International Carrier Bond; Principal; Merger; 19 CFR 113.24, 113.64

HQ 114151 November 4, 1997 BON-2/VES-1-RR:IT:EC 114151 GEV CATEGORY: Bonds Charles Routh, Esq. Garvey, Schubert & Barer Eighteenth Floor Second & Seneca Building 1191 Second Avenue Seattle, Washington 98101-2939 RE: International Carrier Bond; Principal; Merger; 19 CFR  113.24, 113.64 Dear Mr. Routh: This is in response to your letter of October 27, 1997, on behalf of your client, American President Lines (APL), requesting a ruling regarding the bond implications of their forthcoming merger. Our ruling on this matter is set forth below. FACTS: APL is merging with Neptune Orient Lines Ltd. (NOL). As a part of the merger, and pursuant to the approval of the U.S. Maritime Administration, nine of the existing APL ships with Maritime Security Program (MSP) contracts are being transferred to a new entity. The new entity, a trust held by a bank, will hold title to the vessels and will bareboat charter them to American Ship Management, LLC. (ASM). ASM will in turn time charter the vessels to APL which will operate the vessels as before. APL is currently the principal on the Customs International Carrier Bond covering the vessels in question and wishes to remain so subsequent to the aforementioned merger. ISSUE: Whether APL may remain as principal on the International Carrier Bond covering the vessels in question subsequent to its merger with NOL as described above. - 2 - LAW AND ANALYSIS: Pursuant to title 19, United States Code,  1623 (19 U.S.C.  1623), Customs is authorized to prescribe the conditions and form of any bond required or authorized by law, and provide for the approval of the sureties on such bond. The Customs Regulations governing Customs bonds are found in title 19, Code of Federal Regulations, Part 113 (19 CFR Part 113). Section 113.64, Customs Regulations (19 CFR  113.64) includes the terms of the International Carrier Bond. The provisions of  113.64(a) guarantee payment by the bond obligors of all duties, taxes and other charges which are provided by law or regulation. Customs may make a demand against the principal and surety, under the terms of the bond, for any fees that should have been collected and remitted by the carrier to Customs. The above-cited statutory and regulatory authority is non-specific as to any requisite criteria for a principal on a Customs bond, only that an application for such a bond be filed with and approved by Customs (19 CFR Part 113, Subpart B). It should be noted, however, that with respect to a corporate principal on an existing bond, a change in its legal identity resulting from the formation of a new corporation due to a merger, reorganization or similar action necessitates the filing of a new bond. (See 19 CFR  113.24(a)(1)) Accordingly, notwithstanding its forthcoming merger with NOL, APL may remain the principal on its current International Carrier Bond provided its legal identity is not changed as a result of such merger. HOLDING: APL may remain as principal on the International Carrier Bond covering the vessels in question subsequent to its merger with NOL as described above provided its legal identity is not changed as a result of such merger. Sincerely, Jerry Laderberg Chief Entry Procedures and Carriers Branch