Instruments of International Traffic; 19 U.S.C. § 1322(a); 19 C.F.R. § 123.14

HQ H047236 January 14, 2009 BOR-4-04-OT:RR:BSTC:CCI H047236 JLB CATEGORY: Carriers Mr. Keung Loong Sound Freight Solutions 194 Firgrove Cres Toronto, ON m3n 1k6 RE: Instruments of International Traffic; 19 U.S.C. § 1322(a); 19 C.F.R. § 123.14 Dear Mr. Loong: This letter is in response to your electronic ruling request dated December 14, 2008, in which you request a ruling on whether your proposed scenarios involving the transportation of freight aboard Canadian-based trucks constitute a violation of 19 C.F.R. § 123.14(c). Our ruling on your request follows. FACTS Your company, Sound Freight Solutions, is a Canadian-based carrier operating between Canada and the United States. You maintain a fleet of tractors and trailers (i.e., trucks) that transport international shipments of freight approximately two to three times a week. The Canadian-based trucks ordinarily travel with freight originating in either Ontario or Quebec, Canada en route to California, Arizona, or Texas. The first and most common scenario is that the freight is transported directly from Canada to California, Arizona or Texas where the trucks would load freight for delivery back to Ontario and/or Quebec. Due to the slowing economy, however, various other scenarios have been proposed. The second scenario involves the Canadian-based trucks delivering the freight originating in either Ontario or Quebec to either Missouri, Oklahoma, Kansas, Colorado or Utah. At that point, the trucks will travel with empty trailers to their final U.S. destinations of California, Arizona or Texas, approximately 700 to 1500 miles, to pickup their loads destined for Ontario or Quebec, Canada. The third scenario is for the Canadian-based trucks to deliver the freight originating in either Ontario or Quebec to either Missouri, Oklahoma, Kansas, Colorado or Utah. Then to offset costs, freight is loaded at this U.S. point for delivery to California, Arizona or Texas. At that point, freight is loaded destined for Ontario or Quebec, Canada. The final scenario involves the Canadian-based trucks traveling empty from Canada to Michigan, Ohio, Indiana or New York where freight is loaded destined for California, Arizona or Texas. In California, Arizona or Texas, the trucks pickup their loads destined for Ontario or Quebec, Canada. ISSUE Whether the use of Canadian-based trucks as described in the above scenarios is in violation of 19 C.F.R. § 123.14(c)? LAW AND ANALYSIS Pursuant to section 141.4, Customs and Border Protection (“CBP”) Regulations (19 C.F.R. § 141.4), 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 regulations from the requirements of entry. Since Canadian-based trucks are not so exempted, they are subject to entry and payment of any applicable duty. “Instruments of international traffic,” however, may be entered without entry and payment of duty under the provisions of 19 U.S.C. § 1322(a). 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 C.F.R. § 123.14(a). Furthermore, certain foreign-based vehicles engaged, in whole or in part, in the domestic carriage of merchandise that either originates from a location outside the United States or will be subsequently moved to a destination outside the United States, or such vehicles moving without a payload between two points in the same country, shall be considered to be engaged in international traffic. See Customs Bulletin of Oct. 1, 1997, Vol. 31, No. 40, at pp. 7-13. Section 123.14(c), CBP Regulations (19 C.F.R. § 123.14(c)), states that with one exception, a foreign-based truck, admitted as an instrument of international traffic, shall not engage in local traffic in the United States. The exception, specifically set out in 19 C.F.R. § 123.14(c)(1), states that a foreign-based vehicle “may carry merchandise or passengers between points in the United States if such carriage is incidental to the immediately prior or subsequent engagement of that vehicle in international traffic. Any such carriage by the vehicle in the general direction of an export move or as part of the return of the vehicle to its base country shall be considered incidental to its engagement in international traffic.” Section 10.41(d), CBP Regulations (19 C.F.R. § 10.41(d)) 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), CBP Regulations (19 C.F.R. § 123.14(d)) provides that any vehicle used in violation of § 123.14 is subject to forfeiture under 19 U.S.C. § 1592. Under the facts presented for the first scenario, the Canadian-based trucks would be arriving with merchandise destined for points in the United States or departing the United States with merchandise destined for Canadian points. Since the merchandise either originates from outside the U.S. and is destined for a U.S. point, or originates in the U.S. and is destined for points outside the U.S., the trucks are engaging in international traffic and qualify as “instruments of international traffic” pursuant to 19 U.S.C. § 1322(a) and 19 C.F.R. § 123.14(a). Consequently, the trucks are not engaging in local traffic in violation of 19 C.F.R. § 123.14(c)(1). With respect to the second scenario, the Canadian-based trucks would transport merchandise originating in Canada to points in the United States. As such, the trucks would be considered to be engaging in international traffic. At that point, the trucks would travel with empty trailers between two points in the United States. This movement does not constitute engaging in local traffic within the meaning of 19 C.F.R. § 123.14(c)(1) since CBP has specifically stated that foreign-based vehicles moving without a payload between two points in the same country shall not be considered a domestic movement. See Customs Bulletin of Oct. 1, 1997, Vol. 31, No. 40, at pp. 7-13. Once the trucks reach their final U.S. destinations of California, Arizona or Texas, they would be loaded with merchandise destined for Canada. Accordingly, the trucks are engaged in the carriage of merchandise originating in one country and terminating in another and are considered to be engaging in international traffic. Consequently, trucks operating under the proposed movements for the second scenario constitute “instruments of international traffic” and are not engaging in local traffic in violation of 19 C.F.R. § 123.14(c)(1). Under the third scenario, the carriage of merchandise from Canada to the specified U.S. points would constitute engaging in international traffic. At that point, freight would be loaded for transportation between two points in the United States. The use of the trucks to carry merchandise from either Missouri, Oklahoma, Kansas, Colorado or Utah to California, Arizona or Texas would be considered to be engaging in local traffic. However, the trucks would be engaging in local traffic in accordance with 19 C.F.R. § 123.14(c)(1) since the local traffic would be immediately prior or subsequent to the engagement of the vehicles in international traffic and would be incidental to the international traffic as it is in the general direction of the export move. See Headquarters Ruling Letter 115596, dated March 6, 2002; Headquarters Ruling Letter 115465, dated August 31, 2001. The trucks would subsequently be used in the transportation of freight from California, Arizona or Texas to Canada, which is considered engaging in international traffic. As a result, trucks operating under the proposed movements for the third scenario constitute “instruments of international traffic” and are not engaging in local traffic in violation of 19 C.F.R. § 123.14(c)(1). With respect to the final scenario, the Canadian-based trucks would be arriving empty from Canada for the purpose of transporting merchandise out of the United States in accordance with 19 C.F.R. § 123.14(a). First, however, the trucks would pick up merchandise in Michigan, Ohio, Indiana or New York for delivery to California, Arizona or Texas. This constitutes engaging in local traffic within the exception contained in 19 C.F.R. § 123.14(c)(1) since the trucks would be engaging in local traffic immediately prior to engaging in international traffic (from California, Arizona or Texas to Canada) and since the trucks are moving in the general direction of the export move. Thus, the trucks would qualify as “instruments of international traffic” pursuant to 19 C.F.R. § 123.14(a). See Headquarters Ruling Letter 115596, dated March 6, 2002. HOLDING The use of Canadian-based trucks as described in the above scenarios is not in violation of 19 C.F.R. § 123.14(c). Sincerely, Glen E. Vereb, Chief Cargo Security, Carriers and Immigration Branch