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HQ 227841





March 11, 1998

LIQ-9-01/PRO-2-02 RR:CR:DR 227841 CB

CATEGORY: LIQUIDATION

Port Director
U.S. Customs Service
Num. 1 Puntilla Street
San Juan, PR 00901
ATTN.: Protest Officer
Hampton Carter

RE: Protest and Application for Further Review No. 4909-97-100058; Harbor Maintenance Fee; Exemption; 26 U.S.C. ?4462(b)(1)(B) and (C); Mistake of Fact; 19 U.S.C. ?1520(c)

Dear Sir/Madam:

The above-referenced protest was forwarded to this office for a determination. We have considered the points raised and a decision follows.

FACTS:

The subject protest covers sixteen (16) entries liquidated between June 21, 1996, and February 28, 1997. The entries cover shipments of petroleum products shipped from St. Croix, U.S. Virgin Islands and unloaded for consumption in San Juan, Puerto Rico. The entries were liquidated with the assessment of the harbor maintenance fee (HMF).

According to the record, protestant filed a 19 U.S.C. refund of the HMF. You denied the petition on October 22, 1997. Your denial was based on the grounds that assessment of the HMF was a mistake of law not correctable under this statutory provision. The subject protest was filed on November 18, 1997.

Protestant is seeking a refund of the HMF based on the exemption provided for in 26 U.S.C. ?4462. Protestant is alleging that it followed the "erroneous implementation and enforcement of the Harbor Maintenance Tax law as implemented and enforced by Customs via ABI and customs liquidators." Protestant further contends that it made no error in the construction of the law. Protestant alleges the erroneous deposits were made because the ABI program was erroneous, Customs liquidators followed the erroneous ABI program and the Customs Regulations do not address the possession-to-possession movements of merchandise.

ISSUE:

Should the subject protest be granted?

LAW AND ANALYSIS:

Initially, we note that the protest, with application for further review, was timely filed under the statutory and regulatory provisions for protests (see 19 U.S.C. ?1514 and 19 CFR Part
174) and that the decision protested, assessment of the harbor maintenance fees, is a protestable decision (see 19 U.S.C. to reliquidate an entry under section 1520(c) is a protestable decision under section 1514 (19 U.S.C. 1514(a)(7)).

Protestant contends that the erroneous deposits of the HMF were made because the ABI program was erroneous. It appears that protestant is misinformed as to the nature of the ABI filing process. The software program used by ABI filers is not provided by Customs; rather, the software is sold by private vendors. Thus, protestant is incorrect when it alleges that Customs required the payment of the HMF through the ABI program. The onus is on the ABI filer to know when it is appropriate to pay the HMF. If the software program being used by the filer requires that the HMF be calculated then it is up to the filer to discuss this problem with the software vendor. Contrary to protestant's assertion, the Customs Service did not erroneously implement and enforce collection of the HMF through ABI. Thus, the subject protest fails on this ground.

Regarding the alleged mistake of fact, the statutory authority for the harbor maintenance fee 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 fee 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(b), no tax shall be imposed with respect to--
. . .
(B) cargo loaded on a vessel in Alaska,
Hawaii, or any possession of the United
States for transportation to the United
States mainland, Alaska, Hawaii, or such a possession for ultimate use or consumption in the United States mainland, Alaska,
Hawaii, or such a possession,

(C) the unloading of cargo described in subparagraph (A) or (B) in Alaska, Hawaii, or any possession of the United States, or in the United States mainland, respectively, or . . .

The Customs Regulations implementing this provision are found at 19 CFR Part 24. The applicable regulation provides that "possessions" of the United States include Puerto Rico and the U.S. Virgin Islands. See 19 CFR 24.24(c)(4)(ii)(C).

As indicated in the FACTS portion of this ruling, the consumption entries under protest covered merchandise loaded on a vessel in the U.S. Virgin Islands and unloaded in San Juan, Puerto Rico. Thus, both movements (i.e., the loading and unloading) are exempt from the HMF pursuant to 26 U.S.C.

According to information provided by your office, the port determined that such movements between insular possessions were subject to the HMF based on your reading of the applicable regulation and required that the HMF be paid. The regulation (19 CFR 24.24(c)(4)(i)(B)) was not amended to conform to the 1988 statutory change which exempts such movements from the HMF. A regulatory provision does not override statutory language. An agency regulation depends on the underlying statute. A regulation does not stand on its own and it has the force of law only if the regulation is not inconsistent with that underlying statute. See Writing Instrument Mfrs. Ass'n v. United States DOC, CIT Slip Op. 97-151, reprinted 31 Cust. Cull. No. 50, pg. 56, 65 (Nov. 13, 1997). Thus, the fact that the regulation has not been amended to include movements for ultimate consumption in an insular possession does not negate the fact that statutorily these movements are exempt from the HMF.

We disagree with protestant's contention that the Customs officer's failure to follow 26 U.S.C. ?4662(b) is not a mistake of law. The courts have defined mistake of law as mistakes which occur "... where the facts are known, but their legal consequences are not known or are believed to be different than they really are" (Executone Information Systems v. United States, 96 F. 3d 1383, 1386 (Fed. Cir. 1996) (emphasis in original), citing Hambro Automotive Corporation v. United States, 66 CCPA 113, 118, C.A.D. 1231, 603 F. 2d 850 (1979); see also, Degussa Canada Ltd. v. United States, 87 F. 3d 1301 (Fed. Cir. 1996)). The instant protest falls squarely within that definition. Customs in San Juan was aware that the entries covered movements between two insular possessions but incorrectly believed that these movements were subject to the HMF. This is a mistake of law which is not correctable under 19 U.S.C. ?1520(c)(1).

HOLDING:

The subject protest against the denial of a 19 U.S.C. mistake of law which is outside the scope of the statute.

In accordance with Section 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, with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the 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 Subscription Service, Freedom of Information Act, and other public access channels.

Sincerely,

John A. Durant, Director
Commercial Rulings Division

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