BOR-7-04-CO:R:P:C 111176 GV
Edward J. Kiley, Esq.
Grove, Jaskiewicz & Cobert
1730 M Street, N.W., Suite 501
Washington, D.C. 20036-4579
RE: Instruments of International Traffic; Canadian-based Trucks;
19 U.S.C. 1322
Dear Mr. Kiley:
This is in response to your letter dated July 13, 1990,
regarding the proposed use of Canadian-based trucks in the United
States. Our ruling is set forth below.
FACTS:
Preferred Transport Limited ("Preferred") is a Canadian-
based for-hire motor carrier operating in domestic Canadian
commerce, international commerce between the United States and
Canada, and in domestic United States commerce. Preferred holds
appropriate operating licenses from, among others, the Interstate
Commerce Commission ("ICC") authorizing the aforementioned
operations.
Preferred presently conducts extensive services on
commodities moving between the United States and Canada in
international commerce, and involving such ports of entry as
Detroit, Michigan/Windsor, Ontario and Buffalo, New York/Ft.
Erie, Ontario. These services involve transportation of
Canadian-origin goods to U.S. destinations and U.S.-origin goods
to Canadian destinations.
Preferred now proposes to commence operations between
essentially Michigan points and those in upstate New York via an
Ontario routing. Preferred tractor-trailer units would be used
to pick up loads in Michigan, and would enter Canada at
Detroit/Windsor or Port Huron/Sarnia. Reentry into the U.S.
would be at Ft. Erie/Buffalo or Niagara Falls/Niagara Falls. In
some cases, the Preferred tractor-trailer unit which originated
the traffic in Michigan would reenter the U.S. at the Ontario/New
York border, and in other cases the Preferred trailer would be
switched in Ontario and brought into the United States by another
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carrier using a U.S.-based tractor. In all cases the goods would
remain in Preferred's trailer from origin to destination. After
delivery and unloading in New York, the equipment would be used
to transport goods from the U.S. back to Canada. It is noted
that the Preferred tractor-trailer units to be used in this
service are also regularly used in handling shipments from the
U.S. to Canada and from Canada to the U.S.
ISSUES:
1. Whether there is a movement in local traffic in
violation of 19 CFR 123.14(c)(1) when a Canadian-based tractor-
trailer unit which, after hauling merchandise between two United
States points via Canada, is then reloaded at the second United
States point and proceeds to transport merchandise back to
Canada.
2. Whether there is a movement in local traffic in
violation of 19 CFR 123.14(c)(1) or (2) when a Canadian-based
tractor-trailer unit hauls merchandise from a United States point
to a point in Canada where the trailer would be separated from
the tractor, hitched to a U.S.-based tractor which would then
proceed to haul it into the United States and, after unloading,
would then be reloaded to transport merchandise back to Canada.
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
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.
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
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or loaded, constitutes a foreign "truck" as that term is used in
sections 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 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.
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 section 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 section 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 section 123.14, is subject to forfeiture under
section 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.
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It should be noted that the aforementioned ICC authority
issued to Preferred and the applicable Customs Regulations are
easily reconciled. The former authorizes a carrier to transport
general commodities or passengers between points in the United
States, while the latter applies the statutory requirements that
govern such movements.
In regard to the first issue under consideration, the
Canadian truck transporting merchandise from a point in the
United States to a second point in the United States via Canada
would not be considered an instrument of international traffic
within the meaning of section 123.14(a). That section considers
a foreign truck "arriving empty or loaded for the purpose of
taking out merchandise or passengers" as engaged in international
traffic. "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. Furthermore,
the record is devoid of evidence that at the time the proposed
service is to occur the local traffic involved (Michigan to New
York) is pursuant to both a regularly scheduled trip and
incidental to the international schedule (New York to Canada) as
required by section 123.14(c)(1).
Accordingly, the truck involved in the first issue is
considered to have been engaged in "local traffic" within the
meaning of section 123.14(c)(1), Customs Regulations and not
within any of the exceptions noted thereunder regardless of the
fact that the goods would remain in Preferred's trailer from
origin to destination.
In regard to the second issue, there is a movement in local
traffic in violation of section 123.14(c)(2) regarding
Preferred's trailer which, after being hauled from the U.S. to
Canada is switched to a U.S.-based tractor which then hauls it to
its U.S. destination. Pursuant to section 123.14(c)(2), a
foreign-based truck trailer may carry merchandise between points
in the United States only if such local traffic is reasonably
incidental to its economical and prompt departure for a foreign
country. The Canadian-based trailer in question is on an inbound
trip and therefore does not meet these criteria. We note,
however, that neither the Canadian nor the U.S.-based tractors
involved are considered to be used in local traffic in violation
of section 123.14(c)(1).
HOLDINGS:
1. There is a movement in local traffic in violation of 19
CFR 123.14(c)(1) when a Canadian-based tractor-trailer unit
which, after hauling merchandise between two United States points
via Canada, is reloaded at the second United States point and
used to transport merchandise back to Canada.
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2. There is a movement in local traffic in violation of 19
CFR 123.14(c)(2) when a Canadian-based tractor-trailer unit hauls
merchandise from a United States point to a point in Canada where
the trailer would be separated from the tractor and hitched to a
U.S.-based tractor which then proceeds to haul it into the United
States and, after loading, would then be reloaded to transport
merchandise back to Canada.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch