Jump to Navigation

Summer 2003-08 FAAAA preempts Puerto Ricos

newsletter header


Number 52
Summer 2003
Follow up

FAAAA preempts Puerto Rico's
air carriers licensing fee

In the latest development of United Parcel Service, Inc.'s suit against the Puerto Rico Treasury Department, the U.S. District Court for the District of Puerto Rico, on remand from the Court of Appeals, decided that Puerto Rico may not impose a licensing fee on air carriers. United Parcel Service, Inc. v. Flores Galarza, 2003 U.S. Dist. LEXIS 9327.

Background

In 2002 the District Court annulled the Puerto Rico law that prohibits private air carriers to deliver packages until the excise tax is paid. The Court of Appeals affirmed the decision in United Parcel Service, Inc. v. Flores Galarza, 318 F.3d 323 (1st Cir. 2003), but remanded the case, instructing the District Court to determine, among other things, whether the Federal Aviation Administration Authorization Act of 1994 preempts Puerto Rico's imposition of an annual $2,000 licensing fee to air carriers-13 L.P.R.A. § 9059.

Regulating services

UPS's argument before the District Court was that by exercising the power to force air carriers to obtain a license as a condition to operate in Puerto Rico, the Treasury Department was actually regulating carriers' services, something it cannot do under the FAAAA. Treasury, on the other hand, contended that the fee was not related to prices, routes or services, and as such should not be considered to be affecting services.

"The power to grant a license includes the power to withhold or to revoke a license, and thereby, to prohibit a carrier from conducting business in Puerto Rico," the court reasoned. As a matter of fact, during the course of the lawsuit Treasury had threatened to revoke UPS's license if it did not deliver documents concerning its shipments. "Puerto Rico cannot preclude a federally certified air carrier, such as UPS, from providing its services."

4 Note:

The District Court also ruled that:

the injunction that had been issued properly included a $14.24 million fine that Treasury had imposed, and

  • the FAAAA's savings clause preserving state authority over motor vehicle safety is inapplicable and does not exempt Puerto Rico law from preemption. n

© 2003 Goldman Antonetti
Members Of: Interlaw International Lawyers Network
Employment Law Alliance Helping Employers Worldwide

Goldman Antonetti & Córdova is a member of the Employment Law Alliance, the leading international network of over 3,000 attorneys providing employment and labor expertise in more than 90 countries and all 50 U.S. states.