Protest and Application for Further Review No. 4909-97-100036; Harbor Maintenance Fee; Exemption; 26 U.S.C.4462(b)(1)(B) and (C); Interest on Refund; 19 U.S.C. 1505(b)

HQ 227649 October 3, 1997 LIQ-10/15 RR:IT:EC 227649 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. 4909-97-100036; Harbor Maintenance Fee; Exemption; 26 U.S.C. 4462(b)(1)(B) and (C); Interest on Refund; 19 U.S.C. 1505(b) 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: There are ten entries which are the subject of this protest. The entries cover shipments of petroleum products shipped from St. Croix, U.S. Virgin Islands by Hess Oil Virgin Islands Corporation, and unloaded for consumption in San Juan, Puerto Rico. All entries were liquidated with the assessment of the harbor maintenance fee (HMF). The earliest liquidation date covered by this protest is March 28, 1997. The subject protest was filed on June 23, 1997. Protestant is seeking a refund of the HMF based on the exemption provided for in 26 U.S.C. 4462. 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. 1514(a)(5) and 26 U.S.C. 4462(f)). 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. 4462(b). 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. Thus, the fact that the regulation was never 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. Protestant also seeks interest on the harbor maintenance fees paid. The North American Free Trade Agreement (NAFTA) Implementation Act (Pub. L. No. 103-182; 107 Stat. 2057) was enacted on December 8, 1993 (hereinafter the "NAFTA"). Title VI of the NAFTA, titled Customs Modernization, contains various amendments to the Customs laws. Section 642(a) of Title VI of the NAFTA amended 19 U.S.C. 1505 by, among other things, adding a new subsection (b) providing as follows: (b) Collection or refund of duties, fees, and interest due upon liquidation or reliquidation-- The Customs Service shall collect any increased or additional duties and fees due, together with interest thereon, or refund any excess moneys deposited, together with interest thereon, as determined on a liquidation or reliquidation. Duties, fees, and interest determined to be due upon liquidation or reliquidation are due 30 days after issuance of the bill for such payment. Refunds of excess moneys deposited, together with interest thereon, shall be paid within 30 days of liquidation or reliquidation. In applying the above statutory provision to the protest under consideration, we agree that protestant is entitled to the payment of interest upon reliquidation, pursuant to this protest, of the subject entries. HOLDING: 1) The protest against the assessment of the harbor maintenance fee on the loading/unloading of merchandise in a port of a U.S. possession is GRANTED. 2) The protest is GRANTED with respect to the payment of interest. 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