BOR-7-03/04-CO:R:IT:C 112164 GEV
Forest Ayer
Maine Packers Inc.
RFD 3 Box 50
Caribou, Maine 04736
RE: Instruments of International Traffic; Trucks; Rail;
Intermodal Transportation; 19 U.S.C. 1322
Dear Mr. Ayer:
This is in response to your letter dated March 27, 1992,
requesting a ruling on a proposed intermodal (truck/rail)
transportation of merchandise between two United States points
via Canada. Our ruling on this matter is set forth below.
FACTS:
Maine Packers Inc. proposes to load potatoes in North Dakota
on Canadian trailers. These trailers will be delivered to
Winnipeg, Manitoba, Canada, by either U.S. or Canadian tractors.
These trailers will then be loaded onto Canadian rail cars (i.e.,
the "piggyback" procedure) for transportation to Montreal,
Quebec, Canada.
Upon arrival in Montreal, the trailers will be off-loaded
from the rail cars and then be hauled by different Canadian or
U.S. tractors to various points in Maine.
ISSUES:
Whether the intermodal (i.e., truck/rail) transportation
scenarios described above constitute movements in local traffic
in violation of 19 CFR 123.12 and/or 123.14.
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
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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), it is 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)). To receive the same consideration, foreign
railroad equipment other than locomotives may proceed on the
inward trip to the place of complete unloading for any
merchandise imported therein (see 123.12(a)(1), Customs
Regulations).
In addition, 123.12(a)(2), Customs Regulations, states that
foreign railroad equipment other than locomotives may be used on
the outward trip in through trains crossing the boundary or for
such local traffic as is reasonably incidental to its economical
and prompt departure for a foreign country (i.e., in the general
direction of the country of origin, or to the home route junction
point, over a route which the equipment would ordinarily
otherwise travel empty).
Generally speaking, a foreign truck tractor which arrives in
the United States in international traffic towing a foreign
trailer, either empty or loaded, constitutes a foreign "truck" as
that term is used in 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
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.
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Section 123.14(c)(2), Customs Regulations, 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 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 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 123.14, is subject to forfeiture under 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.
It should be noted that 123.14 is applicable only to those
vehicles which have their "principal base of operations in a
foreign country." Customs has no specific requirements for
determining a vehicle's base of operations. As long as an
operator has the intention to establish his base of operations in
a certain place and operate out of that location, and presents
sufficient evidence to support this intention, Customs will
consider that as his base of operations. In the event a vehicle
is not found to be foreign-based thereby rendering 123.14
inapplicable, it may nevertheless be in violation 10.41(d),
Customs Regulations, if it is foreign-owned and carrying
merchandise between points in the United States for hire or as an
element of a commercial transaction without having made a formal
Customs entry. Failure to make entry in this situation, just as
in the case of failure to enter a foreign-based vehicle before
use in local traffic, is subject to penalty under 19 U.S.C. 1592.
Assuming, arguendo, that the Canadian vehicles in the
scenarios under consideration are Canadian-based, our findings
are as follows.
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At the outset it should be noted that the Canadian railroad
equipment involved is used only in the movement of the trailers
between Canadian points (Winnipeg - Montreal). Accordingly, this
leg of the transportation does not constitute a violation of 19
CFR 123.12.
Focusing on the proposed use of Canadian trailers we note
that the mere fact that a truck trailer is transported on a rail
car (i.e., the "piggyback" procedure) does not render the trailer
railroad equipment, nor does it exempt it from the applicable
entry requirements accorded those vehicles not designated as
instruments of international traffic. (C.I.E. 77/56, and ruling
letter DB 514.112 1, dated June 18, 1964) Accordingly, there is
a movement in local traffic in violation of 123.14(c)(2)
regarding the Canadian trailer which, after being loaded in the
U.S. is hauled to Canada, placed aboard a Canadian rail car,
transported to a second Canadian point, then hauled by a tractor
to its final U.S. destination. Pursuant to 123.14(c)(2),
Customs Regulations, a foreign-based truck trailer may carry
merchandise between points in the United States only on its
departure for a foreign country and only if such local traffic is
reasonably incidental to its economical and prompt departure for
a foreign country. The route of the Canadian-based trailers in
question (i.e., U.S.-Canada-U.S.) does not meet these criteria.
In regard to the use of different Canadian or U.S. tractors
on either end of the transportation in question, we note the
following.
The use of U.S. tractors on either or both end legs of the
the transportation would incur no violation of 19 CFR 123.14 as
to the tractors. However, the same cannot be said with respect
to the use of Canadian tractors. Customs has long-held that the
termination of transportation in Canada by a foreign truck which
hauled merchandise to Canada with the present existing intention
by the shipper that the merchandise would ultimately be
transported to the U.S. and the subsequent use of a different
foreign truck in hauling the merchandise from Canada to the U.S.,
whether by the same or a different trucking firm, would not
constitute a break in the continuity of the transportation
between points in the U.S. to the extent that each truck would be
considered as operating in international traffic rather than
solely in local traffic. (Ruling 100323) Accordingly, the
movement of Canadian tractors on both ends of the transportation
constitutes an engagement in local traffic not within the
permitted exceptions of section 123.14(c)(1), Customs
Regulations.
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Furthermore, the use of a Canadian tractor only on the first
leg of the transportation (North Dakota - Winnipeg) would be in
violation of 123.14(c)(1), Customs Regulations. This Canadian
truck (i.e., tractor-trailer unit) would not be considered an
instrument of international traffic within the meaning of
123.14(a), Customs Regulations. 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.
Accordingly, the Canadian truck involved in the first leg of the
transportation is considered to have been engaged in "local
traffic" within the meaning of 123.14(c), Customs Regulations,
and not within any of the exceptions noted thereunder regardless
of the fact that the tractor did not take the load to its final
destination in the United States. The fact that the tractor
separated from the trailer in Winnipeg does not exculpate it
from the prohibitions of 123.14(c)(1), Customs Regulations.
In addition, the use of a Canadian tractor on the final leg
of the transportation (Montreal - Maine) would constitute a
violation of 19 CFR 123.14(a) inasmuch as it is transporting
merchandise that is not in international traffic. Furthermore,
it is the intent of both 19 CFR 123.14 and 19 U.S.C. 1322 to
prevent the movement of merchandise between two U.S. points by
either a single foreign-based carrier or a combination thereof.
In your telephone conversation of March 31, 1992, with Mr.
Glen E. Vereb of my staff you alternatively proposed using only
U.S.-based tractors and trailers owned by your company in the
transportation under consideration. The use of U.S.-based
equipment in the manner you propose would not constitute a
violation of 19 CFR 123.14. Furthermore, you should know that
Customs has ruled that when a U.S. tractor-trailer unit
originating from a U.S. point proceeds to Canada where the
trailer is transferred to a Canadian-based tractor which
subsequently hauls the trailer to its U.S. destination, the
Canadian-based tractor hauling solely from a point in Canada to a
point in the U.S. is in international traffic and cannot be
considered imported merchandise subject to Customs entry solely
because it is transporting merchandise on an international leg of
a movement of the merchandise between U.S. points. (see Customs
Rulings DB 542.112 40283, dated December 19, 1958; 101235 dated
February 27, 1975; and 111285, dated October 21, 1990; copies
attached)
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HOLDING:
The intermodal (i.e., truck/rail) transportation scenarios
under consideration constitute movements in local traffic in
violation of 19 CFR 123.14 with the exception of those scenarios
noted above.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch
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