Polar Tankers, Inc. v. City of Valdez, Alaska

2009-06-15

Headline: Valdez’s special tax targeting large oil tankers is struck down as an unconstitutional tonnage duty, blocking the city from imposing a vessel-value tax that effectively charges ships for using its port.

Holding: The Court held that Valdez’s ordinance taxing large visiting vessels violates the Constitution’s ban on tonnage duties, so the city may not impose that vessel tax without Congress’s consent.

Real World Impact:

Stops Valdez from collecting the vessel-value tax on visiting oil tankers.
Protects tanker operators from city-imposed port charges without Congressional consent.
Leaves open whether a neutral, evenhanded vessel property tax might be allowed.

Topics: port taxes, maritime commerce, oil tanker regulation, state taxation

Summary

Background

The city of Valdez, Alaska adopted an ordinance taxing personal property in large boats and vessels (95 feet or longer) that regularly come to the port, are kept or used there, or take on at least $1 million in cargo; exceptions made the tax fall mostly on large oil tankers. Polar Tankers, a company that ships crude oil from Valdez to refineries in other States, sued, arguing the tax was really a forbidden charge on ships for using the port. State courts split: the Alaska Supreme Court upheld the tax, and Polar Tankers appealed to the United States Supreme Court.

Reasoning

The key question was whether the ordinance amounted to a “duty of tonnage,” meaning a charge on ships for the privilege of entering, trading in, or lying in a port. The Court held that it did. The tax applies almost only to oil tankers, is closely tied to ship size and cargo capacity, and can be triggered by a single entry and loading of expensive cargo. The Court found that Valdez did not tax ships in the same way it taxed other personal property, so the ordinance functioned as a tonnage duty and violated the Constitution.

Real world impact

The ruling forbids Valdez from enforcing that vessel tax and protects visiting tankers from city-imposed port charges of this type unless Congress consents. Because the Court decided the constitutional tonnage issue, it did not address the company’s separate Commerce Clause and Due Process claims. The case is reversed and sent back to the Alaska courts for further proceedings.

Dissents or concurrances

Justices disagreed about scope: some concurring opinions stressed that any tax that operates as a tonnage duty is forbidden, while the dissent argued the charge was a legitimate value-based property tax and should be upheld.