us-cbp-cross-rulings-hq-109622•HQ 109622: Request for Reconsideration
HQ 109622: Request for Reconsideration
us-cbp-cross-rulings-hq-109622HQ 109622: Request for ReconsiderationGuidance
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 109622
August 31, 1988
BOR-7-04-CO:R:P:C 109622 GV
CATEGORY: Carriers
Mr. Richard H. Streeter
Barnes & Thornburg
Federal Bar Building
1815 H Street, NW.
Washington, D.C. 20006
RE: Request for Reconsideration
Dear Mr. Streeter:
This is in reference to your letter of July 1, 1988, on
behalf of your client, Cast North America ("Cast"),
requesting a reconsideration of Customs ruling
BOR-7-04-CO:R:P:C 109232 GV, dated June 21, 1988, regarding
their movements of contain- erized merchandise which
originate in Europe and are destined to points in the New
England area.
FACTS:
Cast is an ocean carrier that operates on the North
Atlantic between the Ports of Montreal, Canada, and
Antwerp, Belgium. It also conducts regularly scheduled
trucking oper- tions in conjunction therewith between the
Port of Montreal and points in the New England region of
the United States with trucking equipment that is domiciled
in Montreal.
In regard to Cast's movements of containerized
merchandise which originate in Europe and are destined to
points in the New England area, after the container is
loaded with merchandise at a point located in Europe, it is
placed on board Cast's vessel in Antwerp and transported to
the Port of Montreal, Canada, where it is off-loaded. In
Montreal, the container is placed on a chassis for delivery
to the consignee which is located in the United States.
The containers are then moved by tractor- trailer in a
regularly scheduled service to points in the New England
region. In most instances, the container and its mer-
chandise will clear Customs at the United States border and
be transported directly to the consignee's facility where
it will be unloaded. Thereafter, the container either will
be moved to a new location where it will be loaded with
export cargo, or it will be transported back to Montreal
empty.
There are instances, however, where prior to delivering
the container and its contents to the ultimate consignee,
Cast has been requested to transport the containers in-bond
to an in- spection facility in Boston in order to have the
Customs in- spection performed in the Boston area. As a
convenience to the shipper and its customs broker, Cast has
complied with those instructions. At the time the trucks
deliver the container loads of merchandise to the container
freight station, Coastal, Inc., (Coastal), the in-bond
manifest is turned over to Coastal for submission to
Customs in Boston. The container is stored at Coastal
until a Customs release has been obtained. Further- more,
while most of the merchandise delivered to the container
station remains on the disconnected trailer, some
merchandise is removed from the trailer for inspection. If
the inspection cannot be performed when the container
arrives, the trailer on which the container is mounted will
be disconnected from the tractor and the trailer and driver
will return to Canada. After the contents of the container
are examined by Customs, the container is reloaded with the
same merchandise. There- after, at a later date a Cast
driver will return in another tractor trailer unit which
will be separated at Coastal, attach his tractor to the
previously dropped-off trailer, and proceed to deliver the
container to the consignee (located at a point not directly
incidental to the international schedule) pursuant to the
terms of the through bill of lading which covers the
transportation of the container from the original point of
origin to its ultimate destination in the United States.
As stated in the affidavit of Mr. John M. Majchrowicz,
General Manager, North American Trucking, for Cast, which
was enclosed in your letter of February 26, 1988, "... it
was Cast's standard operating procedure to pick up the
container on the driver's next trip assuming it had been
able to clear Customs by that time." (emphasis added)
Because Cast's Montreal-New England service is built around
a regular Monday/Wednesday/ Friday schedule, and a smaller
Tuesday/Thursday schedule, the example used by Mr.
Majchrowicz is that if a container was dropped on a Monday,
the driver would retrieve it on the following Wednesday and
proceed to its ultimate destination in the United States.
It should be noted, however, that this is a best case
scenario and in view of the fact that the time frame for
each shipment may vary it cannot be stated that this parti-
cular aspect of Cast's service (i.e., dropping off trailers
at Coastal and hauling them at a later date) is regularly
scheduled.
Cast was advised by Customs personnel in Boston that
following the inspection, the movement from the container
facility to the ultimate destination would constitute an
illegal "point- to-point" or "local" movement within the
domestic transporta- tion of the United States in violation
of section 123.14(c), Customs Regulations (19 CFR
123.14(c)). In response to letters from Cast's counsel
dated November 14 and December 14, 1987, and February 26,
1988, Customs issued ruling BOR-7-04-CO:R:P:C 109232 GV,
dated June 21, 1988, holding that the subject foreign-based
trucks (i.e., truck tractors towing truck trail- ers) are
considered instruments of international traffic until such
time as they are disconnected at the container station. At
the point of separation, the tractors are no longer trans-
porting merchandise in international traffic and therefore
may not engage in local traffic (i.e., carrying merchandise
or pas- sengers between points in the United States) unless
entry is made pursuant to section 10.41(d) and applicable
duty paid. In regard to the trailers, it was held that
they remain in inter- national traffic until they reach the
point on the inward trip of complete unlading for purposes
other than Customs examina- tion. The trailers retain
their status as instruments of international traffic and
may continue to move the merchandise to its ultimate
destination per the through bill of lading (albeit by a
U.S.-based tractor). Pursuant to a letter from counsel,
dated July 1, 1988, Customs was requested to reconsider its
ruling of June 21 1988, on this matter.
ISSUE:
Whether there is a movement in local traffic within the
meaning of 19 CFR 123.14(c) when a Canadian-based tractor
pulls a previously dropped-off Canadian-based trailer
loaded with in- bond merchandise destined to points in the
United States, from a container freight station in Boston
at a date later than when the trailer arrived at the
container station, was disconnected from the tractor
pulling it and remained there until Customs released the
merchandise.
LAW AND ANALYSIS:
Section 141.4, Customs Regulations (19 CFR 141.4),
provides that entry as required by title 19, United States
Code, section 1484(a) (19 U.S.C. 1484(a)), shall be made of
every importation whether free or dutiable and regardless
of value, except for intangibles and articles specifically
exempted by law or regu- lations from the requirements for
entry. Since the foreign- based equipment in question is
not within the definition of in- tangibles as shown in
General Headnote 5, Tariff Schedules of the United States
(19 U.S.C. 1202), it is subject to entry and payment of any
applicable duty if not specifically exempted by law or
regulations.
Instruments of international traffic may be entered
without entry and payment of duty under the provisions of
19 U.S.C. 1322. To qualify as instruments of
international traffic, trucks having their principal base
of operations in a foreign country must be arriving in the
United States with merchandise destined for points in the
United States, or arriving empty or loaded for the purpose
of taking merchandise out of the United States (see section
123.14(a), Customs Regulations (19 CFR 123.14(a). "Taking
out" means destined to a foreign country and does not cover
merchandise or passengers whose intended destination is a
second point in the United States.
A foreign truck tractor which arrives in the United
States in international traffic towing a foreign truck
trailer, either empty or loaded, constitutes a foreign
"truck", as that term is used in section 123.14(a), (b),
and (c)(1), Customs Regulations (19 CFR 123.14(a), (b) and
(c)(1)).
However, section 123.14(c), Customs Regulations (19 CFR
123.14(c)) states that with one exception, a foreign-based
truck, admitted as an instrument of international traffic
under section 123.14, shall not engage in local traffic in
the United States. The exception, set out in section
123.14(c)(1), states that such a vehicle, while in use on a
regularly scheduled trip, may be used in local traffic that
is directly incidental to the international schedule.
Section 123.14(c)(2), Customs Regulations (19 CFR
123.14(c)(2)), provides that a foreign-based truck trailer
admitted as an instrument of international traffic may
carry merchandise between points in the United States on
the return trip as provided by section 123.12(a)(2),
Customs Regulations (19 CFR 123.12(a)(2)) which allows use
of local traffic as is reasonably incidental to its
economical and prompt return to the country from which it
entered the United States. Section 123.14(c)(2) applies
only to truck trailers and not to tractor- trailer units
which, as was stated earlier, are considered trucks as that
term is used in the Customs Regulations.
Section 10.41(d), Customs Regulations (19 CFR
10.41(d)), provides, in part, that any foreign-owned
vehicle brought into the United States for the purpose of
carrying merchandise bet- ween points in the United States
for hire or as an element of a commercial transaction,
except as provided for in section 123.14(c), is subject to
treatment as an importation of mer- chandise from a foreign
country and a regular Customs entry therefore shall be
made. Section 123.14(d), Customs Regula- tions (19 CFR
123.14(d)), provides that any violation of section 123.14,
is subject to forfeiture under section 592, Tariff Act of
1930, as amended (19 U.S.C. 1592).
It is your position that Customs June 21 ruling on this
matter is not only contrary to the plain wording of the
con- trolling regulations, but also disregards well
established principles concerning the "flow of commerce".
In support of this position counsel cites C.I.E. 1062/62
and Walling v. Jacksonville Paper Company, 317 U.S. 564,
568, 63 S.Ct. 332, 335, 87 L.Ed. 460 (1943). A closer
examination of the control- ling authority in this case
does not support your claim.
The Customs Simplification Act of 1953 (Pub. L.
67-243), added section 322 to the Tariff Act of 1930 (19
U.S.C. 1322) to grant to international traffic the
generally recognized customary exceptions from Customs
requirements. Although 19 U.S.C. 1322 does not define
"customary exceptions," the legis- lative history is
explicit in stating that the customary excep- tions
referred to are those mentioned in "United States Import
Duties" (1952, at page 269). Senate Report No. 632, 83rd
Con- gress, 1st Session, page 12, states "It (19 U.S.C.
1322) does not change the customary exceptions as set out
in ... United States Import Duties (1952) p. 269." The
intent of Congress is also apparent from House Report No
760, 83rd Congress, 1st Session, page 13. These provisions
now appear, essentially without change, in sections
10.41(d) and 123.14 referred to above. Customs has long
held that these provisions concern only the movement and
tariff status of the vehicles, regardless of whether the
merchandise carried is engaged in an international
movement.
In C.I.E. 1062/62 Customs held that a truck tractor
which, after clearing Customs at the United States-Canadian
border, dropped its trailer at a compound adjacent to the
customs sta- tion where it later picked up the trailer and
proceeded to transport it to its ultimate destination (New
Jersey), was engaging in a movement in international
traffic temporarily interrupted in the United States during
the time the tractor was absent in Canada. Our ruling of
June 21 held that decision to be clearly distinguishable
from the case now in issue in that it involved the movement
of merchandise by the same trac- tor, the same trailer, on
the same day. We do not agree that the only distinction
between that situation and the one now in issue is that the
final movement does not occur on the same day as the
initial movement (see last page, item 5, of affida- vit of
Mr. John M. Majchowicz, General Manager, North America
Trucking, for Cast, which was enclosed in your letter of
February 26, 1988, stating that Cast does not hold itself
out on a daily basis to perform the same scheduled service
with the same piece of equipment). Accordingly, the three
distinguish- ing characteristics set forth in our previous
ruling cannot be disputed.
In addition, we note that counsel blames Customs for
the delay in not moving the merchandise to its final
destination on the same day as the initial movement.
Counsel readily admits, however, that in most circumstances
during the course of Cast's operations merchandise will
clear Customs at the United States border and will be
transported directly to the customer. It should be noted
that Cast's in-bond transportation of merchan- dise to the
container freight station in Boston for Customs inspection,
rather than inspection at the border (as was the case in
C.I.E. 1062/62), was done at the behest of the shipper and
its customs broker, not at the behest of the Customs
Service and not with prior Customs approval. Furthermore,
at the time the manifest is received by Coastal, Inc., the
in-bond movement of the merchandise is considered to have
terminated in view of the fact that the liability for the
storage and safekeeping of the merchandise has been
transferred from the bonded carrier (Cast) to the container
freight station (Coastal, Inc.) pursuant to section
19.44(b), Customs Regulations (19 CFR 19.44(b)). This
transfer of liability is an additional salient discernible
factor not found in C.I.E. 1062/62.
Accordingly, we reiterate that the facts in C.I.E.
1062/62 and those now under consideration are clearly
distinguishable. To construe the holding in C.I.E. 1062/62
to be applicable to a factual pattern other than the same
one upon which it was based would permit any foreign-based
equipment to transport merchandise between any two United
States points at any time provided the merchandise has not
reached its ultimate United States des- tination. Such an
interpretation would be inconsistent with the intent of
Congress to limit competition with domestic transportation
by vehicles in international traffic. It would work to the
detriment of domestic interests.
Counsel further maintains that Customs previous ruling
on this matter is inconsistent with the principles
concerning the "flow of commerce" (i.e., once goods are
placed in commerce, they remain within the flow of commerce
until their journey is ended). Counsel cites Walling v.
Jacksonville Paper Co., supra, which held that the
temporary placing of paper products in a wholesale
distributor's warehouse prior to their reaching their final
destination did not take such paper products out of
interstate commerce so as to render inapplicable the Fair
Labor Standards Act (29 U.S.C. 201 et seq.).
Customs questions the applicability of Walling. The
issue now under consideration is not the movement of the
merchandise but that of the carrier. We reiterate, that
the issue of what constitutes "local traffic" for the
purposes of 19 CFR 123.14(c) is determined by the physical
operation of the equip- ment, not the character of the
commerce involved. The legal authority you cite is merely
determinative as to the character of the merchandise in
that particular case for purposes of the laws and
regulations administered by the United States Depart- ment
of Labor. It is not controlling as to the dutiability and
Customs treatment of foreign-based tractors and trailers
that move merchandise between two United States points.
Accordingly, we affirm our previous ruling on this
matter (BOR-7-04-CO:R:P:C 109232 GV, dated June 21, 1988).
At the point of separation (i.e., the container freight
station) the tractors were no longer transporting
merchandise in international traffic and therefore could
not engage in local traffic (i.e., transport the trailer
loads of merchandise from the container freight station to
the ultimate destination in the United States) unless entry
were made pursuant to section 10.41(d).
HOLDING:
A movement in local traffic occurs within the meaning
of 19 CFR 123.14(c) when a Canadian-based tractor pulls
a previously dropped-off Canadian-based trailer loaded with
in-bond merchan- dise destined to points in the United
States, from a container freight station in Boston at a
date later than when the trailer arrived at the container
station, was disconnected from the tractor pulling it and
remained there until Customs released the merchandise.
Sincerely,
John E. Elkins
Acting Director, Regulatory
Procedures and Penalties Division
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