Instruments of International Traffic; Canadian-based Trucks;19 CFR  123.14; 19 U.S.C.  1322

HQ 113903 July 16, 1997 BOR-7-04-RR:IT:EC 113903 GEV CATEGORY: Carriers Daniel P. Joyce, Esq. Hirsch & Joyce 2399 Sweet Home Road Buffalo, New York 14228-2326 RE: Instruments of International Traffic; Canadian-based Trucks; 19 CFR  123.14; 19 U.S.C.  1322 Dear Mr. Joyce: This is in response to your letter dated April 10, 1997, on behalf of your client, Jaguar Transport, Inc. ("Jaguar"), of Winnipeg, Manitoba, Canada, requesting a ruling regarding the proposed use of Canadian-based trucks in the United States. Our ruling is set forth below. FACTS: Jaguar conducts international transport operations between the United States and Canada. It holds operating authority issued by the Federal Highway Administration and Canadian provincial regulatory authorities. It provides scheduled and non-scheduled service between points in the United States and Canada, and conducts a number of scheduled weekly international shipments to and from various points in the United States. One of Jaguar's major customers is a large wholesale supplier of fruit and produce in Winnipeg. This supplier purchases fruit and produce from locations in the United States (primarily California, Arizona, Texas and Florida), and sells the products to restaurants, grocery stores and other customers in the Winnipeg area. Jaguar makes regularly scheduled pick-ups of products in the United States for delivery to the supplier in Winnipeg. Within the past year, the supplier opened a branch office in St. Paul, Minnesota, in order to distribute fruit and produce to customers in the St. Paul - Minneapolis area. As a result, Jaguar now also delivers products from Winnipeg to St. Paul, on behalf of the customer, on inbound trips to U.S. destinations in the southwest and southeast. Jaguar also makes scheduled pick-ups in St. Paul on the return trip. As a result, Jaguar has the opportunity to serve its customer better by also delivering products to St. Paul on the return trip to Canada.  - 2 - Jaguar has been able to create international routes that accommodate its needs in Winnipeg, particularly those of its major customers. On inbound routes, Jaguar delivers furniture and office supplies for a large shipper in Canada, to points in central California (including Fresno and Salinas), southern California (Los Angeles area), Arizona and Florida (Tampa and Miami areas). The shipments to California and Arizona depart every Saturday, Sunday and Tuesday. The shipments to Florida depart every Saturday and Wednesday. All inbound shipments also include delivery of fruit and produce to St. Paul. Outbound (return) trips with merchandise destined to Canada depart from California and Arizona every Monday, Wednesday and Friday, and from Florida on Monday and Friday. Each outbound trip also includes a scheduled stop in St. Paul to pick up products for delivery to Winnipeg. Jaguar seeks a ruling on its ability to pick up fruit and produce at the aforementioned U.S. locations for delivery to St. Paul on the above-referenced routes. By way of example, if 24 pallets of goods are picked up in the U.S. outbound to Canada, no more than 4 pallets of goods would be delivered to St. Paul, with the remaining 20 or more to continue on to Winnipeg. As noted above, the carrier now makes a scheduled pick-up in St. Paul on the way to Winnipeg, requiring the trailers to be at less than full capacity when they depart their southern and western U.S. loading points. If Jaguar could off-load merchandise in St. Paul, it would allow the carrier to have a full truckload shipment on its entire return trip. The small amount of merchandise off-loaded in St. Paul would be substituted by merchandise that was picked up in St. Paul destined to Winnipeg. ISSUE: Whether there is a movement in local traffic in violation of 19 CFR  123.14(c)(1) in the scenario described above when Canadian-based tractor-trailer units operating in international traffic on weekly schedules between Winnipeg, Manitoba, Canada, St. Paul, Minnesota and locations in California, Arizona and Florida, transport merchandise to St. Paul from the aforementioned U.S. locations on the return trips to Winnipeg. LAW AND ANALYSIS: Section 141.4, Customs Regulations (19 CFR  141.4), provides that entry as required by title 19, United States Code,  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 regulations from the requirements for entry. Since the foreign-based equipment in question is not within the definition of intangibles as shown in General Note 4, Harmonized Tariff Schedule of the United States (HTSUS; 19 U.S.C.  1202, as amended), they are subject to entry and payment of any applicable duty if not specifically exempted by law and regulations.  - 3 - 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 19 CFR  123.14(a)). A foreign truck tractor which arrives in the United States in international traffic towing a foreign trailer, either empty or loaded, constitutes a foreign "truck" as that term is used in  123.14(a), (b), and (c)(1), Customs Regulations (19 CFR  123.14(a), (b), and (c)(1)). Section 123.14(c), Customs Regulations, states that with one exception, a foreign-based truck, admitted as an instrument of international traffic under  123.14, shall not engage in local traffic in the United States. The exception, set out in  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. A carrier may be considered as engaged in regularly scheduled service whether trips are scheduled hourly, daily, weekly, etc., provided the trips are regular, not varied, and are over an established route. Trips made if and when a load is available do not qualify. 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  123.12(a)(2) which allows use for such transportation as is directly 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 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 provides, in part, that any foreign-owned vehicle brought into the United States for the purpose of carrying merchandise between points in the United States for hire or as an element of a commercial transaction, except as provided for in  123.14(c), is subject to treatment as an importation of merchandise from a foreign country and a regular Customs entry therefore shall be made. Section 123.14(d), Customs Regulations provides that any vehicle used in violation of  123.14, is subject to forfeiture under  592, Tariff Act of 1930, as amended (19 U.S.C.  1592). Whether the use of an instrument of international traffic constitutes a diversion from international traffic is based on the facts in each case. The transportation of merchandise in international traffic is the key; the domestic movement of merchandise must be secondary to the international movement and meet other criteria. There must be a regular international schedule and the domestic movement must follow the same basic route as the merchandise moving in international traffic. - 4 - In regard to the proposed domestic transportation (i.e., fruit and produce loaded at locations in California, Arizona and Florida for delivery to St. Paul), we note that not only would it occur pursuant to regularly scheduled international trips, Jaguar would not be deviating from its international route and is therefore such domestic transportation would be directly incidental to the international schedules. Accordingly, these movements are local traffic that is within the permitted exception set forth in  123.14(c)(1). HOLDING: There is no movement in local traffic in violation of 19 CFR  123.14(c)(1) in the scenario described above when Canadian-based tractor-trailer units operating in international traffic on weekly schedules between Winnipeg, Manitoba, Canada, St. Paul, Minnesota and locations in California, Arizona and Florida, transport merchandise to St. Paul from the aforementioned U.S. locations on the return trips to Winnipeg. Sincerely, Jerry Laderberg Acting Chief Entry and Carrier Rulings Branch