Deep-Draft Ocean-going Vessels

(Explanation below is from Treasury Regulations §48.4042-3)

In general: Under section 4042(c)(1), there is no tax imposed by section 4042(a) if: the vessel was designed primarily for use on the high seas; and

(ii) the vessel has a draft of more than 12 feet on the voyage for which the fuel tax exclusion is sought (e.g. 12 feet 1 inch).

Meaning of “designed primarily for use on the high seas.”. – Section 4042(c)(1) requires a determination of the primacy of the design features rendering the vessel useful for service on the high seas, as opposed to the features which render the vessel useful for service on all less turbulent waters. Thus, whether a ship is “designed primarily for use on the high seas” must be determined from all the facts, including structural features and equipment. If the predominant use of a vessel is on the high seas, it shall be presumed to be “designed primarily for use on the high seas.” If the predominant use of a vessel is on waters other than the high seas, it shall be presumed not to be “designed primarily for use on the high seas.”

Meaning of “high seas.”. – For purposes of this section, “high seas” shall mean waters other than the territorial waters of the United States or any other country. Thus, the high seas shall not include the internal waters of any country, the Great Lakes, harbors, or narrow coastal indentations.

Twelve foot draft

Definition. For purposes of section 4042(c)(1), “draft” shall mean the maximum vertical distance between the mean water line and the bottom of the keel. In cases where a vessel has a skeg or other appendage extending locally below the line of the keel, the draft shall be measured from the deepest appendage. A separate determination of draft must be made for each voyage when the vessel has its greatest load of cargo and fuel. For purposes of this determination, the term “voyage” means a round trip voyage. Therefore, if a vessel travels into the specified waterway system to pick up cargo and has a draft sufficient to qualify for the exclusion when loaded, then for purposes of section 4042(c)(1) the vessel satisfies the 12 foot draft requirement for the entire voyage. Similarly, if a vessel loaded with cargo travels into the specified waterway system with a draft sufficient to qualify for the exclusion provided by section 4042(c)(1), then the fuel consumed on the entire voyage may be excluded, regardless of the vessel's draft after the cargo is unloaded.