BAG-5-02-CO:R:C:E 224163 JRS

District Director of Customs
335 Merchant 228 Customhouse
Honolulu, Hawaii 96813

RE: Personal Exemption for U.S. Residents Returning from Commonwealth of the Northern Mariana Islands and the Federated States of Micronesia; Chapter 98, Subchapter IV, HTSUS; 19 U.S.C. 1202; 48 U.S.C. 1681; subheading 9804.00.65, HTSUS; subheading 9804.00.70, HTSUS; 19 CFR 148.2; 19 CFR 148.33; 19 CFR 7.8(a)

Dear Mr. Roberts:

This is in reference to the above-captioned subject. Our ruling follows.

FACTS:

The District Director of Customs, Honolulu District, seeks a ruling on whether United States residents are currently receiving the proper exemption from duty for articles they acquire abroad for their personal and household use upon returning to the United States from the Commonwealth of the Northern Mariana Islands ("CNMI") and from the Federated States of Micronesia ("Micronesia"). It is our understanding that there is some confusion as to whether the $1,200 personal allowance accorded United States residents returning from Guam is equally applicable to United States residents returning from CNMI or Micronesia. No facts were presented.

ISSUES:

(1) Whether United States residents who return from CNMI or Micronesia are entitled to the $1,200 personal exemption accorded residents returning from American Samoa, Guam, or the United States Virgin Islands.

(2) Whether residents of CNMI and Micronesia bringing goods into the United States may be entitled to the allowances of 19 CFR 148.33 by virtue of being considered "residents" of the United States for purposes of 19 CFR 148.2.

LAW AND ANALYSIS: Historically, CNMI and Micronesia were part of the United States' Trust Territory of the Pacific Islands. 48 U.S.C. 1681. But CNMI is now a self-governing commonwealth in political union with and under the sovereignty of the United States. Presidential Proclamation 5564, November 3, 1986 (see 51 Fed. Reg. 40399, November 7, 1986). In addition, the United States presently has a relationship of free association with Micronesia, which allows Micronesia to be a self-governing federation able to conduct foreign affairs in its own name. Id.

For allowance purposes, Customs regulations provide for two classes of persons: (1) "residents" (United States citizens or persons who have formerly resided in the United States in the absence of satisfactory evidence that they have established a home elsewhere); and (2) "nonresidents" (all other persons). 19 CFR 148.2.

The exemption from duty of articles acquired abroad as an incident of at least a 48 hour foreign journey of any returning United States resident (as defined in 19 CFR 148.2), where the articles are for the returning resident's personal or household use, is covered by 19 CFR 148.33, which references Chapter 98, Subchapter IV of the Harmonized Tariff Schedule of the United States (HTSUS), 19 U.S.C. 1202. The general rule provides that a returning resident is entitled to bring into the United States, free of duty and internal revenue tax, articles accompanying the returning resident the aggregate value in the country of acquisition of which does not exceed $400. 19 CFR 148.33; Subheading 9804.00.65, HTSUS.

However, there is a special personal exemption for residents returning directly or indirectly from American Samoa, Guam, or the United States Virgin Islands. 19 CFR 148.33. Subheading 9804.00.70, HTSUS, states that residents arriving directly or indirectly from American Samoa, Guam, or the United States Virgin Islands are allowed to bring in, free of duty and internal revenue tax, articles for personal and household use the value of which does not exceed $1,200. These three territories from which returning residents receive the higher allowance are insular possessions of the United States which are outside of the Customs territory. 19 CFR 7.8(a).

The Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America ("Covenant") indicates that laws which are applicable to Guam are also applicable to CNMI and that imports from CNMI are to receive the same treatment as imports from Guam. 48 U.S.C. 1681; Covenant, Article V, Section 502(a)(2) and Article VI, Section 603(c). We understand that these two Covenant provisions led to your office's question about whether the higher personal exemption applying to residents returning from Guam should apply to residents returning from CNMI.

In general, under the HTSUS and Customs regulations at 19 CFR 148.2, the personal allowance depends on a person's status as a returning United States resident. Thus, for a person to be entitled to the general personal exemption of $400, he or she must meet the primary condition of having the status of being a returning resident.

However, the special personal exemption for residents returning from the insular possessions of American Samoa, Guam, or the United States Virgin Islands is somewhat unique. Reading the special personal exemption as a whole, as set forth in subheading 9804.00.70, HTSUS and its heading, it contains a condition about the status of the goods in addition to the condition about the status of the person: at least $800 of the $1,200 merchandise value must have been acquired not elsewhere than in the insular possession, unless the other place of acquisition is a "beneficiary developing country" in which case at least $600 must have been acquired not elsewhere than in the insular possession. See Chapter 98, Subchapter IV, U.S. Note 4; General Note 3(c)(v)(A). This is a condition that relates to the status of the goods, not to the status of any person. This condition is similar to the country of origin conditions more typically associated with the import provisions of the HTSUS. For example, the Caribbean Basin Economic Recovery provisions of the HTSUS at General Note 3(c)(v)(B) requires that the merchandise be from the growth, product, or manufacture of the beneficiary country. Thus, the special personal exemption is unique because it contains an import condition relating to the status of the goods as well as the general condition about the status of the person.

The Covenant requires that laws which are applicable to Guam apply to CNMI and that imports "from" CNMI receive the same treatment as imports from Guam. The import condition in the special personal exemption requires that merchandise ($800 or $600) must have been acquired in an insular possession and, therefore, imports "from" Guam (or the other two specified insular possessions) receive a statutory benefit. Consequently, the only means by which imports from the CNMI can receive the same beneficial treatment as like imports from Guam is to interpret this personal exemption as applying equally to residents returning from the CNMI. This would entitle them to bring in, free of duty and internal revenue tax, articles for personal and household use with a value not exceeding $1,200, assuming all other conditions are satisfied, rather than the $400 general personal allowance we understand they are currently receiving.

Regarding Micronesia, the Compact of Free Association indicates it is treated as a foreign country by the United States. 48 U.S.C. 1681. Therefore, United States residents returning from Micronesia are subject to the general personal exemption applicable when returning from any foreign country, and are only allowed to bring in, free of duty and internal revenue tax, accompanying articles acquired abroad for personal and household use the value of which does not exceed $400.

The final issue is whether residents of CNMI and Micronesia bringing goods into the United States may be entitled to the allowances of 19 CFR 148.33 by virtue of being considered "residents" of the United States for purposes of 19 CFR 148.2. The Covenant, Article III, Section 301 contains a broad grant of United States citizenship to residents of CNMI. 48 U.S.C. 1681. Thus, residents of CNMI (who are United States citizens by operation of the Covenant) are "residents" for purposes of 19 CFR 148.2. This entitles them to the $1,200 personal allowance as well. 19 CFR 148.33. However, the Compact of Free Association, Title One, Article IV, Section 141, provides for instances when citizens of Micronesia may become residents but not citizens of the United States. 48 U.S.C. 1681. Since citizens of Micronesia do not become citizens of the United States, we are of the opinion that they cannot claim the personal exemption for returning "residents" by virtue of their being a resident or citizen of Micronesia. 19 CFR 148.2.

HOLDINGS:

(1) United States residents returning from the CNMI are entitled to receive the $1,200 special personal exemption as detailed in subheading 9804.00.70, HTSUS; however, United States residents returning from Micronesia are only entitled to the $400 general personal exemption of subheading 9804.00.65, HTSUS.

(2) Residents of CNMI bringing goods into the United States are considered to be "residents" of the United States for purposes of 19 CFR 148.2, entitling them to the $1,200 personal allowance exemption of 19 CFR 148.33, but residents of Micronesia are not entitled to claim the personal allowance for returning "residents" because they are not citizens of the United States.

Sincerely,

John A. Durant, Director
Commercial Rulings Division