FOR-2-04-CO:R:C:E 224147 JRS
Director, Office of Cargo Enforcement
and Facilitation
Office of Inspection and Control
U.S. Customs Service
Washington, D.C. 20229
RE: Domestic "Zone Restricted" Merchandise Withdrawn from a
Foreign Trade Zone to a Bonded Warehouse Pending Exportation;
19 U.S.C. 81c(a), fourth proviso; 19 U.S.C. 1555; T.D. 83-139;
19 CFR 146.70(c); C.S.D. 82-112; HQ 215998 L, dated July 18,
1983; HQ 221893 JR, dated January 16, 1990; Partial Release from
Warehouse; 19 CFR 19.6(d)
Dear Sir:
This is in response to your request for a ruling (Your FILE:
WAR-1-IC:C MB, dated August 20, 1992) as to whether the storing
of domestic "zone restricted" status merchandise in a bonded
warehouse is permitted under the provisions of 19 CFR 146.70(c)
and not contrary to 19 U.S.C. 1555 and, if so, whether the
partial release procedures as provided in 19 CFR 19.6(d) are
applicable.
FACTS:
Clarification is requested on an "information letter,"
(221893 JR, dated January 16, 1990), issued to United Exports
Trading Association, Inc. (UETA, Inc.) and an earlier ruling,
(215998 L, dated July 18, 1983) on the above-referenced subject.
No facts were submitted.
ISSUE:
Whether domestic merchandise withdrawn from a foreign trade
zone in "zone-restricted" status may be stored in a bonded
warehouse. If so, whether the partial release procedures as
provided in 19 CFR 19.6(d) are applicable.
LAW AND ANALYSIS:
We do not find a conflict to exist between our "information
letter" of January 16, 1990 (221893) and our previous ruling of
July 18, 1983 (215998). The two cases are distinguishable as set
forth below.
In 215988, Customs held that domestic beer on which internal
revenue taxes have not been paid may be placed in a foreign trade
zone in "zone-restricted" status, and, on and after July 18, 1983
(48 FR 27536, T.D. 83-139), may be transferred to a bonded
warehouse pending exportation. Such beer must be identified as
"zone-restricted" beer which may not be withdrawn for consumption
under 19 CFR 146.70(c).
In 221893, based upon the facts provided, American beer, at
least a portion of every shipment, was apparently shipped to
Mexico solely for the purpose of reimportation to the United
States in order to avoid the payment of internal revenue tax,
which otherwise would have been required if shipped directly to
UETA, Inc. in the United States, and then distributed by UETA,
Inc. in Mexico. We concluded that the American goods could not
be considered "imported merchandise" under 19 U.S.C. 1555 since
the returned American goods were never "exported" within the
meaning of 19 CFR 101.1(k), that is, a valid exportation for
Customs purposes was never effectuated. See 17 Op. Atty. Gen.
579 (1883).
Moreover, in 221893, the American beer was not in "zone-
restricted" status as it was never admitted into a foreign trade
zone and, therefore, there would be no such limitation of 19 CFR
146.70(c), namely, that the merchandise could only be exported.
Although UETA, Inc. intended to sell it only for exportation,
there would be nothing that would prevent them from selling the
beer for consumption and perhaps avoiding internal revenue tax.
Whereas, in 215988, beer goes directly to a FTZ in "zone-
restricted" status, is deemed exported, and no tax is ever due.
In 215998, the "exportation" and "importation" cannot be done
with a design to circumvent tax as in 221983 since upon
"importation" into warehouse tax is deferred until entry for
consumption, which of course cannot occur because the beer can
only be exported within 5 years pursuant to 19 U.S.C. 1557.
The key is intent. There can be no intent to return the beer to
Customs territory for consumption, and under 19 CFR 146.70,
beer cannot be entered for consumption, only exported.
Domestic merchandise in "zone-restricted" status does not
become foreign merchandise (see C.S.D. 82-112), nor does it
become imported merchandise. The statute (19 U.S.C. 81c(a),
fourth proviso), provides, that if "zone-restricted" merchandise
is permitted to be entered for consumption from a zone, it is
subject to the provisions of former paragraph 1615(f) of 19
U.S.C. 1201 (now subheading 9801.00.80, HTSUS). "Zone-
restricted" merchandise may be moved to a bonded warehouse not
because it became imported merchandise but because the regulation
was promulgated to facilitate exportation (see discussion in T.D.
83-139). Please note that the Customs Service did not rely on
19 U.S.C. 1555 as its authority to permit the transfer of "zone-
restricted" merchandise from a zone to a Customs bonded warehouse
pending exportation, without obtaining the approval of the
Foreign-Trade Zones Board.
It is our opinion that the partial release procedures from a
of 19 CFR 19.6(d) would be applicable to the instant case.
HOLDING:
Domestic merchandise withdrawn from a foreign trade zone in
"zone-restricted" status may be stored in a bonded warehouse
before its actual exportation as required by 19 CFR 146.70(c).
The partial release procedures as provided in 19 CFR 19.6(d) are
applicable to this case. You may provide a copy of this decision
to the inquirer.
Sincerely,
John Durant, Director
Commercial Rulings Division
cc: Regional Commissioner, Southwest Region