Harbor maintenance tax update.

The harbor maintenance tax (HMT) was enacted as part of the Water Resources Development Act of 1986, to provide financing for port development. The HMT was an excise tax of .04% (.0004) of the value of cargo loaded or unloaded in U.S. ports. The rate was changed to .125% (.00125) by the Revenue Reconciliation Act of 1990.

In March 1998, the Supreme Court held that applying the HMT to exports violated the Export Clause (Article I, Section 9, Clause 5) of the U.S. Constitution, which prohibits export taxing (United States Shoe Corp.). In response, the U.S. Customs Service (USCS) announced that, after April 25, 1998, it would no longer "collect the harbor maintenance fee for cargo loaded on board a vessel for export...." (US Customs Service General Notice, 5/1/98).

The Court remanded the case to the U.S. Court of International Trade (CIT) to determine refund procedures, which the CIT issued in October (United States Shoe Corp. (10/15/98)). To follow these procedures, a taxpayer must first bring suit in the CIT for refund of the HMT. Under this decision, plaintiffs must then file claims with the USCS (P.O. Box 68940, Indianapolis, IN 46268).

The CIT has upheld the validity of the two-year statute of limitations (SOL) on HMT refunds (Stone Container Corp. (1998)). If this two-year SOL holds up, exporters filing now will be entitled only to HMT paid between the period beginning two years prior to the filing of the claim in the CIT and April 25, 1998 (when the USCS stopped collecting the tax).

Some other HMT-related issues are still in litigation. Stone Container Corp., Court No. 96-10-02366, and Swisher Int'l., Inc., Court No. 95-03-00322, have been designated test cases on such issues as there is no SOL or that a six-year SOL applies. Florida Sugar Marketing and Terminal Ass'n, Inc., Court No. 98-05-01303, was designated a test case on the issue of whether the HMT on domestic shipments is unconstitutional under the Export Clause. BMW Manufacturing Corp., Court No. 97-0300396, was designated a test case on whether the HMT on imports into Foreign Trade Zones is permissible. Thomson Consumer Electronics, Inc., Court No. 95-03-00277, was designated a test case on the constitutionality of the HMT on imports in general. Although the CIT has upheld the two-year SOL in Stone Container, based on these various test cases, taxpayers should consider filing suits for refunds for taxes paid prior to the two-year SOL and relative to other undetermined issues.

FROM RON WAINWRIGHT, CPA, RALEIGH, NC