HQ 112750 - Protest No. 2704-93-101292; Harbor Maintenance Fee; User Fee; Public Laws 99-272, 99-662; 19 U.S.C. 58c; - United States International Trade Commision Rulings

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HQ 112750

October 28, 1993

VES-5-CO:R:IT:C 112750 GEV

CATEGORY: CARRIER

Mary A. Rasmussen
Assistant District Director, Entry
U.S. Customs Service
300 S. Ferry Street, Room 1001
Terminal Island, California 90731

RE: Protest No. 2704-93-101292; Harbor Maintenance Fee; User Fee; Public Laws 99-272, 99-662; 19 U.S.C. 58c;

Dear Ms. Rassmussen:

This is in response to your memorandum dated May 21, 1993, forwarding the above-cited protest and related documents. Our ruling on the issues raised therein is set forth below.

FACTS:

Princess Cruises is a wholly owned indirect subsidiary of The Peninsular and Oriental Steam Navigation Company (P&O), a publicly traded company headquartered in London, England that owns many freight and passenger lines located throughout the world. P&O was founded more than 150 years ago and is today one of the world's largest shipping companies.

The ships of the Princess Cruise fleet sail all around the world. Although the cruise itineraries vary, a typical cruise involves passengers boarding the cruise ship at a particular port, stopovers at in-transit ports where some passengers may go ashore, and a final stop at a port where the passengers disembark and the cruise ends. The ports of embarkation and disembarkation may be located in the United States, in a territory or possession of the United States, or in a foreign country. The proportion of passengers going ashore at any particular in-transit port would vary, depending on a variety of circumstances, such as the weather at the port, the availability of dock space (or whether lightering would be required for the movement of passengers to shore), and the interest in the port generally (some passengers prefer to remain on board to read, dine or relax). The cruises at issue in the audits typically lasted from 7 to 15 days, and involved from 600 to 1500 passengers per cruise.

In regard to the above cruises, two itineraries of particular relevance to the Customs audits in question include the "Vancouver/Whittier" cruises and "Transcanal" cruises. The former involves embarkation and disembarkation ports of Vancouver, British Columbia, Canada or Whittier, Alaska, neither of which is designated in the Customs Regulations as a port subject to the harbor maintenance fee (HMF). The Vancouver/ Whittier cruises make brief stopovers at various ports (including Ketchikan and/or Sitka, Alaska which are HMF ports) where some of the passengers may go ashore temporarily.

The Transcanal cruise, as its name implies, involves a cruise that transits the Panama Canal. The westbound version of this cruise begins in Puerto Rico, where the passengers board the vessel. The cruise then visits a number of ports in the Caribbean, and Central and South America, and transits the Canal before terminating in Acapulco, Mexico. After the passengers disembark from the cruise in Mexico, they return to the United States, typically by air carrier. The eastbound version of the Transcanal cruise is similar, except that the passengers board the cruise in Acapulco, Mexico, transit the Canal proceeding east, and disembark from the cruise in San Juan, Puerto Rico.

In response to a letter dated November 6, 1992, from counsel for Princess Cruises in opposition to Customs assessment of the HMF and arriving passenger fee (APF), Customs issued ruling no. 112511, dated January 27, 1992. A protest for further review of ruling no. 112511, dated March 24, 1993, was timely filed. Included as Attachment A to the protest was a supporting memorandum. In addition to the issues previously raised by counsel in the aforementioned November 6, 1992 letter, the protestant disputes Customs assessment of interest on HMF and arriving passenger fee (APF) principal amounts.

Subsequent to the filing of the above-referenced protest and at the request of counsel for Princess Cruises, a meeting was held at Customs Headquarters in Washington, D.C. on April 29, 1993. In attendance were counsel for Princess Cruises, the Chief Financial Officer of Princess Cruises, and Customs officials from the Carrier Rulings Branch, the User Fee Task Force, and the Office of Regulatory Audit. During this meeting the various issues under protest were discussed and Princess Cruises requested and was granted permission to supply additional information in support of their position. Following the passage of two deadlines agreed upon by counsel for Princess Cruises and a Senior Attorney from the Carrier Rulings Branch, an additional memorandum in support of the protest with supporting documentation was submitted on August 20, 1993.

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?

3. Whether the $5 processing fee assessed on passengers arriving in the Customs territory of the United States aboard a commercial vessel or aircraft pursuant to 19 CFR 24.22(g)(1) is applicable to those passengers arriving directly from an exempt location listed in 19 CFR 24.22(g)(2)(i).

4. Whether the $5 processing fee assessed on passengers arriving in the Customs territory of the United States aboard a commercial vessel or aircraft pursuant to 19 CFR 24.22(g)(1) is applicable to those passengers whose cruise originates in an exempt location listed in 19 CFR 24.22(g)(2)(i).

5. Whether Customs has the authority to assess interest on HMF and APF principal amounts.

6. If Customs has the authority to assess interest on HMF and APF principal amounts, is the amount of interest assessed limited to the face amount of the carrier's International Carrier Bond.

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 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.

In support of the position that the terms "boards" or "disembarks" do not apply to passengers temporarily leaving a vessel at stopover or layover ports, counsel contends that there is much less "port use" at such ports as opposed to when passengers "board" or "disembark" the vessel at the beginning or end of their voyage. Specifically, counsel states that the following port services used in Vancouver (a non-HMF port) are used not at all or very rarely in Ketchikan (the stopover port subject to the HMF): (1) Customs services; (2) Immigration services; (3) Garbage off-loading and disposal; (4) Terminal services such as passenger check-in, office space, phone lines, etc.; (5) Baggage handling services, including porters for the passengers and stevedores loading the baggage onto the ship; and (6) The loading of stores, including food; beverages; fuel; consumables such as detergents; and supplies such as plates, glasses, towels, bathroom amenity packs, etc. (August 20, 1993, memorandum at 2-3)

Notwithstanding the discrepancy in the degree of port use between stopover or layover ports and those ports where a voyage commences and ends, "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)(A) of Public Law 99-662, 100 Stat. 4267).

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 a cruise vessel may dock at a pier or rest at anchor in a harbor whereby its passengers go ashore via tender vessels, 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. 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 those in the scenario 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).

Counsel for Princess Cruises further contends that their position that stopover passengers do not "board" or "disembark" is in accord with the definitions of "embark" and "disembark" set forth in §4.80a(a)(4), Customs Regulations. While we would agree with counsel if §4.80a(a)(4) was applicable to the facts of this case, it must be noted that that regulation was promulgated pursuant to a different statute (46 U.S.C. App. 289, the "passenger coastwise law") the purpose of which is not to collect a fee for the use of a port but rather to prohibit the transportation of passengers between coastwise points either directly or via a foreign port on any vessel that is not U.S.-built, owned and documented.

Accordingly, the aforementioned definitions set forth in §4.80a(a)(4) do not support the protestant's position. Furthermore, the U.S. Court of International Trade has upheld Customs disparate interpretation of similar language. In Tropicana Products, Inc. v. U.S, 789 F.Supp. 1154 at 1158 (CIT 1992) the court stated, "...the criterion of whether goods have been 'manufactured' serves different purposes under different statutes..." The court in Tropicana Products also cited National Juice Products Association v. U.S., n. 14, 628 F.Supp. 978 (CIT 1986) where, in discussing whether the "substantial transformation" test applied by the courts to country of origin, drawback, and Generalized System of Preferences should be applied in construing the term "manufactured" as it is used in 19 U.S.C. 1562 (i.e., imported merchandise may not be "manufactured" in a bonded warehouse prior to its withdrawal therefrom) the court stated, "...although the language of the tests applied under the three statutes is similar, the results may differ where differences in statutory language and purpose are pertinent."

Counsel is of the opinion that the cases cited above are inapposite. (March 23, 1993, memorandum at 11) In support of this position counsel quotes the holdings in both cases which state that differing results in interpreting statutory regimes may be obtained in cases where "differences in statutory language and purpose are pertinent." Tropicana Products, at 1157; National Juice Products at 988-989, n. 14. While counsel does not dispute the fact that the purposes of the HMF statute and passenger coastwise law are different, he goes on to state that "...there is no differing statutory language involved." (emphasis added) (March 23, 1993, memorandum at 12) This statement is not correct. A review of the wording of the aforementioned statutes reveals no identical language. Rather, the "virtually identical terms -- 'embarks,' 'boards' or 'boarding,' and 'disembark'" to which counsel refers (March 23, 1993 memorandum at 12) appear in both 19 CFR §§24.24(e)(4) and 4.80a(a)(4), the regulatory authority promulgated by Customs pursuant to the HMF statute and the passenger coastwise law, respectively. Further evidence of Customs intent to limit the definitions of "embark" and "disembark" set forth in §4.80a(a)(4) to the administration of 46 U.S.C. App. 289 is the first sentence of §4.80a(a) which precedes these definitions and specifically states, "For purposes of this section, the following terms will have the meaning set forth below:" (emphasis added) The section of the Customs Regulations to which this refers (i.e., §4.80a) is entitled "Coastwise transportation of passengers."

Accordingly, Customs divergent definitions of "embark" and "disembark" for purposes of administering the HMF and the passenger coastwise law are fully supported by the established case law discussed above.

In further support of Princess Cruises' position that the HMF does not apply to stopovers at HMF ports, counsel cites a letter from Customs Regional Director of the Regulatory Audit Division in the Pacific Region, to Mr. Jim Dahline of Princess Cruises (misdated March 23, 1991, the correct date being April 23, 1991, when the letter was faxed to Mr. Dahline) in response to Mr. Dahline's letter of March 14, 1991, which states, in part, "...we have received word from the Office of Regulations and Rulings that C.R. 4.80a(4) [sic] applies to your Alaska voyages and no HMF is due for stopovers (layovers)."

The "word" referenced in the above letter was not a formal ruling from the Office of Regulations and Rulings (OR&R) on this issue but merely an informal, preliminary telephone conversation on April 23, 1991 (the date the letter was faxed to Mr. Dahline) between the Customs auditor involved and an OR&R staff attorney. (See 19 CFR 177.1(b) which provides, in pertinent part, that, "The Customs Service will not issue rulings in response to oral requests. Oral opinions or advice of Customs Service personnel are not binding on the Customs Service.") A formal ruling on this matter was issued in an internal memorandum from the Director, OR&R, to the Director, Office of Regulatory Audit, on April 7, 1992 (ruling no. 112097), in response to the latter's request. This ruling was communicated in a letter dated May 18, 1992, to Mr. Timothy R. McElroy, Director of Financial Accounting, Princess Cruises, from Customs Regional Director of the Regulatory Audit Division in the Pacific Region. Mr. McElroy had replaced Mr. Dahline as Customs audit contact. Accordingly, the premature inclusion of the aforementioned oral conversation in the letter to Mr. Dahline referenced above did not represent Customs official position on this matter.

Counsel's responses to Customs position as discussed above are as follows: (1) "First, the March 23, 1991 decision by the OR&R was a valid ruling under the Customs Service's own regulations." (2) "Second, the Customs Service' issuance of the subsequent conflicting internal advice memorandum in April 1992 -over one year after issuing the prior ruling -- violated its own regulations, as Princess Cruises was given no notice of the request for internal advice." (3) "Finally, the issuance of the second ruling more than one year after the original ruling violated the Customs Service's regulations [19 CFR 177.11(b)(6)], even if the original ruling were construed to be merely 'advice' from the Office of Regulations and Rulings and not an official 'ruling.'" (Memorandum of August 20, 1993, at 14-15)

In regard to counsel's first response, we note that he continues to incorrectly characterize the March 23, 1991 letter as a "decision by the OR&R". We reiterate that it was a letter from Customs Regional Director of the Regulatory Audit Division in the Pacific Region, to Mr. Jim Dahline of Princess Cruises referencing an informal telephone conversation between a Customs auditor and an OR&R staff attorney. This does not elevate it to the status of a "decision by the OR&R." Furthermore, pursuant to 19 CFR 177.1(d)(1), "A 'ruling' is a written statement issued by the Headquarters Office or the appropriate office of Customs as provided in this part that interprets and applies the provisions of the Customs and related laws to a specific set of facts." (emphasis added) In addition, 19 CFR 177.2(a) provides that a request for a ruling should be addressed to the proper division and branch of OR&R.

Accordingly, since the Carrier Rulings Branch of the International Trade Compliance Division, OR&R is the Customs Headquarters office charged with issuing rulings regarding the HMF and APF (see Federal Register notice of August 19, 1991 (56 FR 41159) and Customs Handbook HB 2100-01), the aforementioned March 23, 1991 letter from Customs Regional Director of the

Regulatory Audit Division is not a valid OR&R ruling. The first formal ruling on this matter was the April 7, 1992, internal memorandum from the Director, OR&R to the Director, Office of Regulatory Audit, in response to the latter's memorandum of February 5, 1992.

In regard to counsel's second response, since the March 23, 1991 letter was not a valid OR&R ruling as discussed above, Customs was under no obligation to notify Princess Cruises pursuant to 19 CFR 177.11(b) prior to issuing the April 7, 1992 internal memorandum.

As for counsel's third response, the contention that Customs violated §177.11(b)(6) of its own regulations is without foundation. The "word" received from OR&R referenced in the March 23, 1991 letter cannot be construed as being "advice" furnished by a Headquarters Office. The memorandum of the Director of the Office of Regulatory Audit, dated February 5, 1992, requesting internal advice as to the legal interpretation of various terms in 19 CFR 24.24 represented the first formal request to OR&R for a resolution of the issues in question, not the situation addressed in §177.11(b)(6) where a Customs "...field office believes that the advice furnished by the Headquarters Office should be reconsidered,..." A review of the aforementioned February 5, 1992 memorandum yields no reference to any prior OR&R advice on this matter, much less a request for reconsideration of such advice. Accordingly, §177.11(b)(6) by its own terms is inapplicable to the case now under consideration.

Customs quarterly accounting procedures are also cited in support of Princess Cruises' 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 the cruise line to identify the "Date of cruise," 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 Princess Cruises 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 Princess Cruises' 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 ports within the meaning of §24.24(e)(4) and that HMFs should be assessed accordingly.

Counsel states that the above-referenced "...'presumption' is nowhere to be found in either the HMF statute or regulations." (March 23, 1993, memorandum at 17) While this statement is correct, it should also be noted that the legislative history of Public Law 99-662 provides, in pertinent part, that:

"...all administrative and enforcement provisions of customs laws and regulations are to apply with respect to administration and enforcement of the port user charge provisions as if such charges were customs duties. Similarly,...the port user charges are to be treated as if they were customs duties." (emphasis added)

(U.S. Code Congressional and Administrative News, vol. 6, 99th Congress, Second Session, 1986 at p. 6707) In addition, the treatment of the HMF as a Customs duty is also provided in the HMF statute (see §4462(f) of Public Law 99-662; 100 Stat. 4268)

In this regard, we note that with respect to the liability for customs duties on imported merchandise arriving by vessel, 19 CFR 141.1(a) provides, in pertinent part, that:

"Duties and the liability for their payment accrue...on arrival of the importing vessel within a Customs port with the intent then and there to unlade,...unless otherwise specially provided for by law." (emphasis added)

It is therefore clear that with respect to imported merchandise arriving by vessel, Customs is entitled to the presumption that duties are liable on such merchandise absent evidence to the contrary (i.e., proof of no intent then and there to unlade or otherwise exempted by law). Since, as stated above, the HMF is treated as a Customs duty and shall be administered as such, it is therefore apparent that Customs is entitled to the presumption that every passenger travelling on a cruise vessel "disembarks" and/or "boards" at stopovers ports subject to the HMF absent evidence to the contrary (i.e., documentation establishing that certain passengers did not leave the vessel). Accordingly, this presumption is fully in accord with the HMF statute and its legislative history.

In further support of Princess Cruises' position, counsel refers to the terminology employed in Customs "Harbor Maintenance Fee Audit Report," dated June 25, 1992. Appendix II of this report includes a schedule of the various Princess Cruises at issue. Included in Attachment 3 to counsel's memorandum is page 1 of Appendix II. This schedule refers to individual Princess Cruises voyages and identifies these by the "embarking port," the "disembarking port," and the "in-transit port." The "embarking port" is the port at which the cruise began, the "disembarking port" is the port at which the cruise ended, and the "in-transit port" is a stopover port where some passengers may have gone ashore temporarily. It is contended that these references are consistent with the normal usage of the terms "embarking" and "disembarking" referenced in the HMF regulations. Consequently, it is alleged that they further support the proposition that a passenger "boards or disembarks a commercial vessel at a port within the definition of this section" for purposes of the HMF only when the port is the origination or termination of the cruise, not when it is an "in-transit" port during the cruise.

In response to the above contention, it should be noted that the aforementioned Appendix II is Customs version of Exhibit A to the same report which was prepared and provided by Princess Cruises. It is their representation and use of terms. The Customs auditor auditing Exhibit A produced Appendix II by merely adding the column of "in-transit" port names to indicate use of HMF designated ports. These audit notations do not reflect Customs position on the statutory construction discussed above.

Counsel for Princess Cruises maintains that, "the Customs auditor made substantial changes to the data originally provided by Princess Cruises in creating a separate and distinct 'Customs Service' document." (Memorandum of March 23, 1993 at 18) Counsel expounds on this allegation by stating, "the Appendix prepared by the Customs Service auditor completely revised the order of the reported voyages, deleted the 'voyage date' column, added a column for 'in-transit' ports, deleted the column for 'net revenues,' deleted the column for 'plus commissions,' changed the column entitled 'tax rate' to 'HMF at .04%,' and changed the column entitled 'tax payable' to 'total HMF per voyage." (Id.)

The annotations of the Customs auditor with respect to the data provided by Princess Cruises served three purposes: (1) to glean from this information a clear reference to the stop-over ports involved; (2) to provide Princess Cruises a clear breakdown of its liabilities for each of its ships; and (3) to review each voyage on the schedule to ensure that only those voyages subject to the applicable fees were included in the audit. The latter purpose was necessary in view of the fact that a prior schedule provided by Princess Cruises for passenger inspection fees included an exempt voyage from Vancouver to Honolulu to Kobe, Japan which, if left undetected, would have resulted in an overpayment in user fees by Princess Cruises. In short, the aforementioned annotations of the data originally provided by Princess Cruises were done in furtherance of facilitating Customs administration of the fees in question and Princess Cruises' understanding of such administration.

Finally, Princess Cruises maintains that their construction of the HMF statute and regulations is consistent with the views of other major cruise lines and consequently should be adopted by Customs. While the cruise industry may be in accord on this matter, their position, although a factor to be considered, is not dispositive as to the final resolution.

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)

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 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.

Counsel acknowledges that Customs and Princess Cruises are in accord with respect to the exclusion of the costs of land-based lodging and connecting air transportation in the calculation of the transportation costs under consideration. However, counsel further states 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. In support of this position, Princess Cruises has submitted an analysis of these costs for a sampling of their Alaska cruises for the years 1988 through 1992. (Attachment B of the August 20, 1993, memorandum)

Upon further review of this matter, we are 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 the "value of the actual charge for transportation paid by the passenger" for purposes of §24.24(e)(4).

Finally, Princess Cruises maintains that their method of calculating the HMF for cruise passengers is consistent with the views of other major cruise lines and consequently should be adopted by Customs. As stated in our discussion of Issue 1 above, the cruise industry's position on this or any other particular issue pending before Customs, although a factor to be considered, is not dispositive as to the final resolution.

ISSUES 3 and 4

Title 19, Code of Federal Regulations, §24.22(g)(1) provides, in pertinent part:

"Except as set forth in this paragraph, each passenger requiring Customs processing who is aboard a commercial vessel or commercial air- craft which arrives in the customs territory of the U.S. from a place outside thereof, shall be assessed a fee in the amount of $5 for the processing."

Section 24.22(g)(1) was promulgated pursuant to §13031 of the Consolidated Omnibus Reconciliation Act of 1985 (the COBRA, Public Law 99-272, 100 Stat. 82) codified at 19 U.S.C. 58c, whose purpose, as clearly stated in the statute and the above regula- tion, was to provide a schedule of fees for the provision of various Customs services.

The exceptions referenced in §24.22(g)(1) are set forth in §24.22(g)(2) (also promulgated pursuant to §13031 of the COBRA). Of particular relevance to Princess Cruises (specifically regarding their Transcanal cruises and some cruises that arrive back into the United States) is the exemption from the assessment of the $5 fee set forth in §24.22(g)(2)(i) which provides that the fee shall not be assessed for the following:

"Persons whose journey originates in Canada, Mexico, a territory or possession of the U.S., or any adjacent island. The U.S. territories and possessions include American Samoa, Guam, the Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands. The adjacent islands include all of the islands in the Caribbean Sea, the Bahamas, Bermuda, St. Pierre, Miquelon, and the Turks and Caicos Islands." (emphasis added)

It is the position of Princess Cruises that the $5 fee should not be assessed for either: (1) cruise passengers arriving back in the United States simply because their last cruise stop prior to arrival is a place listed in §24.22(g)(2)(i) (which includes Mexico and Puerto Rico); or (2) cruise passengers simply because their cruise "originated in" one of the places listed in §24.22(g)(2)(i) (again including Mexico and Puerto Rico). Upon further review of 19 U.S.C. 58c (the statute from which §24.22 was promulgated) as set forth below, Customs is not in accord with this position.

Title 19, United States Code, §58c(a)(5), provides for the assessment of fees associated with passengers as follows:

"For the arrival of each passenger aboard a commercial vessel or commercial aircraft from a place outside the United States (other than a place referred to in subsection (b)(1)(A) of this section), $5." (emphasis added)

Title 19, United States Code, §58c(b)(1)(A), provides for the limitation on the assessment of the above fees as follows:

(b) Limitation on fees

(1) "No fee may be charged under subsection (a) of this section for customs services provided in connection with --

(A) the arrival of any passenger whose journey--

(i) originated in--

(I) Canada,

(II) Mexico,

(III) a territory or possession of the
United States, or

(IV) any adjacent island (within the meaning of §1101(b)(5) of Title 8, or

(ii) originated in the United States and was limited to--

(I) Canada,

(II) Mexico,

(III) territories and possessions of the
United States, and

(IV) such adjacent islands;
(emphasis added)

With regard to 19 U.S.C. 58c(a)(5) which provides for the assessment of the fee, we believe that it must be read in conjunction with subsection (b)(1)(A) of the statute which limits the applicability of the fee not in terms of direct arrivals from those locations listed therein, but in terms of journeys originating in those locations. To apply the "other than..." language within the parentheses of subsection (a)(5) in the manner suggested by the protestant could lead to anomalous and improper results. For example, under this suggested interpretation no fee would have to be collected from a traveler who flies from Paris, France to Martinique and thence to the United States because the arrival in the United States would be from an "adjacent island" referred to in subsection (b)(1)(A). We believe that such a result clearly was not intended by Congress and would be inconsistent not only with the plain wording of the statute but also with the result reached by proper application of subsection (b)(1)(A) as further explained below. Accordingly, in order to give proper effect to the statute in its entirety, it is Customs position that the "other than..." language within the parentheses of subsection (a)(5) operates only as a cross-reference to subsection (b)(1)(A) which must be looked to for the substantively operative fee exemption in this regard.

In disputing the above statutory construction, the protestant cites United States v. Naftalin, 441 U.S. 768 (1979). Counsel points out that in Naftalin, "...the Court held that a particular phrase contained in one subsection of §17(a) of the Securities Act of 1933, but not in the other two subsections of §17(a), would not be read into the two subsections from which it was omitted." Id. at 773-774. Counsel further states that, "[i]n refusing to apply the phrase to all three subsections, the Court reasoned that

'[t]he short answer is that Congress did not write the statute that way. Indeed, the fact that it did not provides strong affirmative evidence that while [the particular phrase] may be relevant to prosecutions brought under § 17(a)(3), it is not required for those brought under § 17(a)(1).'

Id. (emphasis added)." Counsel proffers further support of Princess Cruises' position in this matter in citing Gozlon-Peretz v. United States, 498 U.S. 395, 111 S.Ct. 840, 846-7 (1991) ("[w]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion," citing Russello v. United States, 464 U.S. 16, 23 (1983); and General Motors Corp. v. United States, 496 U.S. 530, 110 S.Ct. 2528, 2532 (1990)).

The above case law is distinguished from the protest under consideration in that unlike the statutory authority cited therein, the language of 19 U.S.C. 58c(a)(5) includes a clear cross-reference to subsection (b)(1)(a). Accordingly, subsection (b)(1)(A) is included in, rather than omitted from, subsection (a)(5). Furthermore, to adopt counsel's reading of 19 U.S.C. 58c(a)(5) (i.e., direct arrival from those locations listed therein triggers the exemption) renders nugatory the language in 19 U.S.C. 58c(b)(1)(a) specifying journey origination as the criterion for fee exemption. Statutory construction in the manner suggested by counsel runs contra to the court's position that:

"...words in statutes should not be discarded as 'meaningless' or 'surplusage' when Congress specifically and expressly included them, particularly where the words are excluded in other sections of the same act."

United States v. Wong Kim Bo, 472 F.2d. 720, 722 (1972); see also City of Galatin v. Cherokee County, 563 F.Supp. 940, 946 (1983); United States v. Handy, 761 F.2d. 1279, 1280 (1985); and Enserch International Exploration, Inc., v. Attlock Oil Company, Ltd., 656 F.Supp. 1162, 1165 (1987).

In addition, the Supreme Court has stated that, "[i]t is axiomatic that all parts of an Act 'if at all possible, are to be given effect.'" Administrator, FAA v. Robertson, 422 U.S. 255, 261 (1975); citing Weinberger v. Hynson, Westcott & Dunning, 412 U.S. 609, 633 (1973); and Kokoszka v. Belford, 417 U.S. 642, 650 (1974). Accordingly, Customs position that 19 U.S.C. 58c(a)(5) must be read in conjunction with subsection (b)(1)(A) gives proper effect to the statute in its entirety and is in accord with established case law.

As noted above, the two fee exemption provisions in subsection (b)(1)(A) are set forth with reference to where the "journey" of the arriving passenger "originated" (i.e., under subsection (i) thereof the journey simply must originate in Canada, Mexico, a territory or possession of the United States, or any adjacent island (the "exempt locations"), and under subsection (ii) thereof the journey must originate in the United States but with further qualification that the journey must be limited to the named exempt locations). In a case involving a traveler who embarks on a cruise which terminates in the United States, it is Customs position that at a minimum the entire cruise itinerary must be considered the "journey" for purposes of subsection (b)(1)(A) for the following reasons: (1) subsection (ii) thereof clearly contemplates a journey involving more than one stage or leg (i.e., the journey must encompass a departure from, and return to, the United States with an intermediate stop in one exempt location and could include stops in more than one exempt location); and (2) if only the last leg of a cruise were to constitute a journey, subsection (i) thereof could be used to nullify the intended effect of the limitation in subsection (ii). Thus, in a case where a cruise originates in the United States and includes a stop in a non-exempt location and a final stop in the U.S. Virgin Islands prior to arrival back in the United States, the fees would have to be collected because the journey does not meet the standard for exemption under subsection (b)(1)(A)(ii) (i.e., the journey originated in the United States and was not limited to an exempt location). On the other hand, if a cruise originates in an exempt location and arrives in the United States after multiple intermediate stops which include a non-exempt location, no fees would have to be collected because the journey in this case is covered by the terms of subsection (b)(1)(A)(i).

However, Customs is of the opinion that the term "journey" as used in subsection (b)(1)(A) may encompass more than merely a cruise under certain factual circumstances, with the result that the place where the cruise originated may not always control the application of the two fee exemption provisions contained in that statutory provision. In this regard, 19 U.S.C. 58c(d)(1) requires, inter alia, (1) that the $5 fee prescribed under subsection (a)(5) be collected by "[e]ach person that issues a document or ticket to an individual for transportation by a commercial vessel or commercial aircraft into the Customs territory of the United States" and (2) that such collection take place "at the time the document or ticket is issued." Since collection of the fee is dependent on, and must take place at the same time as, issuance of the ticket or travel document which results in the passenger's arrival in the United States, the term "journey" must include all stages of an itinerary under circumstances where travel is sold, and one or more tickets or travel documents are issued by one party (including related parties) covering multiple destinations and/or covering multiple or different modes of transportation.

An example of applying Customs interpretation of the term "journey" as discussed above is as follows. If a traveler purchased a travel package in New York City from a travel agent and the transportation document(s) or ticket(s) issued by that travel agent covered air transportation from New York City to San Juan, Puerto Rico and a one week cruise out of San Juan with stops in the U.S. Virgin Islands, Antigua, Martinique, Grenada, and Caracas, Venezuela before returning to San Juan and return air travel to New York City, the travel agent would not be exempt from having to collect the fee because the journey originated in the United States (i.e., New York City) as provided in the exemption set forth in subsection (b)(1)(A)(ii), and the journey also included Caracas, Venezuela. Thus the journey was not limited to the specified locations as further required by that statutory provision. On the other hand, if that same traveler obtained from the travel agent in New York City only the air transportation to and from San Juan and subsequently purchased the same cruise itinerary directly from the cruise line while in San Juan, neither the travel agent in New York City nor the cruise line in San Juan would be expected to collect the $5 fee because (1) the airline ticket issued by the travel agent did not cover transportation into the Customs territory of the United States, and (2) although the cruise would be considered a "journey" for purposes of the passenger fee provisions because the issuance of the cruise transportation document results in an arrival within the Customs territory of the United States (i.e., in Puerto Rico), that journey also originated in Puerto Rico and thus falls within the fee exemption set forth in subsection (b)(1)(A)(i).

In objecting to Customs position, counsel for Princess Cruises states that, "...according to the Customs Service's own example, whether the APF would apply to an arriving passenger would simply be based on the coincidence of where and how the passenger arranged the travel." (emphasis added) (Memorandum of March 23, 1993 at 29) This statement is an oversimplification of the statutory provisions discussed above. The applicability of the APF is contingent on each passenger's itinerary. The collection of the APF is contingent upon the issuance of a ticket or travel document.

In addition, counsel states that Princess Cruises should not be required to pay the APF where, in instances such as in the example above, a travel agent who issues the ticket or travel document to a passenger is independent of Princess Cruises and is acting solely as an agent of the passenger. (Memorandum of August 20, 1993 at 8) To that end, it is stated that, "Princess Cruises does not own any travel agency and, with very minor exceptions (involving approximately one percent of sales for special incentive groups), Princess Cruises does not sell directly to any passengers." (Id.) In support of this contention Princess Cruises submitted two sets of materials in Attachment C of its Memorandum of August 20, 1993: (1) the "General Information" section of the current 1993/1994 Princess Cruises brochure; and (2) a page from the Princess Cruises Passage Ticket and Contract describing the current ticket conditions. Counsel emphasizes that the travel agent is the agent of the passenger and not of Princess Cruises.

Upon further review of this matter, we find that the above argument is not dispositive of Princess Cruises' responsibility to pay the APF. If the travel agent is the "agent" of the cruise line, then the cruise line is issuing the ticket and collecting the APF through its agent and is responsible for remitting the fees in accordance with 19 U.S.C. 58c(d)(1). On the other hand, if, as claimed by Princess Cruises, the travel agent is actually the "agent" of the passenger, then the cruise line issues the ticket directly to the passenger through the travel agent and the cruise line is still responsible for collecting and remitting the fees in accordance with 19 U.S.C. 58c(d)(1).

ISSUES 5 and 6

Section 111 of the Customs and Trade Act of 1990 (Public Law 101-382) amended 19 U.S.C. 58c(g) to provide that all administra- tive and enforcement provisions of the Customs laws and regula- tions, except those relating to drawback, shall apply with respect to any fee prescribed under §58c(a) (which includes APFs), and with respect to persons liable therefor, as if such fee is a customs duty. This amendment brought §58c into conformance with the HMF statute, which, as originally enacted, also provided that all Customs administrative and enforcement provisions of laws and regulations shall apply to the fee as though such fee was a Customs duty (See §4462(f) of Public Law 99-662; 100 Stat. 4268)

Under the provisions of 19 U.S.C. 1505(c), duty amounts fixed by liquidation or reliquidation are considered delinquent if not paid within 30 days. Interest on delinquent accounts accrues from the 15th day after liquidation or reliquidation. Inasmuch as the APF and HMF are considered to be duties for administrative and enforcement purposes, the failure to pay these fees can result in the accrual of interest once the debt is fixed. In our view, the debt becomes fixed once it is billed to the principal and surety.

Section 113.64 of the Customs Regulations (19 CFR §113.64) includes the terms of the International Carrier Bond (required of all passenger cruise lines). The provisions of §113.64(a) guarantee payment by the bond obligors of all duties, taxes and other charges which are provided by law or regulation. Customs may make a demand against the principal and surety, under the terms of the bond, for any fees that should have been collected and remitted by the carrier to Customs.

The provisions of §113.64(e) require the principal and surety to "exonerate the United States and its officers from any risk, loss or expense arising out of entry or clearance of the carrier, or handling of the articles on board." Clearance of passengers includes the collection of fees and is an activity relating to the entry or clearance of the carrier.

When the APFs or the HMFs remain unpaid, Customs suffers the loss of interest that would have accrued on those funds had they been paid in a timely manner. In order to exonerate the United States from risk, loss or expense arising from the clearance of the carrier, the bond obligors would, in addition to the fees that should have been collected and remitted, also owe an amount equal to the interest that would have been earned on timely paid fees. Accordingly, any demand made on the obligors for unpaid fees should also include an amount equal to the interest that would have been earned on the funds had they been paid timely. If the demand goes unpaid, billing will commence, with post-billing interest being chargeable, as permitted by §1505.

Any claim made under the International Carrier Bond would be limited to the face amount of the bond.

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 "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.

3. The $5 processing fee assessed on passengers arriving in the Customs territory of the United States aboard a commercial vessel or aircraft pursuant to 19 CFR 24.22(g)(1) is applicable to a passenger arriving directly from an exempt location listed in 19 CFR 24.22(g)(2), unless the passenger's journey either originated in an exempt location listed therein or originated in the United States and was limited to the exempt locations listed therein.

4. In the case of a travel itinerary which starts at and returns to a point within the United States and involves multiple or different modes of transportation including a cruise which stops in a location which is not an exempt location specified in 19 CFR 24.22(g)(2)(i), the $5 processing fee assessed on passengers arriving in the Customs territory of the United States aboard a commercial vessel or aircraft pursuant to 19 CFR 24.22(g)(1) is applicable to a passenger even though the cruise portion of such itinerary originated in one of those exempt locations, unless the cruise constitutes a separate journey by virtue of the fact that the ticket or travel document covering the cruise portion of the travel was issued and paid for as a separate transaction unrelated to the other stages of the travel itinerary.

5. Customs has the authority to collect interest on delinquent HMF and APF principal amounts inasmuch as both the HMF and APF are considered to be duties for Customs administrative and enforcement purposes. Duty amounts fixed by liquidation or reliquidation are considered delinquent if not paid within 30 days pursuant to 19 U.S.C. §1505(c). The failure to pay these fees can result in the accrual of interest once the debt is fixed. In regard to delinquent HMF and APF principal amounts, the debt becomes fixed once it is billed to the principal and surety.

In addition to the assessment of interest as discussed above, untimely paid HMF and APF principal amounts give rise for a demand by Customs on the obligors of an International Carrier Bond pursuant to §113.64(e) in an amount equal to the interest that would have been earned had the funds been paid timely.

6. Any claim made under the International Carrier Bond is limited to the face amount of the bond.

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,

Harvey B. Fox

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