Rule2025-17826
Tonnage Tax Modernization
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 16, 2025
Effective
September 16, 2025
Issuing agencies
Homeland Security DepartmentU.S. Customs and Border Protection
Abstract
This interim final rule amends U.S. Customs and Border Protection (CBP) regulations so that a tonnage year, for purposes of calculating tonnage taxes for a vessel, is aligned with the fiscal year of the Federal Government. Currently, CBP calculates a unique tonnage year for each vessel, starting when the vessel first enters the United States. This rule also permits CBP to issue a single electronic receipt for the payment of tonnage taxes and light money. This rule simplifies the tonnage tax process, decreases the number of errors in assessing tonnage taxes, and simplifies the tracking of tonnage tax payments.
Full Text
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<title>Federal Register, Volume 90 Issue 177 (Tuesday, September 16, 2025)</title>
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[Federal Register Volume 90, Number 177 (Tuesday, September 16, 2025)]
[Rules and Regulations]
[Pages 44512-44524]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-17826]
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DEPARTMENT OF HOMELAND SECURITY
U.S. Customs and Border Protection
19 CFR Part 4
[Docket No. USCBP-2025-0581; CBP Dec. 25-13]
RIN 1685-AA34
Tonnage Tax Modernization
AGENCY: U.S. Customs and Border Protection, Department of Homeland
Security.
ACTION: Interim final rule; request for comments.
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SUMMARY: This interim final rule amends U.S. Customs and Border
Protection (CBP) regulations so that a tonnage year, for purposes of
calculating tonnage taxes for a vessel, is aligned with the fiscal year
of the Federal Government. Currently, CBP calculates a unique tonnage
year for each vessel, starting when the vessel first enters the United
States. This rule also permits CBP to issue a single electronic receipt
for the payment of tonnage taxes and light money. This rule simplifies
the tonnage tax process, decreases the number of errors in assessing
tonnage taxes, and simplifies the tracking of tonnage tax payments.
DATES:
Effective Date: This interim final rule is effective on September
16, 2025.
Comment Date: Comments must be received by November 17, 2025.
ADDRESSES: Please submit comments, identified by docket number, by the
following method:
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Follow the instructions for submitting comments via docket number
USCBP-2025-0581.
Instructions: All submissions received must include the agency name
and docket number for this rulemaking. All comments received will be
posted without change to <a href="https://www.regulations.gov">https://www.regulations.gov</a>, including any
personal information provided. For additional information on the
rulemaking process, see the ``Public Participation'' heading of the
SUPPLEMENTARY INFORMATION section of this document.
Docket: For access to the docket to read background documents or
comments received, go to <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
FOR FURTHER INFORMATION CONTACT: Brian Sale, Branch Chief, Office of
Field Operations, U.S. Customs and Border Protection, by telephone at
202-325-3338 or by email at <a href="/cdn-cgi/l/email-protection#bdf2fbf290f0fcf3f4fbf8eee9ffeffcf3fef5fddedfcd93d9d5ce93dad2cb"><span class="__cf_email__" data-cfemail="eba4ada4c6a6aaa5a2adaeb8bfa9b9aaa5a8a3ab88899bc58f8398c58c849d">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Public Participation
Interested persons are invited to participate in this rulemaking by
submitting written data, views, or arguments on all aspects of the
interim final rule. CBP also invites comments that relate to the
economic, environmental, or federalism effects that might result from
this rule.
Comments that will provide the most assistance to CBP will
reference a specific portion of the interim final rule, explain the
reason for any recommended change, and include data, information, or
authority that support such recommended change.
II. Background and Need for Rule
U.S. Customs and Border Protection (CBP) assesses and collects
tonnage taxes on vessels brought into the United States from a foreign
port or place under the authority of 46 U.S.C. 60301.\1\ Section 4.20
of title 19 of the Code of Federal Regulations (19 CFR 4.20) details
how CBP calculates regular tonnage taxes. In general, CBP calculates
regular tonnage taxes based on either a lower rate of 2 cents per net
ton for certain specified vessels, not to exceed 10 cents per net ton
in any one year, or a higher rate of 6 cents per net ton, not to exceed
30 cents per net ton per year, for all other vessels.\2\ See 46 U.S.C.
60301(a), (b); 19 CFR 4.20(a). Additional regulatory provisions
describe the exceptions to regular tonnage tax, the process for
obtaining a certificate of payment and cash receipt, the process for
applying for a refund, and guidance on how regular tonnage tax is
calculated. See 19 CFR 4.20-4.21, 4.23-4.24. Tonnage tax is generally
collected along with special tonnage taxes and light money, if
applicable. See 19 CFR 4.20(c), 4.22.\3\
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\1\ See also Treasury Order 100-20 in which the Secretary of the
Treasury delegated to the Secretary of Homeland Security the
authority related to the customs revenue functions vested in the
Secretary of the Treasury as set forth in 6 U.S.C. 212 and 215,
subject to certain exceptions; and DHS, Delegation No. 07010.3,
Delegation of Authority to the Commissioner of U.S. Customs and
Border Protection II.A (Rev. No. 03.2, Incorporating Change 2) (Dec.
11, 2024).
\2\ The lower rate of 2 cents per net ton applies to each entry
in a port of the United States of a vessel entering from a foreign
port or place in North America, Central America, the West Indies,
the Bahama Islands, the Bermuda Islands, or the coast of South
America bordering on the Caribbean Sea, a vessel entering from the
high seas adjacent to the United States or the above listed foreign
locations, and on all vessels (except for vessels of the United
States, recreational vessels and barges as defined in 46 U.S.C.
2101) that depart from a U.S. port or place and return to the same
port or place without being entered in the United States from
another port or place. See 46 U.S.C. 60301(a); 19 CFR 4.20(a). At
each entry in a port of the United States of a vessel from a foreign
port or place not otherwise specified as receiving the lower rate,
the higher rate of 6 cents per net ton, not to exceed a total of 30
cents per net ton per year, applies. See 46 U.S.C. 60301(b); 19 CFR
4.20(a).
\3\ Light money is a duty of a specified amount per ton
applicable to all foreign vessels entering U.S. ports, unless
exempted. See 46 U.S.C. 60302-60304.
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A. Tonnage Year
The relevant statute and CBP regulations establish a yearly maximum
for the payment of regular tonnage taxes. 46 U.S.C. 60301(a), (b); 19
CFR 4.20(a). For example, if a vessel has made five payments at the 2-
cent rate during a tonnage year, CBP will not assess additional regular
tonnage tax at the 2-cent rate on that vessel for the remainder of that
tonnage year. See 19 CFR 4.20(b). Similarly, if a vessel has made five
payments at the 6-cent rate during a tonnage year, CBP will not assess
additional tonnage tax at the 6-cent rate on that vessel for the
remainder of that tonnage year. See 19 CFR 4.20(b).
When determining whether a vessel has met the yearly maximum, CBP
calculates a ``tonnage year'' that is unique to each vessel. The
tonnage year starts on the date of the first entry of the vessel
concerned and expires on the day preceding the corresponding date of
the following year. See 19 CFR 4.20(b).
The use of a unique tonnage year for each vessel results in an
overly complicated calculation of regular tonnage taxes. For each
vessel, the CBP officer must determine the relevant tonnage year to
determine whether the yearly maximums have been met. This process
increases the opportunities for errors in the tonnage tax calculation,
resulting in both overpayments and underpayments. Overpayments result
in additional work for CBP to process any requests for a refund and
underpayments result in a loss of revenue for the U.S. Government.
Additionally, if CBP identifies an error in a vessel's tonnage tax
calculation, the process to correct the vessel history can be arduous
and time consuming.
A consistent tonnage year for all vessels will simplify the tonnage
tax collection process and will provide greater certainty on the amount
of money due for both CBP and the vessel agents and operators. CBP
officers will be able to calculate tonnage taxes more quickly because
they will not need to determine each vessel's unique tonnage year.
Additionally, vessel agents and operators will be better able to
predict their yearly tonnage tax payments and
[[Page 44513]]
will need to spend less time checking their payment history for errors
because there will be less uncertainty on when a tonnage year starts or
ends.
B. Receipt Process for Regular Tonnage Tax, Special Tonnage Tax, and
Light Money
Upon each payment of regular tonnage tax, special tonnage tax or
light money, CBP provides to the master of the vessel a certificate on
CBP Form 1002 (Certificate of Payment of Tonnage Tax) that includes the
control number from the related cash receipt (CBP Form 368 or 368A).\4\
See 19 CFR 4.23. CBP Form 1002 constitutes the official evidence of the
payment of regular tonnage taxes, special tonnage taxes, and light
money. See 19 CFR 4.23. This certificate must be presented upon each
entry during the tonnage year to establish the date of commencement of
the tonnage year and to ensure against overpayment. See 19 CFR 4.23.
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\4\ Although these forms are referenced as ``Customs Form[s]''
in 19 CFR 4.20 and 4.23, these forms are now CBP Forms.
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This manual, paper-based receipt process outlined in the
regulations is cumbersome for CBP officers and vessel agents and
operators.\5\ The process requires duplicative receipts for the payment
of tonnage taxes because CBP prepares and issues, and the vessel agents
and operators must keep in the records, a receipt for the payment of
tonnage taxes on CBP Form 368 or 368A, as well as a receipt on CBP Form
1002.
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\5\ For participants in the Mobile Collections and Receipts
Pilot (MCR), CBP may issue a single electronic receipt that is the
combined equivalent of CBP Forms 1002 and 368. See 82 FR 58008 (Dec.
12, 2017) and 88 FR 86912 (Dec. 15, 2023); see also CBP, Automation
of 368 and 1002 Receipts, <a href="https://www.cbp.gov/trade/priority-issues/revenue/revenue-modernization/automation-368-and-1002-receipts">https://www.cbp.gov/trade/priority-issues/revenue/revenue-modernization/automation-368-and-1002-receipts</a> (last
visited Mar. 7, 2025).
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In order to modernize this paper-based process, this rule will
replace CBP Form 1002 with an electronic receipt in most circumstances.
This automation will result in multiple benefits to both CBP and vessel
agents and operators. For example, CBP personnel can create draft
receipts prior to boarding a vessel, which decreases the amount of time
it takes to fill out and issue the receipt. This enables CBP personnel
to issue electronic receipts more quickly and efficiently.
Additionally, the automation provides vessel owners and operators with
the ability to store and receive receipts electronically. This
decreases the possibility that a vessel agent or operator will be
unable to provide evidence of prior tonnage tax payments and would be
required to obtain a replacement receipt from the port director to whom
the payment was made. See 19 CFR 4.23.
III. Amendments to the Regulations
A. Aligning the Tonnage Year With the Fiscal Year
This rule changes the definition of a tonnage year in 19 CFR
4.20(b) to align with the fiscal year of the Federal Government,
starting on October 1 of each year and ending on September 30 of the
following year.\6\ See 31 U.S.C. 1102. CBP will no longer calculate a
tonnage year based on when a particular vessel first enters the United
States.
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\6\ Special tonnage taxes and light money are not subject to a
yearly maximum and, therefore, are not affected by the shift to a
fiscal year tonnage year.
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This change will simplify the tonnage tax collection process,
eliminate the unique calculation of a tonnage year for each vessel, and
reduce errors caused by multiple tonnage years, thereby considerably
reducing the time and effort CBP officers currently spend calculating
tonnage taxes and investigating and correcting tonnage tax errors. This
is part of a broader effort by CBP to align various taxes and fees with
the fiscal year to simplify assessments and collections and improve
efficiencies for both CBP and the public. CBP is not changing the
requirement that the tonnage tax year is calculated without regard to
the rate of the payment made at the first entry of the vessel
concerned.
As a result of this change, most vessels will be required to start
a new tonnage year earlier than they would without this rule. For
example, a vessel that has paid the yearly maximum under current
requirements and which has several more months until the vessel's
unique tonnage year expires, would be required to start a new tonnage
year on October 1. CBP does not expect this to cause significant
disruption to vessel operations because the rate of applicable tonnage
taxes is not increasing, and tonnage taxes are generally not a
significant cost compared to other vessel duties and taxes.
Additionally, CBP does not expect the tonnage tax revenue in the
transition year to be significantly higher compared to subsequent years
as a result of this rule. Finally, CBP has conducted outreach to the
trade, which has been supportive of this change.\7\
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\7\ Since February 2023, CBP's Office of Field Operations has
conducted outreach to vessel agents attending in-person and virtual
training sessions and received positive feedback on the proposal to
change the definition of tonnage year so that all vessels use the
same timeframe. CBP also conducted outreach to various trade
associations representing vessel operators and agents and received
positive feedback to the proposal to implement a consistent tonnage
year for all vessels.
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B. Modernized Receipt Process
This rule amends several provisions in 19 CFR 4.20 and 4.23 to
modernize the receipt process so that CBP may issue a single,
electronic receipt for the payment of regular tonnage tax, special
tonnage tax, and light money. This contrasts with the current
procedures outlined in the regulations, which require CBP to issue two
paper receipts for each payment at each entry.
First, this rule amends 19 CFR 4.23 to state that CBP will issue to
the master of each vessel, upon each payment of regular tonnage tax,
special tonnage tax, or light money, a receipt of payment. This will
replace the current paper-based process in the regulations, that
require CBP to issue a certificate of payment on CBP Form 1002, as well
as a receipt on CBP Form 368/368A for the same payment. See 19 CFR
4.23. In most situations, CBP will provide the master of the vessel
with an electronic receipt. If CBP is unable to provide an electronic
receipt, such as in a system outage, CBP will issue a receipt on a
paper CBP Form 368/368A or other equivalent paper receipt. The receipt
will constitute the official evidence of payment and must be presented
upon each entry during the tonnage year to ensure against overpayment.
See new 19 CFR 4.23. In the absence of the receipt, evidence of payment
of tonnage tax can be obtained from the port director to whom the
payment was made. Id. The vessel agents and operators are responsible
for maintaining their records of payment, electronically or on paper,
to be available for CBP review.
As a result of this change, CBP Form 1002 will be eliminated. CBP
will not be required to maintain paper copies of CBP Form 1002 and
vessel agents and operators will not be required to maintain paper
copies of finalized CBP Form 1002s. Vessel agents and operators should
maintain any finalized CBP Forms 1002 for the entirety of any tonnage
year in which they received a paper CBP Form 1002 as a receipt of
payment.
Second, CBP is amending section 4.20(f)(2) to eliminate the
reference to ``Customs Form 1002.'' Pursuant to 19 CFR 4.20(f)(2),
certain information is noted on CBP Form 1002 and on the Vessel
Entrance or Clearance Statement, CBP Form 1300. This notation on two
forms is redundant and does not serve CBP operations. CBP will continue
to include the necessary information on CBP Form 1300 and on the
receipt issued for payment. CBP is also amending section 4.20(f)(2) so
that ``Customs Form 1300'' is referred to as
[[Page 44514]]
``CBP Form 1300'' in accordance with current naming conventions.
Finally, CBP is amending 19 CFR 4.23 so that the receipt for
payment of tonnage taxes is no longer used to establish when the
tonnage year starts for a particular vessel. A consistent tonnage year
for all vessels, equal to the fiscal year of the Federal Government,
means that CBP does not need to rely on the receipt of payment for each
vessel to establish when a tonnage year starts. CBP will continue to
rely on the receipt of payment when determining whether a vessel has
reached the yearly maximum number of payments for a tonnage tax rate.
C. Description of the Yearly Maximums
In addition to defining the tonnage year, 19 CFR 4.20(b) provides
the maximum number of payments during a tonnage year, five payments at
the maximum (6-cent) rate and five payments at the minimum (2-cent)
rate, so that the maximum assessment of regular tonnage taxes may
amount to 40 cents per net ton for the tonnage year of a vessel engaged
in alternating trade. This rule amends section 4.20(b) to improve
readability and clarity. CBP does not intend for this change to
substantively affect the calculation of tonnage taxes.
D. Guidance
CBP uses four scenarios listed in 19 CFR 4.20 as guidance when
determining the port of origin for a voyage to the United States and
the applicable rate of regular tonnage tax. See 19 CFR 4.20(a)(1)-(4).
CBP is revising the wording of these scenarios to provide more clarity
for the trade and to the ports of entry. The revisions are not intended
to substantively alter how CBP determines a port of origin or rate of
tonnage tax.
IV. Statutory and Regulatory Reviews
A. Administrative Procedure Act
Section 553(b) of the Administrative Procedure Act (APA) generally
requires agencies to publish a notice of proposed rulemaking in the
Federal Register that solicits public comments before the rule takes
effect. CBP finds that this rule is exempt from prior notice and
comment rulemaking procedures under section 553(b)(A) of the APA.
Pursuant to section 553(b)(A), the standard prior notice and comment
procedures do not apply to an agency rulemaking to the extent that the
rule involves matters of ``agency organization, procedure, or
practice.'' Rules are procedural if they are ``primarily directed
toward improving the efficient and effective operations of an agency,
not toward a determination of the rights or interests of affected
parties.'' Mendoza v. Perez, 754 F.3d 1002, 1023 (D.C. Cir. 2014)
(quoting Batterton v. Marshall, 648 F.2d 694, 702 n.34 (D.C.C. 1980).
The purpose of the exception is ``to ensure that agencies retain
latitude in organizing their internal operations.'' Mendoza, 754 F.3d
at 1023 (quoting Batterton, 648 F.2d at 707).
This rule is a procedural rule promulgated for efficiency purposes
that falls within this exception. This rulemaking replaces a paper
certificate of payment of tonnage tax (CBP Form 1002) with an
electronic receipt, or if an electronic receipt is not feasible, with a
single, equivalent paper receipt. This is a change in the format of the
receipt and does not change any of the substantive requirements related
to the payment or receipt process. Eliminating CBP Form 1002 so that
certain information is listed only on the Vessel Entrance or Clearance
Statement, CBP Form 1300, and not on both CBP Forms 1300 and 1002 is
also only a change in CBP recordkeeping procedures that does not affect
the substantive rights or interests of the public.
Additionally, the shift to a tonnage year that is aligned with the
fiscal year does not substantively affect the rights or interests of
the public. Congress has determined the substantive requirements of
tonnage tax, including the applicable rates and the yearly maximums.
See 46 U.S.C. 60301. This rule does not change those substantive
requirements, and vessel agents and operators will continue to be
subject to the same rates and the same requirements for meeting the
yearly maximums regardless of this rule. The only change to the tonnage
tax process is to change which 12-month period CBP uses to determine
the tonnage year. CBP considers this change to merely set forth a CBP
accounting procedure for implementing the statute that does not itself
impose a substantive requirement. Although average tonnage tax revenue
is expected to increase under this rule, an estimated 94% of all
vessels in a given year will pay no more in tonnage tax with the rule
than without it. For those vessels that do pay more tonnage tax in a
given year, the increase will be nominal, with the average tonnage tax
per entry increasing by approximately $128. For these reasons, CBP may
forgo advance notice and comment.
As discussed above, section 553(b) of the APA generally requires
agencies to publish a notice of proposed rulemaking in the Federal
Register that solicits public comments before the provisions of the
rule take effect. In addition to the aforementioned procedural rule
exception, CBP finds that this rule is exempt from the prior notice and
public comment requirements for good cause under 5 U.S.C. 553(b)(B),
which permits agencies to forgo those procedures when they are
impracticable, unnecessary, or contrary to the public interest. CBP
finds prior notice and comment unnecessary in this case because this
rule does not impose new obligations on the public, does not alter the
substantive requirements governing tonnage tax rates or eligibility,
and instead eliminates duplicative and outdated administrative
processes. The revisions streamline how CBP documents tonnage tax
payments and standardizes the tonnage year across all vessels,
improving internal consistency and clarity for vessel agents and
operators. Because these changes are limited to administrative
procedures and remove, rather than impose, compliance burdens, standard
notice and comment is unnecessary under 5 U.S.C. 553(b)(3)(B). Although
prior notice and comment is not required in this context, CBP
nonetheless invites post promulgation comments to identify any
technical or procedural improvements that may aid in future
implementation.
Section 553(d) of the APA requires agencies to delay the effective
date of final rules by a minimum of 30 days after the rule publishes in
the Federal Register, subject to certain exceptions. For the same
reasons stated above, CBP finds good cause under 5 U.S.C. 553(d)(3) to
waive the 30-day delay in the rule's effective date. Specifically, CBP
finds that a delayed effective date is unnecessary because this rule is
an administrative, deregulatory rule that does not impose new
obligations or alter substantive requirements. CBP assesses that trade
members will not experience significant disruptions in adjusting to the
revised requirements; thus, delaying the effective date of this rule
would unnecessarily postpone operational improvements expected to
reduce administrative errors, eliminate duplicate paperwork, and
promote uniformity in the tonnage tax collection process. Immediate
implementation will enable CBP and the trade community to utilize the
benefits of these streamlined procedures without further delay.
Moreover, this rule is a procedural rule. Because procedural rules are
not substantive rules within the meaning of 5 U.S.C. 553(d), the
delayed effective date requirement does not apply. For these reasons,
CBP may forgo a 30-day delayed effective date.
[[Page 44515]]
B. Executive Orders 12866, 13563, and 14192
Executive Orders 12866 (Regulatory Planning and Review) and 13563
(Improving Regulation and Regulatory Review) direct agencies to assess
the costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits. Executive Order 13563 emphasizes the importance of
quantifying both costs and benefits, of reducing costs, of harmonizing
rules, and of promoting flexibility. Executive Order 14192 (Unleashing
Prosperity Through Deregulation) directs agencies to significantly
reduce the private expenditures required to comply with Federal
regulations and provides that ``any new incremental costs associated
with new regulations shall, to the extent permitted by law, be offset
by the elimination of existing costs associated with at least 10 prior
regulations.''
The Office of Management and Budget (OMB) has not designated this
rule a ``significant regulatory action,'' under section 3(f) of
Executive Order 12866. Accordingly, OMB has not reviewed it.
This interim final rule is considered an Executive Order 14192
deregulatory action. We estimate that this rule generates $24,792 in
net annualized cost savings at a 7% discount rate, discounted relative
to year 2024, over a perpetual time horizon. We estimate that this rule
would result in a total net deregulatory impact on CBP and trade
members by simplifying tonnage tax calculations and reducing tax
calculation errors, with only a small one-time development cost to
update the electronic application that records vessels' tonnage tax
histories. The present value of the positive net impact of the rule
over Fiscal Years (FY) 2025-2035 would be $239,109 under a 3% discount
rate or $195,555 under a discount rate of 7%, discounting to FY 2025.
Annualized over the ten-year period FY 2025-2034, the net impact would
be a positive $27,214 per year under a 3% discount rate or $26,021 per
year under a 7% discount rate. The rule would also lead to an increase
in transfers from trade members to the U.S. Government over FY 2025-
2035 with a present value of $2,731,750 under a discount rate of 3% or
$2,356,446 under a discount rate of 7%. In terms of annualized value
over ten years, from FY 2025-2034, these present values translate to an
increase in transfers by $310,917 or $313,556 per year under a discount
rate of 3% or 7%, respectively.
1. Background
Upon making entry in the United States, a vessel arriving from a
foreign port or place is assessed a tonnage tax by CBP.\8\ Generally, a
vessel arriving from North America, the Caribbean, or a South American
port on the Caribbean coast is subject to a rate of 2 cents per net
ton, whereas a vessel arriving from elsewhere is subject to a rate of 6
cents per net ton. If the vessel has already made five payments at a
given rate in the current tonnage year, it is exempt from further
tonnage taxes at that rate for the remainder of the tonnage year.
Currently, a vessel's tonnage year begins on the date the vessel makes
entry in the United States without a tonnage year already in effect.
The tonnage year then expires on the day preceding the corresponding
date of the following year.
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\8\ See 19 CFR 4.20.
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When processing at a port, the master of the vessel or vessel agent
will present the certificates of payment of tonnage tax from recent
entries to establish the start date of the current tonnage year. Upon
payment of the tonnage tax on the current entry, the CBP officer will
give the master or agent a new certificate of payment to record both
the current payment and the start date of the tonnage year used for
said payment. Before the recent automation of tonnage tax receipts, the
certificate of payment was a paper CBP Form 1002 that included the
control number of the cash receipt (CBP Form 368 or 368A).\9\ Now,
thanks to CBP's Mobile Collections and Receipts (MCR) initiative, CBP
may instead issue an electronic receipt that is the combined equivalent
of CBP Forms 1002 and 368.\10\ The master or vessel agent may then use
a printed copy of the receipt sent by email as a certificate of
payment.
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\9\ See supra note 5; 19 CFR 4.23.
\10\ CBP, Automation of 368 and 1002 Receipts, <a href="https://www.cbp.gov/trade/priority-issues/revenue/revenue-modernization/automation-368-and-1002-receipts">https://www.cbp.gov/trade/priority-issues/revenue/revenue-modernization/automation-368-and-1002-receipts</a> (last visited Feb. 29, 2024).
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In FY 2023, 12,475 vessels made entry in the United States from a
foreign port or place.\11\ At 4.6 entries per vessel, vessels arriving
from foreign ports made 57,513 entries in total.\12\ Using CBP entrance
data, we calculate that 56% of these entries were subject to a tonnage
tax, with the remainder exempted for being made past the five-payment
cap. Under the baseline tonnage year calculation method described
further in the Transfers section below, the total tonnage tax payments
in FY 2023 summed to $27,402,291, averaging $476 per entry. The mean
vessel paid $2,197 in total, and the median vessel paid $1,108.
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\11\ Internal CBP database; entrance data provided by CBP Office
of Field Operations subject matter experts on September 29, 2023,
October 27, 2023, and January 23, 2024.
\12\ Entry here refers to entry of a vessel arriving from a
foreign port or place.
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CBP sometimes applies an incorrect tonnage year start date when
assessing tonnage taxes. After a mistake is made, CBP officers will
sometimes continue to use the wrong tonnage year start date for the
vessel's subsequent entries if the original error is not caught, which
leads to more errors. Using the wrong tonnage year start date can lead
to CBP's overcounting or undercounting the number of entries a vessel
has made in the current tonnage year. As a vessel's tonnage tax
obligation depends on the number of entries made in the current tonnage
year, such an error can lead to an incorrect assessment of the tonnage
tax. Upon finding an error in a vessel's recorded tonnage year start
date, CBP must then take the time to look through the vessel's past
receipts to determine when the vessel's true tonnage year began.
Requesting additional tonnage tax payments from underbilled vessels and
granting refunds to overbilled vessels are time-consuming for CBP. Such
billing errors also make the current system confusing to the public.
2. Purpose of Rule
The rule would align vessels' tonnage years with the fiscal year of
the Federal Government, starting on October 1 of each year and ending
on September 30 of the following year. The alignment would occur by
cutting all current tonnage years short, ending them on September 30
and beginning the new tonnage year on October 1 of whichever year CBP
begins the new process, assumed here to be FY 2026 (which begins on
October 1, 2025). Switching vessels to a universal tonnage year would
simplify the calculation of tonnage taxes and reduce billing errors.
With fewer billing errors made, CBP would spend less time making
requests for additional payments or handling requests for refunds and
the trade would have more clarity as to the amount of money owed. The
simplification would also allow CBP officers to calculate tonnage taxes
more quickly. Vessel agents have expressed enthusiasm for this new
tonnage year calculation method.\13\
---------------------------------------------------------------------------
\13\ Information provided by CBP Office of Field Operations
subject matter expert on October 26, 2023. See also footnote 7,
above.
---------------------------------------------------------------------------
3. Baseline and Regulatory Scenarios
This regulatory impact analysis compares a baseline scenario and
the
[[Page 44516]]
regulatory scenario to measure the net impact of the rule. In the
baseline, CBP would continue to calculate tonnage years the current
way, as explained in the Background section. Under the regulatory
scenario, CBP would align vessels' tonnage years with the fiscal year
at the start of the FY 2026, as explained in the Purpose of Rule
section. No technological or other regulatory changes in the future are
expected to affect the frequency or costliness of CBP's errors in
calculating tonnage tax payments in either scenario. In the Alternative
Transition Options section, we analyze another way to transition to the
new tonnage year calculation method.
4. Costs
The only costs from the rule would be the cost of redevelopment
within the MCR application to account for the new universal tonnage
year start date. A subject matter expert estimated on March 20, 2025,
that redevelopment would take 80 hours of labor. Based on the average
hourly pay of CBP employees of this type ($93.55/hour),\14\ the one-
time cost of redevelopment would be $7,484. The change in vessels'
tonnage years would not increase administrative costs or compliance
costs. The rule would increase the amount that trade members pay in
tonnage taxes on net, but this effect counts as a transfer rather than
as a cost because the change in tax expense represents a transfer of
value within society and not an aggregate societal cost or cost
savings. This effect is explained further in the Transfers section
below.
---------------------------------------------------------------------------
\14\ Source of average hourly pay among other CBP positions: CBP
bases this wage on the fully-loaded FY 2024 salary and benefits of
the national average of other CBP positions, which is equal to a GS-
9, Step 6. Source: Information provided by CBP's Office of Finance
on June 17, 2024.
---------------------------------------------------------------------------
We examined whether it is likely that vessels would alter their
activity in response to a change in tonnage year calculation method.
For example, under the rule, a vessel planning to make regular trips
(i.e., more than five) to the United States for the length of one year
could reduce its tonnage taxes by beginning those trips at the start of
the fiscal year of the Federal Government rather than part way through.
Beginning the calculations at the start of the fiscal year would make
the vessel's entries fall under one tonnage year rather than two,
reducing the number of entries subject to a tonnage tax. By contrast,
under the current method of calculating tonnage years, adjusting the
start date of those trips would not reduce tonnage taxes. At only 2
cents or 6 cents per net ton, however, a change in how tonnage taxes
are assessed would probably not cause any distortions in vessel
activity. The annual revenue collected from the tonnage tax is only 2%
as large as the revenue collected from the harbor maintenance fee for
vessels arriving from foreign ports, which is itself 0.125% of the
value of the cargo. Hence, tonnage taxes are on average about 0.0025%
as much as the cargo value, or 1 cent for every $400 of cargo. The
marginal tonnage tax rate may be somewhat higher than the average rate,
but not by a significant amount. Therefore, we assume that the savings
in tonnage taxes that a vessel operator could achieve by purposely
delaying entry to the start of the new fiscal year would be smaller
than the cost of the delay and that vessels' entrance timing would
therefore not be distorted by the rule.
5. Cost Savings of Rule
Aligning vessels' tonnage years with the fiscal year of the Federal
Government would simplify the calculation of tonnage taxes, resulting
in time savings for the Government. The complexity of the current
definition of tonnage year makes the process of assessing tonnage tax
longer and more error-prone than necessary. CBP officers sometimes
miscalculate vessels' tonnage year start dates by mistake and sometimes
due to a misunderstanding of the regulations. By restricting every
tonnage year to start on October 1, the rule would leave no room for
calculation errors or misconceptions regarding the tonnage year start
date.
Under the existing process, the nature of the tonnage tax means
that one error can beget multiple errors. If a CBP officer assigns a
vessel the wrong tonnage year start date, then future tonnage year
start dates will be wrong as well if the original error is not fixed.
If a vessel's supposed tonnage year start date is later than its true
tonnage year start date, the CBP officer may undercount the vessel's
past tonnage tax payments and mistakenly assess a tonnage tax from
which the vessel should be exempt. Alternatively, if the vessel's
supposed tonnage year start date is earlier than its true tonnage year
start date, the vessel may be underbilled. It takes time for CBP to fix
all of these errors when they are finally discovered. If a vessel is
found to have been overbilled, a vessel agent may submit to CBP a
request for refund, and these requests take time for CBP to process,
though we lack the data to estimate the time burden.
When a CBP officer discovers an error regarding a vessel's past
tonnage taxes, such as a wrong tonnage year start date, the officer
submits a service ticket to the Revenue Modernization Service Desk. CBP
then looks through the vessel's tonnage tax payment history in Mobile
Collections Receipts (MCR), where the information is recorded, and
makes edits to correct for any errors.\15\ Between November 14, 2024,
and March 13, 2025, the Revenue Modernization Service Desk resolved 40
incident tickets.\16\ Of these, 29 tickets required a correction to be
made to the vessel's tonnage year start date. At the rate of 29 such
tickets submitted over 120 days, we estimate that 88 tickets that at
least partly involve an incorrect tonnage year start date will be
submitted annually.
---------------------------------------------------------------------------
\15\ Information provided by CBP Office of Finance subject
matter expert on March 13, 2025.
\16\ Based on data provided by CBP Office of Finance on March
13, 2025.
---------------------------------------------------------------------------
CBP believes the rule would prevent all issues stemming from
miscalculated tonnage year start dates. Some of these tickets may be
submitted anyway due to unrelated issues, such as errors related to the
CBP User Fee, but a service ticket that only reports an issue with the
CBP User Fee can be resolved more quickly than a ticket reporting both
a CBP User Fee error and a tonnage tax error. We are unable to quantify
the time savings that would result from preventing these tonnage tax
errors, as we lack estimates for the average time it takes for a CBP
officer to submit a ticket or for CBP to resolve a ticket, nor do we
know how much this time burden would decline for service tickets that
would no longer have any tonnage tax errors but would still have been
submitted because of CBP User Fee errors.
Aligning vessels' tonnage years with the fiscal year would not only
cut down on errors but also help CBP officers to calculate tonnage
taxes more quickly. To calculate a vessel's tonnage tax obligation, a
CBP officer must look at the vessel's payment history and count the
tonnage tax payments made during the current tonnage year to check
whether the vessel has reached its five-payment maximum at the relevant
tonnage tax rate. Under the current definition of tonnage year, this
process requires CBP officers to keep track of the vessel's particular
tonnage year while counting the vessel's past payments. If every vessel
had the same tonnage year, however, CBP officers could count each
vessel's payments faster because they would not be slowed down by the
need to keep track of the vessel's unique tonnage year start date.
Instead, officers would always count the tonnage payments back to
October 1 of the
[[Page 44517]]
current fiscal year of the Federal Government, regardless of the
vessel.
CBP asked three subject matter experts in the field to quantify how
long it takes them to calculate a vessel's tonnage tax using the
current tonnage year definition and how long the calculation takes when
using the fiscal year as tonnage year.\17\ The three subject matter
experts gave estimates for the average time burden under the current
regulation of 25, 35, and 45 seconds. Those experts' estimates using
the fiscal year of the Federal Government as tonnage year were 15, 17,
and 20 seconds, respectively. The time savings from the new tonnage
year definition would thus average 17.7 seconds, a 50.5% reduction in
the average time burden.
---------------------------------------------------------------------------
\17\ The subject matter experts' responses were provided to us
by CBP's Office of Field Operations on March 11, 2025.
---------------------------------------------------------------------------
CBP officers calculate tonnage tax every time a vessel enters after
arriving from a foreign port. Therefore, we use the number of entries
from foreign ports to estimate the number of times CBP officers make
these calculations per year. Table 1 presents the number of entrances
made by vessels arriving from a foreign port from fiscal years 2012 to
2024. The number of entrances was not following any trend before the
COVID-19 pandemic. The number then fell in FY 2020 but has since
rebounded nearly to its FY 2019 level, as of FY 2024. Now that volumes
have returned to pre-COVID-19 levels, we do not expect there to be any
future trend in the number of entries by vessels arriving from foreign
ports, and so we use 59,307, the annual count in FY 2024, as our
estimate for all future years during the period of analysis.
Table 1--Annual Entrances by Vessels Arriving From a Foreign Port
------------------------------------------------------------------------
Fiscal year Entrances
------------------------------------------------------------------------
2012........................................................ 59,669
2013........................................................ 58,653
2014........................................................ 60,714
2015........................................................ 61,431
2016........................................................ 58,062
2017........................................................ 57,681
2018........................................................ 61,008
2019........................................................ 59,603
2020........................................................ 52,882
2021........................................................ 52,503
2022........................................................ 57,216
2023........................................................ 57,513
2024........................................................ 59,307
------------------------------------------------------------------------
Source: based on entrance data obtained through the Vessel Management
System in CBP's ACE database on January 14, 2025.
If the rule would save CBP officers 17.7 seconds per tonnage
calculation and this calculation is done for all 59,307 entrances of
vessels arriving from a foreign port per year, then the rule would save
a total of 291 hours per year in tonnage tax calculation. The average
hourly pay for CBP officers is $99.33 per hour,\18\ and so the value of
these time savings would be $28,908 per year. It is possible that the
savings could be even higher because the officers who provided the
savings estimates are experts and may calculate tonnage taxes faster
than most CBP personnel. If calculating tonnage taxes takes the average
CBP officer more time than these sources, it is possible that the time
savings from the new tonnage year definition are also larger for the
average officer. Furthermore, these time estimates for tonnage tax
calculations describe the time burdens for the simplest cases, but
sometimes tonnage tax calculation can take much longer. One of the
field sources later reported that a more complicated case took him 6
minutes to determine that a vessel owed no tonnage tax.\19\ If the
tonnage year change can significantly reduce the time burden of tonnage
tax calculation in these more complicated cases, then the true time
savings would be larger than our estimate.
---------------------------------------------------------------------------
\18\ Source of average hourly pay among CBP officers: CBP bases
this wage on the fully-loaded FY 2024 salary and benefits of the
national average of CBP Officer positions, which is equal to a GS-
11, Step 10. Source: Information provided by CBP's Office of Finance
on June 17, 2024.
\19\ Information provided by CBP Office of Field Operations on
March 11, 2025.
---------------------------------------------------------------------------
The new tonnage year definition would also improve the vessel
entrance process for trade members, who have expressed support for the
rule change. By simplifying the calculation of tonnage year start
dates, the rule would give vessel agents and vessel operators more
clarity on whether a given entry will require a tonnage tax payment.
Because CBP would also make fewer billing errors, trade members would
spend less time checking for errors in the tonnage tax assessment and
challenging CBP's calculations. Due to the difficulty of estimating
this time burden, we cannot quantify the cost savings to trade members.
In addition to changing vessels' tonnage years, the rule would also
modify the regulations regarding receipts for tonnage taxes and light
money. CBP officers typically use MCR to create electronic receipts for
tonnage tax payments as well as light money payments. These electronic
receipts are the combined equivalent of CBP Forms 368 and 1002. On the
rare occasion when CBP does not use the electronic MCR application, CBP
instead issues the paper CBP Forms 368 and 1002, in accordance with
current regulation. The rule would modify the regulations so that, on
occasions when MCR is not used, CBP would not necessarily have to issue
both CBP Forms 368 and 1002. Instead, a CBP officer could issue just
CBP Form 368. This change would save time, as the officer would not
need to issue CBP Form 1002 and the vessel agent would not need to hold
onto a copy of CBP Form 1002. We expect that this will save a positive
but negligible amount of time for CBP and would save a small amount of
storage costs for vessel agents. We request comment on the savings to
vessel agents of no longer needing to maintain copies of the CBP Form
1002 in their records.
Table 2--Projected Cost Savings, FY 2025-2035
------------------------------------------------------------------------
Value of time
Fiscal year Time savings savings (2024
(hours) USD)
------------------------------------------------------------------------
2025.................................... 0 $0
2026.................................... 291 28,908
2027.................................... 291 28,908
2028.................................... 291 28,908
2029.................................... 291 28,908
2030.................................... 291 28,908
2031.................................... 291 28,908
2032.................................... 291 28,908
2033.................................... 291 28,908
2034.................................... 291 28,908
2035.................................... 291 28,908
------------------------------------------------------------------------
Table 2 displays the quantified cost savings from the rule, which
are the annual time savings to CBP officers from calculating tonnage
years more quickly. The tonnage year start date change would not take
effect until the start of FY 2026, but we include FY 2025 for
consistency with other sections of this analysis. The present value of
these savings over FY 2026-2035 would be $246,592 under a 3% discount
rate or $203,039 under a 7% discount rate, discounted to base year FY
2025. In addition to these cost savings, there are others that are
harder to quantify. CBP would spend less time fixing errors in MCR that
stem from incorrect tonnage year start dates and less time processing
requests for refunds from vessels that were overbilled due to tonnage
tax miscalculation. Vessel agents would also face less uncertainty
regarding their tonnage tax obligations and therefore spend less time
checking for errors in their tonnage tax payments. Finally, CBP
officers could be trained more quickly, as CBP would not have to spend
as much time explaining how tonnage taxes work because the
[[Page 44518]]
definition of tonnage year would be less complicated.
6. Transfers
Aligning vessels' tonnage years with the fiscal year of the Federal
Government would increase Government revenue by raising the share of
entries that are subject to a tonnage tax. This effect counts as a
transfer rather than as a cost or cost savings because the change in
tax expense represents a transfer of value within society and not an
aggregate societal cost or benefit. Therefore, the size of the
transfer, reported below, would not affect the net impact of the rule
change. To estimate the effect of the rule on government revenue, we
applied the baseline and regulatory tonnage year calculation methods to
the same historical entrance data. After projecting future tonnage tax
revenue in each case, we then estimate that the rule would increase
government revenue by an annualized value of $310,917 under a discount
rate of 3% or $313,556 under a discount rate of 7%, annualized over ten
years starting at base year FY 2025.
We use historical vessel entrance data spanning FY 2017 to FY 2023
to compute which entries would be taxable under which tonnage year
calculation method. In the entrance data, some observations are listed
as having zero net tonnage, but CBP believes that most zero-tonnage
observations are inaccurate. Therefore, among vessels with zero net
tonnage listed on some entries and positive net tonnage listed on other
entries, we substituted each vessel's smallest positive value of net
tonnage for its zero net tonnage values. CBP's entrance data does not
contain the tonnage tax rate that an entry was or would be subject to,
but the data does contain the vessel's last port. We assume for these
calculations that a vessel's last port is where the cargo was laden and
assign the tonnage tax rate accordingly. All vessels arriving from
another U.S. port are therefore assumed to be exempt from the tonnage
tax. To the extent that the vessel's last port is different from where
the cargo was laden, the tonnage tax rate could differ. According to a
smaller CBP dataset containing more information about tonnage tax
payments, most vessels are taxed at the tonnage tax rate that would
apply if their cargo were laden at the most recent foreign port. Hence,
this assumption is unlikely to significantly affect the results of the
analysis.
Under the regulatory tonnage year calculation method, each vessel's
tonnage year start date is set to October 1 of each fiscal year. To get
the start dates of vessels' first tonnage year under the baseline, we
use each vessel's earliest filing date in the FY 2017-2023 entrance
data. After determining each vessel's first tonnage year start date, we
calculate the start of all later tonnage years according to the
baseline tonnage year calculation method. CBP does have records of
tonnage tax payments, which include additional information not found in
the basic entrance data such as the start date of each entry's tonnage
year under the baseline and the applicable tonnage tax rate. However,
if we were to compare the tonnage tax payments that would have occurred
if the rule had been in place to the actual baseline tonnage tax
records, the comparison between the baseline and regulatory scenarios
would be clouded by differences in calculation errors and information
constraints. Recalculating the baseline tonnage year start dates and
assigning the tax rates using only the basic entrance data allows us to
isolate the effect of the tonnage year calculation method when
comparing tonnage tax payments under the baseline and regulatory
scenarios.
After calculating the start dates of all vessels' tonnage years
under both the baseline and regulatory tonnage year calculations, we
calculate the annual mean net tonnage of taxed entries and the annual
number of taxed entries at each tax rate under each calculation method,
shown in Table 3 and Table 4. We use these historical series to form
projections from FY 2026 to 2035. To project the future mean net
tonnages of taxed entries for both rates, under both the baseline and
regulatory scenarios, we calculated the compound annual growth rate of
each series from FY 2017-2023 and use these as the estimates for future
growth rates.
The mean net tonnage of entries taxed at the 2-cent rate is
projected to grow at 3.75% per year under the baseline and 3.37% under
the regulatory scenario. For 6-cent entries, the growth will be slower,
at 1.46% and 1.34% under the baseline and regulatory scenarios,
respectively. Table 5 shows the projection of mean net tonnage for each
series from FY 2026-2035.
Table 3--Mean Net Tonnage of Taxed Entries
----------------------------------------------------------------------------------------------------------------
2-Cent rate 6-Cent rate
Fiscal year ---------------------------------------------------------------
Baseline Rule Baseline Rule
----------------------------------------------------------------------------------------------------------------
2017............................................ 13,273 13,233 21,869 22,034
2018............................................ 13,962 13,892 21,951 22,140
2019............................................ 14,614 14,452 22,186 22,306
2020............................................ 14,990 15,027 22,375 22,573
2021............................................ 14,597 14,550 23,451 23,597
2022............................................ 15,953 15,622 23,509 23,550
2023............................................ 16,700 16,510 23,977 24,006
----------------------------------------------------------------------------------------------------------------
Table 4--Number of Taxed Entries
----------------------------------------------------------------------------------------------------------------
2-Cent rate 6-Cent rate
Fiscal year ---------------------------------------------------------------
Baseline Rule Baseline Rule
----------------------------------------------------------------------------------------------------------------
2017............................................ 18,300 19,043 13,541 13,829
2018............................................ 19,097 19,898 13,606 13,950
2019............................................ 18,604 19,609 13,495 13,759
2020............................................ 15,953 17,192 12,961 13,323
2021............................................ 15,750 16,420 15,079 15,319
2022............................................ 16,421 17,147 15,745 16,001
2023............................................ 16,903 17,584 15,123 15,416
----------------------------------------------------------------------------------------------------------------
[[Page 44519]]
Table 5--Projected Mean Net Tonnage of Taxed Entries
----------------------------------------------------------------------------------------------------------------
2-Cent rate 6-Cent rate
Fiscal year ---------------------------------------------------------------
Baseline Rule Baseline Rule
----------------------------------------------------------------------------------------------------------------
2026............................................ 18,648 18,238 25,040 24,984
2027............................................ 19,347 18,853 25,405 25,318
2028............................................ 20,072 19,489 25,775 25,657
2029............................................ 20,824 20,147 26,151 26,001
2030............................................ 21,604 20,827 26,532 26,349
2031............................................ 22,413 21,530 26,918 26,702
2032............................................ 23,253 22,256 27,310 27,060
2033............................................ 24,124 23,007 27,708 27,422
2034............................................ 25,028 23,784 28,111 27,790
2035............................................ 25,966 24,586 28,521 28,162
----------------------------------------------------------------------------------------------------------------
Turning to the projected number of taxed entries, we found that the
FY 2017-2023 compound annual growth rates did not reflect the paths
that the series are currently on and are likely to follow. Under both
the baseline and regulatory scenario, the number of taxed entries at
the 2-cent rate fell in FY 2020 and then began rising back toward the
pre-2020 level. Because the compound annual growth rate (CAGR) from FY
2017-2023 is negative, and because using the positive FY 2021-2023 CAGR
would likely overstate the amount of future growth, we assume that the
future number of taxed entries will have not a constant growth rate but
a constant rate of convergence toward the FY 2017-2019 average. We use
the rate of convergence from FY 2021-2023 as our future estimate. As
for entries at the 6-cent rate, the number of taxed entries, under
either scenario, dipped somewhat in FY 2020 and then rose well above
the pre-2020 average. In FY 2023, the number of taxed entries at the 6-
cent rate began to fall. We assume for our projections that the number
of 6-cent taxed entries will continue to fall back down to the FY 2017-
2019 average at the same rate as from FY 2022-2023. Table 6 shows the
FY 2017-2019 averages and the rates of convergence \20\ used for the
future projections of each series, and Table 7 shows the implied
projected growth rates. Table 8 shows the FY 2026-2035 projected values
of each series.
---------------------------------------------------------------------------
\20\ If the rate of convergence is, for example, 0.778, then the
difference between each year's number of taxed entries and the pre-
2020 mean will be 0.778 times the previous year's difference.
Table 6--Rates of Convergence, Number of Taxed Entries
----------------------------------------------------------------------------------------------------------------
2-Cent rate 6-Cent rate
---------------------------------------------------------------
Baseline Rule Baseline Rule
----------------------------------------------------------------------------------------------------------------
FY2017-2020 Mean................................ 18,667 19,517 13,547 13,846
Rate of Convergence............................. 0.778 0.790 0.717 0.729
----------------------------------------------------------------------------------------------------------------
Table 7--Projected Growth Rates of Taxed Entries
----------------------------------------------------------------------------------------------------------------
2-Cent rate 6-Cent rate
Fiscal year ---------------------------------------------------------------
Baseline (%) Rule (%) Baseline (%) Rule (%)
----------------------------------------------------------------------------------------------------------------
2026............................................ 1.35 1.38 -1.60 -1.54
2027............................................ 1.03 1.08 -1.16 -1.14
2028............................................ 0.80 0.84 -0.84 -0.84
2029............................................ 0.61 0.66 -0.61 -0.62
2030............................................ 0.47 0.52 -0.44 -0.45
2031............................................ 0.37 0.41 -0.32 -0.33
2032............................................ 0.28 0.32 -0.23 -0.24
2033............................................ 0.22 0.25 -0.16 -0.18
2034............................................ 0.17 0.20 -0.12 -0.13
2035............................................ 0.13 0.16 -0.08 -0.09
----------------------------------------------------------------------------------------------------------------
Table 8--Projected Number of Taxed Entries
----------------------------------------------------------------------------------------------------------------
2-Cent rate 6-Cent rate
Fiscal year ---------------------------------------------------------------
Baseline Rule Baseline Rule
----------------------------------------------------------------------------------------------------------------
2026............................................ 17,837 18,564 14,128 14,453
2027............................................ 18,022 18,764 13,964 14,288
2028............................................ 18,165 18,922 13,846 14,168
2029............................................ 18,277 19,047 13,761 14,081
2030............................................ 18,364 19,145 13,701 14,017
[[Page 44520]]
2031............................................ 18,431 19,223 13,657 13,971
2032............................................ 18,484 19,285 13,626 13,937
2033............................................ 18,524 19,334 13,604 13,912
2034............................................ 18,556 19,372 13,588 13,894
2035............................................ 18,581 19,402 13,576 13,881
----------------------------------------------------------------------------------------------------------------
These projections of mean net tonnage and number of taxed entries
imply what nominal revenue will be over the same time period. Using
Survey of Consumer Expectations (SCE) inflation expectations \21\ from
January 2024, we convert projected nominal tonnage tax revenue to
projected tonnage tax revenue in 2024 U.S. dollars.\22\ Table 9 and
Table 10 display the projections for nominal revenue and real revenue,
respectively, from FY 2025 to 2036. Because the rule would not change
vessels' tonnage years until FY 2026, revenue would be the same in FY
2025 in both scenarios. We include the FY 2025 projections because our
period of analysis is FY 2025-2035, due to the costs that would be
incurred from the rule during FY 2025.
---------------------------------------------------------------------------
\21\ SCE, Inflation Expectations, <a href="https://www.newyorkfed.org/microeconomics/sce#/inflexp-1">https://www.newyorkfed.org/microeconomics/sce#/inflexp-1</a> (last visited Oct. 9, 2024). FRBNY
requires the following attribution and disclaimer to be included
with any publication or presentation of the SCE data: `Source:
Survey of Consumer Expectations, (copyright) 2013-2024 Federal
Reserve Bank of New York (FRBNY). The SCE data are available without
charge at <a href="http://www.newyorkfed.org/microeconomics/sce">http://www.newyorkfed.org/microeconomics/sce</a> and may be
used subject to license terms posted there. FRBNY disclaims any
responsibility or legal liability for this analysis and
interpretation of Survey of Consumer Expectations data.'
\22\ The SCE Inflation Expectations include the expected
inflation rate 1 year, 3 years, and 5 years out. FRBNY, SCE,
Inflation Expectations, <a href="https://www.newyorkfed.org/microeconomics/sce#/inflexp-1">https://www.newyorkfed.org/microeconomics/sce#/inflexp-1</a> (last visited Oct. 9, 2024). We use the 1-year-out
expected inflation rate for both the first and second years out from
FY 2024, the 3-year-out expected inflation rate for the third and
fourth years, and the 5-year-out expected inflation rate as the
inflation rate of all remaining years.
Table 9--Projected Nominal Revenue, FY 2025-2035
----------------------------------------------------------------------------------------------------------------
Fiscal year Baseline Rule Difference
----------------------------------------------------------------------------------------------------------------
2025............................................................ $27,588,401 $27,588,401 $0
2026............................................................ 27,879,164 28,436,812 557,648
2027............................................................ 28,258,408 28,780,570 522,162
2028............................................................ 28,705,021 29,186,803 481,782
2029............................................................ 29,203,992 29,641,665 437,673
2030............................................................ 29,744,711 30,135,195 390,483
2031............................................................ 30,319,739 30,660,273 340,534
2032............................................................ 30,923,921 31,211,857 287,936
2033............................................................ 31,553,746 31,786,417 232,671
2034............................................................ 32,206,885 32,381,530 174,646
2035............................................................ 32,881,860 32,995,578 113,718
----------------------------------------------------------------------------------------------------------------
Table 10--Projected Real Revenue (2024 USD), FY 2025-2035
----------------------------------------------------------------------------------------------------------------
Fiscal year Baseline Rule Difference
----------------------------------------------------------------------------------------------------------------
2025............................................................ $26,784,855 $26,784,855 $0
2026............................................................ 26,278,786 26,804,423 525,637
2027............................................................ 26,024,508 26,505,391 480,884
2028............................................................ 25,828,666 26,262,172 433,506
2029............................................................ 25,627,338 26,011,408 384,070
2030............................................................ 25,455,885 25,790,066 334,180
2031............................................................ 25,305,859 25,590,080 284,221
2032............................................................ 25,171,399 25,405,772 234,373
2033............................................................ 25,048,451 25,233,154 184,703
2034............................................................ 24,934,223 25,069,432 135,209
2035............................................................ 24,826,796 24,912,656 85,860
----------------------------------------------------------------------------------------------------------------
As shown in Table 11 and Table 12, the regulatory calculation
method would increase the present value of government revenue from the
tonnage tax by $2,731,750 or $2,356,446, discounted at a rate of 3% or
7% to the start of FY 2025. This result translates to an annualized
increase of $310,917 or $313,556 under a discount rate of 3% or 7%,
annualized over FY 2025-2034.
Table 11--Tonnage Tax Revenue (2024 USD), FY25-FY35, 3% Discount Rate
----------------------------------------------------------------------------------------------------------------
Baseline Rule Difference
----------------------------------------------------------------------------------------------------------------
Present Value................................................... $244,210,613 $246,942,363 $2,731,750
[[Page 44521]]
Annualized Value (FY 2025-2034)................................. 25,624,912 25,911,554 286,642
----------------------------------------------------------------------------------------------------------------
Table 12--Tonnage Tax Revenue (2024 USD), FY25-FY35, 7% Discount Rate
----------------------------------------------------------------------------------------------------------------
Baseline Rule Difference
----------------------------------------------------------------------------------------------------------------
Present Value................................................... $206,159,356 $208,515,802 $2,356,446
Annualized Value (FY 2025-2034)................................. 25,694,181 25,987,871 293,690
----------------------------------------------------------------------------------------------------------------
Government revenue would be higher under the regulatory scenario
because on average vessels' entries would be split between more tonnage
years. For example, a vessel making recurring entries in the United
States from April 2026 to March 2027 would experience one tonnage year
under the baseline and two tonnage years under the regulatory scenario.
The vessel would therefore have fewer entries per tonnage year in the
latter case, putting more of its entries under each tonnage year's cap
of five tonnage tax payments at a given rate. Because a baseline
tonnage year always begins with an entry, the time span of a baseline
tonnage year tends to cover more entries than a fiscal year.
In addition to making the above projections, we also calculated
statistics describing how tonnage tax payments would have differed in
2023 between the baseline and regulatory scenarios. Aligning vessels'
tonnage years with the fiscal year of CBP in 2023 would have led to an
increase in total tonnage tax revenue of $608,573 (in 2023 U.S.
dollars). The share of entries subject to a tonnage tax would have
increased from 55.7% to 57.4%, leading to 974 more tonnage tax
payments. Tonnage tax per vessel would have risen by $49, a 2%
increase, and the tax per entry by $11. Total tonnage taxes would have
stayed the same for 92% of vessels, while 6% of vessels would have paid
more under the regulatory scenario and 2% would have paid less. Among
the 6% of vessels that would have seen an increase in total payments,
the tax per vessel would have risen by $1,061, a 37% increase, and the
tax per entry by $128.
7. Net Impact
The net impact of the rule would be positive, as the time savings
to CBP officers would exceed the one-time development costs in MCR.
Table 13 displays the quantified cost savings and costs of the rule.
The net impact of aligning the tonnage year with the fiscal year of the
Federal Government would be negative in FY 2025 due to development
costs and then positive every year afterward. The present value of the
rule would be $239,109 under a 3% discount rate or $195,555 under a 7%
discount rate, discounted to FY 2025. Annualized over a ten-year period
starting in base year FY 2025, the positive net impact equals $27,214
per year or $26,021 per year under a discount rate of 3% or 7%. This
quantified net impact does not take into account other cost savings of
the rule that are more difficult to quantify, such as the savings
stemming from the elimination of tonnage year calculation errors or the
reduced uncertainty for trade members. The estimated net impact also
does not include the increase in tax revenue that would result from the
rule, as the tax revenue change represents neither a cost nor cost
savings, but a transfer.
Table 13--Net Impact, FY 2025-2035 (2024 USD)
----------------------------------------------------------------------------------------------------------------
Fiscal year Cost savings Cost Net impact
----------------------------------------------------------------------------------------------------------------
2025............................................................ $0 $7,484 -$7,484
2026............................................................ 28,908 0 28,908
2027............................................................ 28,908 0 28,908
2028............................................................ 28,908 0 28,908
2029............................................................ 28,908 0 28,908
2030............................................................ 28,908 0 28,908
2031............................................................ 28,908 0 28,908
2032............................................................ 28,908 0 28,908
2033............................................................ 28,908 0 28,908
2034............................................................ 28,908 0 28,908
2035............................................................ 28,908 0 28,908
----------------------------------------------------------------------------------------------------------------
8. Alternative Transition Options
In this section, we consider an alternative way to align vessels'
tonnage years with the fiscal year of the Federal Government. In the
analysis above, the alignment would occur by cutting all vessels'
baseline tonnage years short on September 30 of 2025 and beginning the
new universal tonnage year on the following day. CBP could instead do a
long transition. In this scenario, vessels' baseline tonnage years
beginning in FY 2025 would be extended to the end of FY 2026 rather
than cut short at the start of FY 2026. Vessels' tonnage years would
then be aligned with the fiscal year of the Federal Government in FY
2027. Hence, the cost savings and costs of the rule would be delayed by
one year, compared to the quick transition scenario. The development in
MCR would need to be done before FY 2027 instead of before FY 2026 as
in the quick transition scenario, and CBP officers would not experience
any time savings until FY 2027. This delay would lower the positive
present value of the net impact of the rule. Table 14 displays the
costs, cost savings, and net impact of the rule under the alternative
transition option from FY 2025 to FY 2035. Under a discount rate of 3%,
the present value of the net impact in this
[[Page 44522]]
scenario would be $211,261, which is $27,848 lower than in the quick
transition scenario. Under a discounted rate of 7%, the present value
of the net impact would be $169,028, which is $26,527 lower than in the
quick transition scenario.
Table 14--Net Impact (Long Transition), FY 2025-2035 (2024 USD)
----------------------------------------------------------------------------------------------------------------
Fiscal year Cost savings Cost Net impact
----------------------------------------------------------------------------------------------------------------
2025............................................................ $0 $0 $0
2026............................................................ 0 7,484 -7,484
2027............................................................ 28,908 0 28,908
2028............................................................ 28,908 0 28,908
2029............................................................ 28,908 0 28,908
2030............................................................ 28,908 0 28,908
2031............................................................ 28,908 0 28,908
2032............................................................ 28,908 0 28,908
2033............................................................ 28,908 0 28,908
2034............................................................ 28,908 0 28,908
2035............................................................ 28,908 0 28,908
----------------------------------------------------------------------------------------------------------------
As for transfers, the long transition would clearly lead to lower
government revenue than in the case of the quick transition, as the
long transition year would lead to more of vessels' entries being made
past the five-payment cap at a given rate. To project what real
government revenue would be in the long transition scenario from FY
2025 to FY 2035, we start by calculating the number and mean net
tonnage of taxed entries at each rate in FY 2023 if vessels' baseline
tonnage years beginning in FY 2022 had been extended to the end of FY
2023, using the same data and methods described in the Transfers
section above. Table 15 shows how these values would have deviated from
the baseline results in FY 2023.
Table 15--Taxed Entries, Long Transition Year (FY 2023)
------------------------------------------------------------------------
Deviation from FY23 baseline
-----------------------------------
2-Cent entries 6-Cent entries
(%) (%)
------------------------------------------------------------------------
Mean Net Tonnage.................... -6.08 -1.63
Number of Taxed Entries............. -29.05 -12.74
------------------------------------------------------------------------
We then project what the number and mean net tonnage of taxed
entries at each rate would be in FY 2026 if the tonnage years beginning
in FY 2025 were extended to the end of FY 2026 by applying the percent
deviations in Table 15 to our projection of the baseline values in FY
2026. Our projection of the number and mean net tonnage of taxed
entries at each rate from FY 2026 to FY 2035 under the long transition
alternative is thus composed of our FY 2026 projection of the long
transition year values and our FY 2027-2035 projections under the
alternative tonnage year calculation method, described in the Transfers
section above.
Calculating the annual nominal revenue implied by the projections
and converting to real 2024 U.S. dollars, again using the SCE expected
inflation rates, we arrive at our FY 2025-2035 projection of real
government tonnage tax revenue under the long transition scenario. Once
again, our projected revenue for FY 2025 in the long transition
scenario would be the same as in the baseline, as the rule would have
no effect on vessels' tonnage years until FY 2026. Table 16 and Table
17 compare how the present values and annualized values of government
revenue would change after switching from the baseline to the
alternative tonnage year calculation method using each transition
option under discount rates of 3% and 7%. While a quick transition to
the regulatory scenario would raise the present value of government
revenue by $2,731,750 (under a discount rate of 3%), a delayed
transition would instead lower it by $2,560,531. Under a discount rate
of 7%, a quick transition would raise the present value of government
revenue by $2,356,447, while a delayed transition would lower it by
$2,737,992. The annualized value of tonnage tax revenue over FY 2025-
2034 would be $602,346 lower under a delayed transition than under a
quick transition to the new tonnage year calculation method under a
discount rate of 3%, or $677,882 lower under a discount rate of 7%.
This difference in tonnage tax revenue does not factor into the net
impact of the transition method. As the loss or gain to some trade
members would be exactly offset by the gain or loss to the U.S.
Government, the change in tax revenue represents a transfer within
society rather than an aggregate cost or cost savings to society.
Table 16--Tonnage Tax Revenue (2024 USD), Transition Options, FY25-FY35,
3% Discount Rate
------------------------------------------------------------------------
Change from baseline to alternative
---------------------------------------
Quick transition Long transition
------------------------------------------------------------------------
Marginal Present Value.......... $2,731,750 -$2,560,531
Marginal Annualized Value (FY 310,917 -291,429
2025-2034).....................
------------------------------------------------------------------------
[[Page 44523]]
Table 17--Tonnage Tax Revenue (2024 USD), Transition Options, FY25-FY35,
7% Discount Rate
------------------------------------------------------------------------
Change from baseline to alternative
---------------------------------------
Quick transition Long transition
------------------------------------------------------------------------
Marginal Present Value.......... $2,356,447 -$2,737,992
Marginal Annualized Value....... 313,556 -364,326
(FY 2025-2034)..................
------------------------------------------------------------------------
C. Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act (RFA) (5 U.S.C. 603(b)), as amended
by the Small Business Regulatory Enforcement and Fairness Act of 1996
(SBREFA), requires an agency to prepare and make available to the
public a regulatory flexibility analysis that describes the effect of a
proposed rule on small entities (i.e., small businesses, small
organizations, and small governmental jurisdictions) when the agency is
required ``to publish a general notice of proposed rulemaking for any
proposed rule.'' Because this rule is being issued as an interim rule,
on the grounds set forth above, a regulatory flexibility analysis is
not required under the RFA.
D. Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995, enacted as
Public Law 104-4 on March 22, 1995, requires each Federal agency, to
the extent permitted by law, to prepare a written assessment of the
effects of any Federal mandate in a proposed or final agency rule that
may result in the expenditure by state, local, and tribal governments,
in the aggregate, or by the private sector, of $100 million or more
(adjusted annually for inflation) in any one year. See 2 U.S.C.
1532(a). This rule will not result in the expenditure by state, local,
and tribal governments, in the aggregate, or by the private sector, of
$100 million or more in any one year. Therefore, no actions were deemed
necessary under the provisions of the Unfunded Mandates Reform Act of
1995.
E. Paperwork Reduction Act
The Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3507(d))
requires that CBP consider the impact of paperwork and other
information collection burdens imposed on the public. An agency may not
conduct, and a person is not required to respond to, a collection of
information unless the collection of information displays a valid
control number assigned by the Office of Management and Budget. The
recordkeeping requirements for CBP Forms 1002 and 368 are covered by
OMB control number 1651-0076. As a result of this rule, the
recordkeeping requirement for CBP Form 1002 is removed as the form will
no longer be required. As this form makes up such a small portion of
the overall recordkeeping requirement, CBP does not estimate any change
in the overall burden associated with this collection.
F. Privacy
CBP will ensure that all Privacy Act requirements and policies are
adhered to in the implementation of this rule and will issue or update
any necessary Privacy Impact Assessment and/or Privacy Act System of
Records notice to fully outline processes that will ensure compliance
with Privacy Act protections.
V. Signing Authority
In accordance with Treasury Order 100-20, the Secretary of the
Treasury delegated to the Secretary of Homeland Security the authority
related to the customs revenue functions vested in the Secretary of the
Treasury as set forth in 6 U.S.C. 212 and 215, subject to certain
exceptions. This regulation is being issued in accordance with DHS
Directive 07010.3, Revision 3.2, which delegates to the Commissioner of
CBP the authority to prescribe and approve/sign regulations related to
customs revenue functions.
Rodney S. Scott, Commissioner, having reviewed and approved this
document, has delegated the authority to electronically sign this
document to the Director (or Acting Director, if applicable) of the
Regulations and Disclosure Law Division for CBP, for purposes of
publication in the Federal Register.
List of Subjects in 19 CFR Part 4
Exports, Freight, Harbors, Maritime carriers, Oil pollution,
Reporting and recordkeeping requirements, Vessels.
For the reasons stated in the preamble, CBP amends 19 CFR part 4 as
follows:
PART 4--VESSELS IN FOREIGN AND DOMESTIC TRADES
0
1. The general authority citation for part 4 and the specific authority
citation for Sec. 4.20 continue to read as follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1415, 1431, 1433, 1434,
1624, 2071 note; 46 U.S.C. 501, 60105.
* * * * *
Section 4.20 also issued under 46 U.S.C. 2107(b), 8103, 14306,
14502, 14511-14513, 14701, 14702, 60301-60306, 60312;
* * * * *
0
2. Amend Sec. 4.20 by revising paragraphs (a)(1) through (4), (b), and
(f)(2) to read as follows:
Sec. 4.20 Tonnage Taxes.
(a) * * *
(1) Arriving in ballast. Vessels arriving to the United States in
ballast from either a 2-cent port, 6-cent port, or both, will be
subject to the tonnage rate applicable to the last port of call.
(2) Arriving with cargo, passengers, or both from a port, or ports,
of the same rate--(i) Vessels arriving to the United States with cargo,
passengers, or any combination thereof taken onboard only at a 2-cent
port or ports will be subject to the 2-cent rate.
(ii) Vessels arriving to the United States with cargo, passengers,
or any combination thereof taken onboard only at a 6-cent port or ports
will be subject to the 6-cent rate.
(3) Arriving from ports subject to various rates--(i) If any of the
cargo or passengers on board the vessel were taken on board at a 6-cent
port, then the vessel will be subject to the 6-cent rate, except for in
the situation specified in paragraph (a)(3)(iii) of this section.
(ii) Vessels which transport cargo, passengers, or any combination
thereof taken on board at a 6-cent port or ports and which discharge
all cargo and passengers in a 2-cent port or ports prior to arriving in
the United States will be subject to the 2-cent rate, regardless of
whether the vessel is in ballast or took on cargo or passengers at the
2-cent port, as long as there is no cargo or passengers still onboard
from a 6-cent port.
(iii) Vessels which arrive to the United States with cargo,
passengers, or any combination thereof from a 6-cent port will be
subject to the 6-cent rate. If the vessel then proceeds to a foreign 2-
cent port to discharge or take on cargo, passengers, or any combination
thereof
[[Page 44524]]
and returns to the United States, the vessel will be subject to the 2-
cent rate.
(4) Yearly maximum met. A vessel subject to the 6-cent rate will
not be assessed at the 2-cent rate, even if the yearly maximum
(specified in paragraph (b) of this section) has been met at the 6-cent
rate. A vessel subject to the 2-cent rate will not be assessed at the
6-cent rate, even if the yearly maximum (specified in paragraph (b) of
this section) has been met at the 2-cent rate.
(b) The tonnage year is equal to the fiscal year beginning on
October 1 of each year and ending on September 30 of the following
year, without regard to the rate of the payment made at each entry.
Each vessel may be charged no more than five payments at the 6-cent
rate and no more than five payments at the 2-cent rate within a tonnage
year.
* * * * *
(f) * * *
(2) An appendix is attached to the marine document showing a net
tonnage ascertained under the so-called ``British rules'' or the rules
of any foreign country which have been accepted as substantially in
accord with the rules of the United States, in which case the tonnage
so shown may be accepted and the date the appendix was issued shall be
noted on the Vessel Entrance or Clearance Statement, CBP Form 1300. For
the purpose of computing tonnage tax on a vessel with a tonnage mark
and dual tonnages, the higher of the net tonnages stated in the
vessel's marine document or tonnage certificate shall be used unless
the CBP officer concerned is satisfied by report of the boarding
officer, statement or certificate of the master, or otherwise that the
tonnage mark was not submerged at the time of arrival. Whether the
vessel has a tonnage mark, and if so, whether the mark was submerged on
arrival, shall be noted on CBP Form 1300 by the boarding officer.
* * * * *
0
3. Revise Sec. 4.23 to read as follows:
Sec. 4.23 Receipt of Payment.
Upon payment of regular tonnage tax, special tonnage tax, or light
money, the master of the vessel shall be issued a receipt. This receipt
shall constitute the official evidence of such payment and shall be
presented upon each entry during the tonnage year to ensure against
overpayment. In the absence of a receipt, evidence of payment may be
obtained from the port director to whom the payment was made.
Robert F. Altneu
Director, Regulations and Disclosure Law Division, Regulations and
Rulings, Office of Trade, U.S. Customs and Border Protection.
[FR Doc. 2025-17826 Filed 9-15-25; 8:45 am]
BILLING CODE 9111-14-P
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</html>Indexed from Federal Register on September 16, 2025.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.