Carnival Cruise Lines, Inc. v. U.S.
| Decision Date | 12 April 2005 |
| Docket Number | No. 04-1110.,No. 04-1219.,04-1110.,04-1219. |
| Citation | 404 F.3d 1312 |
| Parties | CARNIVAL CRUISE LINES, INC., Hal Antillen, N.V., Hal Shipping Ltd., Wind Surf Limited, Holland America Line, N.V., and Hal Cruises Limited, Plaintiffs-Appellants, v. UNITED STATES, Defendant-Cross Appellant. |
| Court | U.S. Court of Appeals — Federal Circuit |
Robert P. Parker, Paul, Weiss, Rifkind, Wharton & Garrison LLP, of Washington, DC, argued for plaintiffs-appellants. With him on the brief was John H. Longwell.
Todd M. Hughes, Assistant Director, Commercial Litigation Branch, Civil Division United States Department of Justice, of Washington, DC, argued for defendant-cross appellant. With him on the brief were Peter D. Keisler, Assistant Attorney General, and David M. Cohen, Director. Of counsel on the brief was Richard McManus, Senior Attorney, Office of the Chief Counsel, United States Bureau of Customs and Border Protection, of Washington, DC.
Before MICHEL, Chief Judge,* NEWMAN, and BRYSON, Circuit Judges.
Opinion for the court filed by Circuit Judge BRYSON. Concurring opinion filed by Chief Judge MICHEL.
The four appellants in this case are Carnival Cruise Lines, Inc., and three of its wholly owned subsidiaries (collectively, "Carnival"). Carnival operates passenger cruise ships and therefore is subject to the Harbor Maintenance Tax ("HMT"), which is assessed under the Harbor Maintenance Revenue Act of 1986 ("HMRA"), Pub.L. No. 99-662, tit. XIV, 100 Stat. 4266-73. The pertinent portions of that Act are codified at 26 U.S.C. §§ 4461-62.
In 1992, the United States Customs Service (now the Bureau of Customs and Border Protection) audited the HMT payments remitted by one of the Carnival entities for the period between April 1, 1987, and December 31, 1991. Following the audit, Customs assessed $322,311 in underpayments against Carnival. The two issues that formed the basis for the asserted underpayment were (1) Carnival's failure to make HMT payments based on passengers' boarding or disembarking during layover stops in the course of cruises, and (2) Carnival's deduction of travel agents' commissions from the price of the cruise tickets that Carnival used to calculate the amount of HMT that was due.
While it is clear that the HMT applies to passenger ships, the statute follows a somewhat circuitous route in imposing taxes on such vessels. The indirect manner in which the statute imposes the HMT on passenger vessels is largely responsible for the difficult statutory construction issues presented in this case.
The HMT imposes a "tax on any port use." 26 U.S.C. § 4461(a). "Port use" is defined as "the loading of commercial cargo on, or ... the unloading of commercial cargo from a commercial vessel at a port." Id. § 4462(a)(1). The statute reaches passenger vessels by defining "commercial cargo" to include "any cargo transported on a commercial vessel, including passengers transported for compensation or hire." Id. § 4452(a)(3) (emphasis added). The statute imposes a tax "on any port use" in an amount equal to "0.125 percent of the value of the commercial cargo involved." Id. § 4461(b).
In the case of "the transportation of passengers for hire," the statute defines the term "value" to mean "the actual charge paid for such service or the prevailing charge for comparable service if no actual charge is paid." 26 U.S.C. § 4462(a)(5)(B). The statute does not define the terms "loading" and "unloading" as applied to passengers, but the implementing regulation, 19 C.F.R. § 24.24(e)(4), states that "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." Based on that regulation, Customs has taken the position that when a passenger temporarily goes ashore and subsequently returns to the vessel at a layover stop, the passenger is considered to have "disembarked" and "boarded" the vessel for purposes of the HMT. Thus, Customs has taken the position that cruise operators are liable for the HMT with respect to passengers who leave the vessel at interim stops; moreover, in a January 1993 headquarters ruling, Customs took the position that there is a rebuttable presumption that every passenger on a cruise ship disembarks and reboards at layover stops. See HQ 112511 (Jan. 27, 1993).
With respect to valuation, Customs stated in the same headquarters ruling that the "actual charge" for transportation paid by the passenger includes "all embarkation to disembarkation costs reflected on passenger tickets, including commissions paid to travel agents, port taxes, charges for pilotage, U.S. Customs and Immigration and Naturalization services, wharfage, and `suite amenities' provided they are contracted for and paid for prior to the commencement of the voyage (i.e., included in the cost of the ticket)." Customs excluded from its computation "the costs of land-based lodging and connecting air transportation." HQ 112511 (Jan. 27, 1993). In a subsequent headquarters ruling, Customs modified its position by excluding from the "actual charge" calculation any portion of a travel agent's commission that may be attributable to land-based lodging or connecting air transportation. See HQ 112844 (Oct. 28, 1993).
Following the audit and Customs' decision with respect to the asserted shortfall in Carnival's HMT payments for the period under review, Carnival brought an action in the Court of International Trade challenging the assessment. Carnival argued that it was improper to assess HMT based on the passengers' presumed disembarking and reboarding at layover stops on cruises, and that it was improper for Customs to include, when calculating the "value" of the transportation, charges for services, amenities, and other expenses not directly tied to the actual transportation of the passengers.
The Court of International Trade initially entered judgment in favor of Carnival based on the Supreme Court's decision in United States v. United States Shoe Corp., 523 U.S. 360, 118 S.Ct. 1290, 140 L.Ed.2d 453 (1998), which declared the provisions of the HMRA relating to exported goods invalid under the Export Clause of the Constitution. The Court of International Trade held that the provisions of the HMRA governing the transportation of passengers were likewise unconstitutional under the Export Clause. See Carnival Cruise Lines, Inc. v. United States, 8 F.Supp.2d 877 (Ct. Int'l Trade 1998). We reversed, concluding that the provisions relating to the transportation of passengers were not invalid and that the relevant provisions were severable from the provisions that had been declared unconstitutional by the Supreme Court. Carnival Cruise Lines, Inc. v. United States, 200 F.3d 1361, 1369 (Fed.Cir.2000). On remand, the Court of International Trade upheld Customs' position on the valuation issue with one modification: the court held that the HMT base does not include charges for port taxes and other Customs charges. Carnival Cruise Lines, Inc. v. United States, 246 F.Supp.2d 1296, 1303 (Ct. Int'l Trade 2002). With respect to whether disembarking and reboarding at a layover port constitute triggering events under the HMT, the court upheld Customs' position on that issue based on this court's earlier decision in Princess Cruises, Inc. v. United States, 201 F.3d 1352, 1359 (Fed.Cir.2000). However, the court accepted Carnival's argument that the imposition of HMT liability on the theory that Customs first put forth in HQ 112511 could not lawfully be applied to events predating the issuance of that ruling. Accordingly, the court held that Carnival "should not be held liable for HMT payments on cruises which made only layover stops at HMT covered ports prior to the issuance of HQ 112511." 246 F.Supp.2d at 1301.
Carnival has appealed to this court from the portion of the trial court's decision relating to valuation. The government has cross-appealed from the portion of the trial court's decision holding the assessment of HMT for layover stops inapplicable to layover stops prior to January 27, 1993, the date on which HQ 112511 was issued. In Princess Cruises, Inc. v. United States, 397 F.3d 1358 (Fed.Cir.2005), we recently upheld a similar ruling by the Court of International Trade with respect to the retroactive application of Customs' theory as to layover stops. We therefore address the government's cross-appeal as to the layover issue only briefly, and we affirm the trial court's judgment on that issue. With respect to Carnival's appeal as to the valuation issue, to which we devote more attention, we agree with the trial court's analysis and therefore affirm on that issue as well.
II
Carnival argues that Customs included unauthorized expenses in the HMT valuation base. In particular, Carnival objects to the inclusion of what it refers to as "non-transportation charges reflected in a cruise package fare," such as "shipboard entertainment and suite amenities." Carnival asserts that the language of section 4462(a)(5) makes clear that only costs for "transportation" can be included in the HMT base. In support of its argument, Carnival points to the portion of the statute providing that "[i]n the case of the transportation of passengers for hire, the term `value' means the actual charge paid for such service...." 26 U.S.C. § 4462(a)(5)(B). Carnival argues that the term "such service" refers to "the transportation of passengers for hire" and that the HMT base therefore can include only charges that are "integral to the movement of passengers." Carnival points to the dictionary and to language from a prior decision by this court defining "transportation" as "transfer[ring] or convey[ing] from one person or place to another." Executive Jet Aviation, Inc. v. United States, 125 F.3d 1463, 1468 (Fed.Cir.1997). Employing that definition, Carnival concludes that the interpretation of section 4462(a)(5)(B) "has nothing to do with whether actual or...
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