Carnival Cruise Lines v. U.S.

• Decision Date: 05 January 2000
• Citation: 200 F.3d 1361
• Parties: (Fed. Cir. 2000) CARNIVAL CRUISE LINES, INC., HAL ANTILLEN, N.V., HAL SHIPPING LTD., WIND SURF LIMITED, HOLLAND AMERICA LINE, N.V., and HAL CRUISES LIMITED, Plaintiffs-Appellees, v. UNITED STATES, Defendant-Appellant. 98-1536 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1361

200 F.3d 1361 (Fed. Cir. 2000)

CARNIVAL CRUISE LINES, INC., HAL ANTILLEN, N.V., HAL SHIPPING LTD., WIND SURF LIMITED, HOLLAND AMERICA LINE, N.V., and HAL CRUISES LIMITED, Plaintiffs-Appellees, v. UNITED STATES, Defendant-Appellant.

United States Court of Appeals for the Federal Circuit

98-1536

DECIDED: JANUARY 5, 2000

Appealed from: United States Court of International Trade Senior Judge R. Kenton Musgrave

Robert P. Parker, Paul, Weiss, Rifkind, Wharton & Garrison, of Washington, DC, argued for plaintiffs-appellees. With him on the brief were Robert E. Montgomery, Jr., and Aseel M. Rabie.

Todd M. Hughes, Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for defendant-appellant. With him on the brief were David W. Ogden, Acting Assistant Attorney General, and David M. Cohen, Director.

J. Kevin Horgan, deKieffer & Horgan, of Washington, DC, for amicus curiae Thomson Consumer Electronics, Inc.

Lawrence M. Friedman, Barnes, Richardson & Colburn, of Chicago, Illinois, for amicus curiae Amoco Oil Company.

Before MICHEL, Circuit Judge, FRIEDMAN, Senior Circuit Judge, and BRYSON, Circuit Judge.

FRIEDMAN, Senior Circuit Judge.

The United States appeals the decision of the United States Court of International Trade that the application of the Harbor Maintenance Tax ("Harbor Tax"), 26 U.S.C. § 4461, to passengers on cruise ships violates the Export Clause of the United States Constitution, art. I, § 9, cl. 5. Carnival Cruise Lines, Inc. v. United States, 8 F. Supp. 2d 877, 879-80 (Ct. Int'l Trade 1998). We reverse and remand.

I

A. The Water Resources Development Act of 1986 ("Water Resources Act"), Pub. L. No. 99-662, 100 Stat. 4082 (1986), was a comprehensive statute designed to improve the nation's ports and harbors. The Act included the Harbor Tax as Subchapter A of Title XIV. (Title XIV of the Act was separately entitled the Harbor Maintenance Revenue Act, Pub. L. No. 99-662, tit. XIV, §§ 1401-07, 100 Stat. 4082, 4266-73 (1986)). The Harbor Tax imposes an ad valorem tax upon the operators of commercial vessels for the use of certain ports. It was intended to help fund the harbor improvement programs under the Water Resources Act. The relevant portions of the Harbor Tax provide:

(a) General rule

There is hereby imposed a tax on any port use.

. . .

(c) Liability and time of imposition of tax

(1) Liability

The tax imposed by subsection (a) shall be paid by--

(A) in the case of cargo entering the United States, the importer,

(B) in the case of cargo to be exported from the United States, the exporter, or

(C) in any other case, the shipper.

(2) Time of imposition

Except as provided by regulations, the tax imposed by subsection (a) shall be imposed--

(A) in the case of cargo to be exported from the United States, at the time of loading, and

(B) in any other case, at the time of unloading.

26 U.S.C. § 4461.

The statutory definitions for section 4461 include the following:

(1) Port use

The term "port use" means--

(A) the loading of commercial cargo on, or

(B) the unloading of commercial cargo from,

a commercial vessel at a port.

. . .

(3) Commercial cargo

(A) In general

The term "commercial cargo" means any cargo transported on a commercial vessel, including passengers transported for compensation or hire.

26 U.S.C. § 4462(a).

The statute thus treats "passengers transported for compensation or hire" as part of a vessel's "commercial cargo," which is subject to the Harbor Tax.

The Act also includes a severability clause, discussed in part IV, below.

B The appellees (collectively "Carnival") own and operate fleets of commercial cruise ships. Since the Harbor Tax became effective in 1987, the Customs Service has been assessing and collecting the tax for all passengers on cruises that originate, stop, or terminate in a port to which the Harbor Tax applies. Carnival protested to the Customs Service the tax on these vessels and, when the Customs Service denied the protest, filed the present suit in the Court of International Trade. See Carnival, 8 F. Supp. 2d at 878. In their second amended complaint Carnival contended that the application of the Harbor Tax to their cruise ships violated the Export Clause of the Constitution, and was also invalid on other grounds. See id. at 878-79.

In 1995, prior to the filing of the present case, the Court of International Trade held in another case that, as applied to exports, the Harbor Tax violated the Export Clause. United States Shoe Corp. v. United States, 907 F. Supp. 408 (1995), aff'd, 114 F.3d 1564 (Fed. Cir. 1997). In 1998, the Supreme Court upheld that ruling. United States v. United States Shoe Corp., 523 U.S. 360 (1998) ("U.S. Shoe"). The Court noted that in United States v. International Business Machines Corp., 517 U.S. 843 (1996), it held that "the Export Clause categorically bars Congress from imposing any tax on exports." U.S. Shoe, 523 U.S. at 363. The issue in U.S. Shoe was "whether the Harbor Maintenance Tax . . . as applied to goods loaded at United States ports for export, is an impermissible tax on exports or, instead, a legitimate user fee." Id. The Court held that the Harbor Tax "does not qualify as a permissible user fee," and therefore was a prohibited tax on exports. Id.

The Court of International Trade rendered two opinions in the present case. The first, issued while U.S. Shoe was progressing through the appellate process, held that "those portions of the [Harbor Tax] that apply to exports, and are thus unconstitutional in accordance with this Court's opinion in U.S. Shoe . . . are severable from the remainder of the [Harbor Tax], in particular those portions of the statute that involve Plaintiffs' operations." Carnival Cruise Lines, Inc. v. United States, 929 F. Supp 1570, 1577 (Ct. Int'l Trade 1996).

In its second opinion, rendered after the Supreme Court's decision in U.S. Shoe, the court granted partial summary judgment that, as applied to passengers, the Harbor Tax violated the Export Clause. Carnival Cruise Lines, Inc. v. United States, 8 F. Supp. 2d 877, 880-81 (Ct. Int'l Trade 1998). The court reasoned that "the statute has equated passengers with cargo, and U.S. Shoe has held that taxing exports, or 'loading,' of cargo violates the Constitution. Therefore, the 'loading' of passengers must also violate the Constitution." Id. at 880.

II

The Export Clause of the Constitution, art. I, § 9, cl. 5, states:

No Tax or Duty shall be laid on Articles exported from any State.

The Supreme Court's Export Clause jurisprudence has repeatedly recognized that the clause bars a tax on "goods." See, e.g., International Business Machines, 517 U.S. at 846, 848, 849, 855, 862. In U.S. Shoe, the Court stated that in International Business Machines it had "held that the Export Clause allows no room for any federal tax, however generally applicable or nondiscriminatory, on goods in export transit." 523 U.S. at 367; see also Thames & Mersey Marine Ins. Co. v. United States, 237 U.S. 19, 27 (1915); Dooley v. United States, 183 U.S. 151, 154-155 (1901).

The passengers on Carnival's cruise ships are neither "articles" nor "goods." They are people. The application of the Harbor Tax to them would not involve the laying of any tax upon "Articles" exported from any state. "Articles" and "goods" relate to items of commerce, not people.

To apply the Export Clause to people would be inconsistent with the basic purpose of the Clause. "As a purely historical matter, the Export Clause was originally proposed by delegates to the Federal Convention from the Southern States, who feared that the Northern States would control Congress and would use taxes and duties on exports to raise a disproportionate share of federal revenues from the South." International Business Machines, 517 U.S. at 859 (citing 2 M. Farrand, The Records of the Federal Convention of 1787, at 95, 305-308, 359-363 (rev. ed. 1966)). The Framers sought to "alleviate the fear of northern repression through taxation of southern exports . . . by completely denying to Congress the power to tax exports at all." Id. at 861. The Clause was directed solely against taxation of "exports," i.e., "goods."

The provisions of the Harbor Tax statute defining "commercial cargo," the loading or unloading of which constitutes "port use" to which the tax applies, as "including passengers transported for compensation or hire," do not mean that by virtue of such transportation "passengers" become "articles" subject to the Export Clause. These definitional provisions are a common legislative drafting technique for defining the coverage of a statute. It is for Congress to define and determine the coverage of the Harbor Tax; Congress decided to make it applicable to passengers transported for compensation or hire. By defining the reach of the Harbor Tax to cover such passengers, however, Congress could not and did not change the carriage of passengers into the export of goods, which is what the Export Clause covers.

Indeed, before this court Carnival does not even attempt to support the Court of International Trade's holding that the Export Clause bars the application of the Harbor Tax to passengers on the cruise ships. Instead, it seeks affirmance of the court's judgment on the alternative ground that the application of the tax to exports that was invalidated in U.S. Shoe as violating the Export Clause cannot be severed from its application to the cruise passengers, and therefore also falls as a result of U.S. Shoe. We now turn to that issue.

III

Before addressing the merits of Carnival's severability argument, we must first consider the antecedent issue whether Carnival may make that argument as an alternative basis for affirming the judgment of the Court of International Trade.

A. A preliminary point may be quickly disposed of. Carnival argues that in its second decision the Court of International Trade in fact rejected and...