Opinion ID: 1909529
Heading Depth: 2
Heading Rank: 2

Heading: Dredging and Interstate Commerce

Text: To determine whether dredging falls within the meaning of engaged in interstate commerce as intended by § 40-23-4(a)(10), Ala.Code 1975, we must read the statute as a whole, because the meaning of the phrase engaged in interstate commerce depends upon the context in which it appears. Ex parte Jackson, 614 So.2d at 406-07. When determining whether a party is engaged in interstate commerce within the context of § 40-23-4(a)(10), we must construe the exemption against the taxpayer and give favorable consideration to the construction of the statute by the highest tax-administration official. Ex parte City of Tuscaloosa, 757 So.2d at 1188; Standard Dredging Corp., 271 Ala. at 28, 122 So.2d at 285. Nevertheless, we must not so strictly construe the statute as to defeat the statutory purpose. Union Tank Car Co., 281 Ala. at 248-49, 201 So.2d at 404. To determine whether an activity constitutes interstate commerce this Court must consider the course of business and determine its relation to interstate commerce. Miller Transporters, Inc., 454 So.2d at 1375. Therefore, in this case we must look at the activity of the dredges. In Standard Dredging Corp., this Court assume[d], without deciding, that Standard's maintenance dredging of Mobile Bay constituted interstate commerce within the meaning of the Commerce Clause. 271 Ala. at 29, 122 So.2d at 285. Therefore, this Court did not address whether dredging constituted interstate commerce. Waterways are navigable when they are used or are susceptible of being used as highways for commerce, over which trade and travel may be conducted; they are navigable waters of the states when they form by themselves or by connecting with other waters a continued highway over which commerce may be carried on with other states or with foreign countries. The Daniel Ball, 77 U.S. (10 Wall.) 557, 563, 19 L.Ed. 999 (1870). Neither party contends that Mobile Bay and the Mobile River are not navigable waterways and thus not highways for commerce. The United States Supreme Court has held that employees working on toll bridges over navigable waterways are engaged in interstate commerce for purposes of the application of the Fair Labor Standards Act (the FLSA). Overstreet v. North Shore Corp., 318 U.S. 125, 63 S.Ct. 494, 87 L.Ed. 656 (1943). The Court determined that toll bridges and roads over waterways that connect to other states are instrumentalities of interstate commerce and that maintaining, repairing, and operating those bridges and roads constituted being engaged in interstate commerce. Id. at 130, 63 S.Ct. 494. The Court reasoned that if the toll bridge and roads were not properly operated and maintained they would present an obstacle to interstate commerce. Id. Thus, the Court held that the employees engaged in operating and maintaining the toll bridge so that there could be interstate passage of persons and goods over them were so closely related to that interstate movement as a practical matter that those employees must be regarded as engaged in interstate commerce. Id. at 132, 63 S.Ct. 494. See, e.g., Mitchell v. Empire Gas Eng'g Co., 256 F.2d 781, 784 (5th Cir.1958)(summarizing cases holding that the deepening of navigable waters, the construction of retaining walls to provide harbor facilities for Naval vessels, the construction and repair of dikes and revetments on the Mississippi River, and the construction of new and relocated locks on the Gulf Intracoastal Waterway have all been held to be commerce within the meaning of the FLSA); VanKlaveren v. Killian-House Co., 210 F.2d 510, 513 (5th Cir.1954)(persons engaged in the maintenance and repair of interstate instrumentalities are within the coverage of the FLSA). Applying the reasoning of the United States Supreme Court, we hold that dredging a navigable waterway is substantially related to interstate commerce. Indeed, without dredging, the waterways would surely become impassable, and interstate commerce would be obstructed. Mobile Bay and the Mobile River are both navigable waterways and instrumentalities of interstate commerce. Failure to maintain these waterways would prevent shipping from the Gulf of Mexico to the northern portions of the State and beyond that to other states. Bean's dredges removed silt from Mobile Bay and the Mobile River to allow the passage of shipping vessels, which include vessels from both other states and from foreign countries. This dredging is necessary to keep the navigable waters open and to allow the flow of interstate commerce. Therefore, like operating a toll bridge that permits and furthers interstate commerce, dredging constitutes being engaged in interstate commerce. In addition to Overstreet, our holding today is also supported by the United States Court of Appeals for the Seventh Circuit and by the District Court of Puerto Rico. Walling v. Great Lakes Dredge & Dock Co., 149 F.2d 9 (7th Cir.1945); Cuascut v. Standard Dredging Corp., 94 F.Supp. 197 (D.P.R.1950). In Cuascut the sole issue was the extent to which, for the purposes of the FLSA, the plaintiffs were engaged in commerce while performing dredging operations. Cuascut, 94 F.Supp. at 200. The court first addressed the dredging operations being performed and found that San Juan Bay had been used for many years as a highway of interstate commerce. Id. The court further found that those dredging operations that constituted either repair, maintenance, or improvement of the bay as a highway of interstate commerce were engaging in commerce and brought the plaintiffs within the coverage of the FLSA. Id. Analogously, the parties in this case do not dispute that Mobile Bay and the Mobile River are highways of interstate commerce. Nor do the parties dispute that Bean was removing silt from the bay and the river in order to allow passage of vessels. Thus, Bean was maintaining and improving Mobile Bay and the Mobile River as highways of interstate commerce, which constitutes being engaged in interstate commerce. Additionally, in Walling, the parties stipulated that the employees on the dredges in the Great Lakes were engaged in interstate commerce and that dredging constituted interstate commerce. Walling, 149 F.2d at 10. Therefore, it was apparent to the parties in Walling that dredging constituted interstate commerce. Similarly, we also find that dredging highways of interstate commerce, such as Mobile Bay and the Mobile River, constitutes being engaged in interstate commerce. The administrative law judge narrowly interpreted the statute to exclude dredges because, the judge reasoned, dredges do not involve foreign, international, or interstate commerce within the meaning of the statute. The administrative law judge reasoned that because § 40-23-4(a)(10), Ala. Code 1975, is an exemption statute, a broad construction of the Commerce Clause cannot be applied in construing that statute. He further reasoned that the phrase engaged in interstate commerce must be strictly construed to include only vessels actually engaged in commerce while traveling from an Alabama port to ports in other states or countries. Furthermore, the administrative law judge reasoned that Overstreet and Cuascut, which both involved the FLSA, did not apply to this case because the FLSA is to be liberally construed in favor of ensuring coverage under the FLSA for employees. We disagree with the administrative law judge's opinion. Even subjecting the statute to the strict construction to which it is entitled as an exemption statute, when read in its entirety the statute includes vessels that do not travel from port to port. Section 40-23-4(a)(10), Ala.Code 1975, exempts: ships, vessels, towing vessels, or barges, or drilling ships, rigs or barges, or seismic or geophysical vessels, or other watercraft. (Emphasis added.) If the Legislature intended port-to-port activity to be the sole requirement for exemption it would not have included vessels such as seismic and geophysical vessels or drilling ships or barges, which do not necessarily travel port to port. Nor would the Legislature have made port-to-port activity an indication of a presumption of, rather than a requirement for, engaging in interstate commerce. Furthermore, other sections of the statute make specific exclusions or requirements when a certain activity or subject is not to be exempted. [3] Therefore, when the statute is read in its entirety, it does not require that vessels be engaged in port-to-port activity in order to be engaged in interstate commerce. Furthermore, we recognize that the FLSA is liberally interpreted to protect employees and that tax-exemption statutes, on the other hand, are to be narrowly construed. However, the statute is not to be so narrowly construed as to defeat its purpose, which is to allow certain tax exemptions for interstate activities. We find it difficult to reconcile the fact that workers on a dredge, engaged in dredging a navigable waterway, are engaged in interstate commerce for the purposes of the FLSA, while the ship performing the dredging is not. Therefore, it follows that if employees of a dredge are engaged in interstate commerce, the dredge must also be so engaged. Moreover, we also recognize that the meaning of interstate commerce for similar transactions should not differ drastically from jurisdiction to jurisdiction. We acknowledge the analogous commercial and industrial tax-exemption statute enacted by the Virginia legislature. Va.Code Ann. § 58.1-609.3.4 (Michie 2002). However, unlike § 40-23-4(a)(10), Ala.Code 1975, Virginia's statute specifically mentions dredges. It reads: This exemption shall include dredges, their supporting equipment, attendant vessels, and fuel and supplies for use or consumption aboard such vessels, provided the dredges are used exclusively or principally in interstate or foreign commerce. Va.Code Ann. § 58.1-609.3.4. While our Legislature did not specifically note that dredges were exempt from sales taxes for their fuel and supplies as previously discussed, dredges are an integral part of continuing interstate commerce upon Mobile Bay and the Mobile River. Therefore, the requirements of § 40-23-4(a)(10), Ala.Code 1975, are satisfied and Bean's dredges should be exempt from fuel-and-supplies sales tax as provided by § 40-23-4(a)(10).