarterly payments using a "Cruise Vessel Summary Sheet" ("CVSS"). 
It is contended that since the CVSS requires 

                              - 5 -

the cruise line to identify the "Number of Passengers on Cruise,"
and the "Total Eligible Charges for Passengers on Cruise," the HMF
is therefore calculated based on the total passengers on the
cruise, which means it only applies if the cruise begins or ends
at an HMF port.  It is the position of Holland America that,
assuming arguendo, the applicability of the HMF to passengers who
make a stopover at an HMF port, even if the cruise begins and ends
at non-HMF ports, the cruise operator would have to record the
number of stopover passengers notwithstanding the fact that there
is no place on the CVSS to record this, nor is there any indication
that such records must be maintained by the cruise operator.     

     The above argument is partially correct.  Absent evidence to
the contrary (e.g. documentation establishing the number of
passengers actually "disembarking" and/or "boarding" the vessel
when it calls at an HMF port) the calculation of the HMF is based
on the total number of passengers on the cruise as is reflected in
the CVSS, Customs Form (CF) 349 ("Harbor Maintenance Fee Quarterly
Summary Report"), and CF 350 ("Harbor Maintenance Fee Amended
Quarterly Summary Report").  However, the fact that there is no
requirement by the cruise operator, nor provision in Customs
accounting procedures, to specify those passengers who actually
"disembark" and/or "board" the vessel at a stopover port to which
the HMF applies does not override the statutory construction
discussed above so as to support Holland America's position that
the HMF only applies when the cruise begins or ends at an HMF port. 
Passengers as a matter of course purchase cruise packages where
itineraries list the ports of call, including the stopover ports
in question.  In fact, it appears that the primary reason for
stopping at the port is to allow passengers to disembark and visit
the port.  Therefore, Customs is entitled to the presumption,
rebuttable upon submission of adequate documentation, that every
passenger travelling on the vessel "disembarks" and/or "boards" at
these stopover/layover ports within the meaning of  24.24(e)(4) and
that HMFs should be assessed accordingly.   

                             ISSUE 2

     Title 19, Code of Federal Regulations,  24.24(e)(4) provides
in pertinent part:

          "Subject to the exemptions and special rules of this
          section, when a passenger boards or disembarks a
          commercial vessel at a port within the definition of
          this section, the operator of that vessel is liable
          for the payment of the port use fee.  The fee is to
          be based upon the value of the actual charge for 
          transportation paid by the passenger or on the         
prevailing charge for comparable service if no actual       charge
is paid..."  (emphasis added)

                              - 6 -

     Section 24.24(e)(4) was promulgated pursuant to the Water
Resources Development Act of 1986 (see  4462(a)(5)(B) of Public
Law 99-662, 100 Stat. 4267).  A review of both the statute and its
legislative history yields no further clarification as to what
specific expenditures constitute the transportation costs in
question.  In this regard it should be noted that the language
contained in both is verbatim ("...'value' means the actual charge
paid for such service, or the prevailing charge for comparable
service if no actual charge is paid...").  (see 100 Stat. 4267, and
U.S. Code Congressional and Administrative News, vol. 6, 99th
Congress, Second Session, 1986 at p. 6712)

     In view of the lack of guidance from the authority cited
above, we look to the plain meaning of the statutory language.  
The American Heritage Dictionary, Second College Edition, defines
"actual" as "existing in fact or reality."  In this regard it
should be noted that the legislative history of Public Law 99-662
provides in part that, "The port user charges...are to be
administered and enforced by the U.S. Customs Service."  (see  
U.S. Code Congressional and Administrative News, vol. 6, 99th
Congress, Second Session, 1986 at p. 6707)  It is apparent,
therefore, that Customs is accorded a degree of latitude in the
assessment of port use charges pursuant to  24.24(e)(4). 
Furthermore, the Supreme Court has recognized that, "...great
weight should be given the construction of a law that is adopted
by the agency charged with the law's enforcement."  Udall v.
Tallman, 380 U.S. 1, 16 (1965)

     In calculating the "value of the actual charge for
transportation paid by the passenger" for purposes of  24.24(e)(4),
it was Customs position that this should include those expenditures
which comprise the normal fare the cruise line would charge a
passenger for a particular trip, including any travel agent's
commission and those transportation and lodging costs included in
the overall cruise package in bringing the passenger to and from
the port of embarkation, provided the passenger actually availed
himself of such transportation and lodging.  (Customs ruling no.
543896, dated May 13, 1987)  This position was reiterated in an
internal memorandum from the Director, International Trade
Compliance Division, OR&R, to the Director, User Fee Task Force,
dated October 7, 1991 (ruling no. 111598)

     Upon further review of this matter, Customs remains of the
opinion that the "transportation costs" for passengers of cruise
vessels includes all "embarkation-to-disembarkation" costs as
reflected on passenger tickets, including commissions paid to
travel agents, port taxes, charges for pilotage, U.S. Customs and
U.S. Immigration and Naturalization services, wharfage, and any
"suite amenities" provided they are contracted and paid for prior
to the commencement of the voyage (i.e., included in the cost of
the ticket).  This position is supported by House Conference 

                              - 7 -

Report No. 99-1013, at p. 229 (see U.S Code and Administrative
News, vol. 6, 99th Congress, Second Session, 1986, at p. 6741)
which provides, in part, that "Passenger vessels also are subject
to the charge, with value generally determined by reference to the
prices paid by the passengers for their transportation."  However,
after numerous discussions with representatives of the cruise
industry, Customs has determined that the costs of land-based
lodging and connecting air transportation are not to be included
in Customs calculation of the transportation costs under
consideration regardless of whether a passenger avails himself of
such transportation and lodging.  Although this position represents
a divergence from ruling no. 543896 cited above, Customs believes
this revised position constitutes an equitable resolution of this
matter taking into consideration both the concerns of the cruise
industry and Customs responsibility in administering the port use
fee.  This position was communicated to Mr. John T. Estes,
President, International Council of Cruise Lines, in letters dated
June 12 and October 6, 1992, from Mr. Charles W. Winwood, Assistant
Commissioner, Office of Inspection and Control.

     Accordingly, Customs agrees that the costs of land-based
lodging and connecting air transportation should be excluded  from
the calculation of the transportation costs under consideration. 
However, counsel further states that other identifiable charges
(e.g., ship-board entertainment and suite amenities), though
included in the total cruise-package fare, do not reflect the
"actual charge for transportation" and therefore should be excluded
from the aforementioned calculations.  For the same reason, counsel
contends that the portion of the travel agents' commissions
attributable to the costs of land-based lodging and connecting air
transportation should likewise be excluded from the calculation of
transportation costs.  

     Upon further review of this matter, we remain of the opinion,
as discussed above, that identifiable charges for additional
services such as ship-board entertainment and suite amenities which
are included in the cruise package fare are part of the
"embarkation-to-disembarkation" costs and are therefore included
in the calculation of the transportation costs.  However, we are
also of the opinion that the inclusion of the entire amount of a
travel agent's commission in the calculation of the aforementioned
transportation costs without regard to whether any portion of such
commission is attributable to the costs of land-based lodging and
connecting air transportation is inconsistent with our position
that the transportation costs include all "embarkation-to-
disembarkation" costs.  Accordingly, accurate apportionment of
travel agents' commissions clearly distinguishing that portion of
the commissions attributed to 
land-based lodging and connecting air transportation will result 
in the exclusion of any such costs from Customs calculation of  - 8 -

the "value of the actual charge for transportation paid by the
passenger" for purposes of  24.24(e)(4).   

HOLDINGS:

     1.  After boarding a vessel at a port exempt from the
assessment of HMFs, a passenger who proceeds with the vessel to a
port subject to the assessment of HMFs where he/she temporarily
goes ashore and subsequently gets back on the vessel is considered
to have "disembarked" and "boarded" at that port for purposes of
19 CFR 24.24(e)(4) so as to incur liability on behalf of the vessel
operator for the payment of a port use fee.

     2.  For the purpose of calculating port use fees pursuant to
 24.24(e)(4), Customs Regulations, Customs considers the "value of
the actual charge for transportation paid by the passenger" to
include all items which would be included in the normal fare the
cruise line would charge a passenger for a particular voyage. 
These "embarkation-to-disembarkation" costs would include travel
agents' commissions, port taxes, charges for pilotage, U.S. Customs
and U.S. Immigration and Naturalization services, wharfage, and any
shipboard entertainment and suite amenities provided these costs
are contracted and paid for prior to the commencement of the voyage
(i.e., included in the cost of the ticket).  However, the costs of
land-based lodging and connecting air transportation as well as any
portion of a travel agent's commission associated therewith, are
not included in these "embarkation-to-disembarkation" costs. 

     Accordingly, the protest is granted in part and denied in
part.

     In accordance with  3A(11)(b) of Customs Directive 099 3550-
065, dated August 4, 1993, Subject: Revised Protest Directive, this
decision should be mailed by your office to the protestant no later
than 60 days from the date of this letter.  Any new billing (the
equivalent of the reliquidation of an entry) in accordance with the
decision must be accomplished prior to mailing of the decision. 
Sixty days from the date of the decision the Office of Regulations
and Rulings will take steps to make the decision available to
Customs personnel via the Customs Rulings Module in ACS and the
public via the Diskette Sub- scription Service, Lexis, Freedom of
Information Act and other public access channels.

                              Sincerely,



                              Stuart P. Seidel
                              Director, International Trade