Cruise Ship Law

CARNIVAL CRUISE LINES, INC., HAL ANTILLEN, N. V., HALLSHIPPING LTD., WIND SURF LIMITED, HOLLAND AMERICA LINE, N. V., and HAL CRUISESLIMITED, Plaintiffs-Appellants, v. UNITED STATES, Defendant-Cross Appellant.

04-1110, 04-1219
UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
2005 U.S. App. LEXIS 5929
April 12, 2005, Decided

PROCEDURAL POSTURE: Plaintiffs, a cruise ship operator and its subsidiaries, appealed a decision of the U.S. Court of International Trade, which affirmed the position of the U.S. Bureau of Customs and Border Protection that it was improper for the operator to deduct certain amounts from the price of the cruise tickets for the purpose of paying the Harbor Maintenance Tax (HMT) under the Harbor Maintenance Revenue Act of 1986, 26 U.S.C.S. §§ 4461, 4462.

OVERVIEW: The operator was subject to the HMT, which was a tax imposed on any port use in an amount equal to a percentage of the value of the commercial cargo involved. Commercial cargo included passengers transported for compensation or hire. 26 U.S.C.S. § 4462(a)(5)(B) defined value to mean the actual charge paid for the transportation of passengers or the prevailing charge for comparable service if no actual charge was paid. Customs took the position that the "actual charge" for transportation paid by the passenger included all embarkation to disembarkation costs reflected on passenger tickets. The operator argued that it was improper for Customs to include, when calculating the value, charges for services, amenities, and other expenses not directly tied to the actual transportation of the passengers. In affirming the trial court's decision, the court held that the tax was imposed on the actual charge for the transportation, not on the transportation component of a service that consisted largely of providing entertainment. The court held that Customs' interpretation was a reasonable one that avoided the problems created by attempting to separate the entertainment charges.

OUTCOME: The court affirmed the decision.