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

HQ H054416 April 1, 2009 BOR-4-04-OT:RR:BSTC:CCI H054416 JLB CATEGORY: Carriers Mr. Keung Loong Royal Transport Ltd. 207 Edgeley Blvd. Unit 16, Suite 205 Vaughan, Ontario L4K 4B5 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 correspondence dated March 12, 2009, 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) or any of the “Immigration and Naturalization rules and regulations.” Our ruling on your request follows. FACTS Your company, Royal Transport Ltd., 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 four times a week. The Canadian-based trucks ordinarily travel with freight originating from Quebec, Ontario, Alberta, or British Columbia, Canada en route to California, Arizona, Texas, Florida or Washington. The first and most common scenario is that the freight is transported directly from Canada to these U.S. destinations where the trucks would load freight for delivery back to Canada. Due to the slowing economy, however, two other scenarios have been proposed. The second scenario is for the Canadian-based trucks to deliver the freight originating in Canada to a U.S. destination (i.e. Washington, Idaho, Oregon, Nevada, Colorado, Utah, California, Arizona, Texas, Missouri, Indiana, Illinois, Michigan, Ohio, New York, Rhode Island, Florida, or Georgia). Then to offset costs, freight is loaded at this U.S. point or in a bordering U.S. state for delivery to California, Arizona, Texas, Florida or Washington. At that point, freight is loaded destined for Canada. The final scenario involves the Canadian-based trucks traveling empty from Canada to a U.S. state close to the Canadian border (i.e. Washington, Montana, North Dakota, Minnesota, Wisconsin, Illinois, Michigan, Ohio, Pennsylvania, New York, Vermont, New Hampshire, Massachusetts, or Maine) where freight is loaded destined for California, Arizona, Texas, Florida or Washington. In California, Arizona, Texas, Florida or Washington, the trucks pickup their loads destined for 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, U.S. 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 either pickup a shipment in the delivery state or a state bordering the delivery state. If the trucks traveled with an empty trailer between the delivery state and the state bordering the delivery state, this movement would 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. 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 the delivery state or a state bordering the delivery state to California, Arizona, Texas, Florida or Washington would be considered to be engaging in local traffic. However, because the trucks would subsequently be used in the transportation of freight from California, Arizona, Texas, Florida or Washington to Canada, thus, engaging in international traffic, 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; Headquarters Ruling Letter H047236, January 14, 2009. 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). 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 a U.S. state bordering or near the Canadian border for delivery to California, Arizona, Texas, Florida or Washington. 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, Texas, Florida or Washington 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; Headquarters Ruling Letter H047236, January 14, 2009. In regard to the employment of Canadian drivers in the above-described scenarios, we note that pursuant to 19 C.F.R. § 123.14(c)(1), a Canadian driver “will not be permitted to operate a vehicle…unless the driver is in compliance with the applicable regulations of the [former] Immigration and Naturalization Service [now CBP].” We suggest you contact Maureen Dugan, Admissibility and Passenger Programs, Office of Field Operations, CBP Headquarters, at (202) 344-2784 with any questions regarding the use of Canadian drivers in these scenarios. 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