HQ 225445: Internal advice request concerning liability of bondprincipal to ensure exportation of merchandise purchased in duty-free shop; 19 CFR 113.63(g)(5); 19 CFR 113.62(a) and (b).

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 225445

                         January 17, 1995


BON-2 CO:R:C:E 225445  TLS

CATEGORY: Entry

District Director
U.S. Customs Service
111 West Huron Street  Rm. 603
Buffalo, New York  14202-2378


RE: Internal advice request concerning liability of bond
principal to ensure exportation of merchandise purchased in duty-
free shop; 19 CFR 113.63(g)(5); 19 CFR 113.62(a) and (b).


Dear Sir:

     This office has received the above-referenced request for
internal advice as provided for under Customs regulations.  We
have considered the request and have made the following decision.

FACTS:

     You state that a duty-free store operator wishes to locate a
store at an access road entrance leading to a bridge crossing
into Canada.  The only point at which a vehicle could exit from
the access road is immediately before entering the bridge toll
booth.  The store operator proposes to take steps to ensure that
merchandise purchased in its store will be exported across the
bridge.  You would like to add the following language to the bond
terms:

     The principal is responsible for monitoring the
     exportation of all bonded merchandise sold from their
     store.  The principal is required to immediately report
     all instances of nonexportation of bonded merchandise
     to U.S. Customs.  The principal is obligated to pay all
     taxes and duties due for goods not exported as
     required.  The principal is liable for penalties and/or
     liquidated damages assessed by U.S. Customs for failure
     to assure exportation of bonded merchandise.

Pursuant to 19 CFR 113.14, you seek advice on whether the
proposed language may be added to the bond terms.

ISSUE:

     Whether Customs may amend the bond terms in this case to
hold the duty-free store owner liable if there are no reasonable
assurances made for exportation of the duty-free merchandise or
the merchandise is in fact not exported at all.

LAW AND ANALYSIS:

     Under 19 U.S.C. 1555(b)(3)(A), a duty-free enterprise must
make reasonable assurances that the duty-free merchandise it
sells will be exported.  Generally, such merchandise must be
delivered "only beyond the exit point."  This includes land
border situations.  See 19 CFR 19.39(a).  The "exit point" is
defined as an area in close proximity to an actual exit for
departing the Customs territory.  19 CFR 19.35(d).  There must be
no practical alternative to continuing on to a foreign country or
returning to the Customs territory via a U.S. Customs inspection
facility.  Id.  The district director has the final authority "as
to what constitutes the exit point or reasonable assurance of
exportation in a given situation..."  Id.
  
     Section 113.63, Customs Regulations (19 CFR 113.63), covers
basic custodial bond conditions.  Under 19 CFR 113.63(c)(5),
Class 9 bonded warehouse operators are to provide reasonable
assurances of exportation of merchandise withdrawn under the
sales ticket procedure of [19 CFR 144.37(h)].  A duty-free store
by definition is a Class 9 bonded warehouse.  See 19 CFR
19.1(a)(9).  Under 19 CFR 144.37(h), the sales ticket from the
purchase of merchandise in a duty-free store may serve as a
blanket permit for withdrawal.  Under 19 CFR 113.63(g)(5), the
principal of a custodial bond must agree to "pay any charges
arising out of the principal's custodial operation."  The
language "any charges" would include the charges arising from the
principal's failure to reasonably assure exportation of
merchandise bought in its store.

     Under 19 CFR 113.14, a district director may draft
conditions covering a transaction under bond if the director
believes there are no existing regulations applicable to that
transaction.  Your inquiry notes that you believe the more
specific language you suggest regarding the bond principal's
liability should be applied in this case.  The language you have
suggested would hold the principal liable for penalties and
damages Customs would assess for failure to assure exportation of
the duty-free store merchandise.  Under 19 CFR 113.62(a) and (b),
a bond principal (and the surety) agree to pay duties, taxes, and
charges arising from instances where the bonded merchandise was
released into the commerce of the United States.  To the extent
that the proposed language is consistent with the above-cited
provisions, we do not believe the proposed language is necessary. 
This is especially true when considering the purpose of 19 CFR
113.14.  The regulation provides for the drafting of additional
bond conditions if current regulations are found to be
inadequate.  We find the above-cited regulations are directly
applicable to and adequately address the proposed transaction. 

HOLDING:

     Customs regulations (19 CFR 113.62 and 19 CFR 113.63 in
particular) are applicable to situation above, where the owner of
a duty-free warehouse has proposed to locate the duty-free store
directly across the street from a bridge access road leading out
of the Customs territory.  To the extent that the language you
propose to add to the bond terms is consistent with the existing
regulatory requirements, it need not be included in the bond
terms.  The amendment of the bond is not warranted.
     
                    Sincerely,




                    John Durant, Director
                    Commercial Rulings Division