VES-3-06-OT:RR:BSTC:CCR H256573 KLQ
Mr. Richard Belanger
Sidley Austin LLP
1501 K Street, N.W.
Washington, D.C. 20005
RE: 19 U.S.C. § 1553a; 19 C.F.R. §§ 18.1(a)(1) and 18.31; 19 C.F.R. §§ 123.31 and 123.32; TransCanada Pipelines Limited; natural gas transportation; pipeline.
Dear Mr. Belanger:
This is in response to your August 19, 2014, ruling request on behalf of your client, TransCanada Pipelines Limited (“TransCanada”), in which you request a ruling determining the reporting requirements for natural gas which is transported through the United States (“U.S.”) between points in Canada. Our decision follows.
FACTS
The following facts are from your ruling request and email to this office, dated December 22, 2014. TransCanada ships natural gas by pipeline between points in Canada. On occasion, some of the gas moves through the U.S. via an agreement with an interconnecting interstate natural gas pipeline system, the Great Lakes Gas Transmission system (“GLGT system”). TransCanada only uses the GLGT system to transport the natural gas between points in Canada. It does not use the system to enter natural gas into the U.S. for purposes of consumption. There are three interconnecting points along the GLGT system for receipt and delivery of natural gas from the TransCanada Mainline into the United States. The three interconnecting points are in Emerson, Sault Sainte Marie and St. Clair. Emerson is served by the Port of Pembina, North Dakota; Sault Sainte Marie is served by the Port of Sault Sainte Marie, Michigan; and St. Clair is served by the Port of Port Huron, Michigan. As the operator of the interconnecting pipeline and a shipper on the GLGT system, TransCanada does not have title to the natural gas; however, TransCanada is aware of the quantity of gas nominated for delivery, the points of delivery, and the flow of the GLGT system at the TransCanada/GLGT interconnect locations.
ISSUES
What are the reporting requirements upon arrival at the port of entry in the U.S. for shipments of natural gas scheduled to be transported through the U.S. by pipeline?
What are the reporting requirements upon arrival at the port of destination in the U.S. for shipments of natural gas that were transported through the U.S. by pipeline?
LAW AND ANALYSIS
Issue One: Reporting Requirements for Shipments of Natural Gas Scheduled to be Transported through the United States by Pipeline upon arrival into the United States
All merchandise imported into the U.S. is required to be entered, unless specifically excepted.
Date of importation is defined in Customs and Border Protection (“CBP”) regulation 19 C.F.R. § 101.1 and states in pertinent part:
Date of importation means, in the case of merchandise imported otherwise than by vessel, the date on which the merchandise arrives within the Customs territory of the United States. In the case of merchandise imported by vessel, “date of importation” means the date on which the vessel arrives within the limits of a port in the United States with intent then and there to unlade such merchandise.
(emphasis added).
Pursuant to 19 C.F.R. § 142.4(a), which states in pertinent part:
At the time of entry. Except as provided in §10.101(d) of this chapter, or paragraph (c) of this section, merchandise shall not be released from Customs custody at the time Customs receives the entry documentation or the entry summary documentation which serves as both the entry and the entry summary, as required by §142.3 unless a single entry or continuous bond on Customs Form 301, containing the bond conditions set forth in §113.62…has been filed.
Therefore, merchandise, upon importation into the U.S., must either be entered or secured with a bond. TransCanada asserts that: (1) it does not intend to enter the natural gas into the United States for consumption; (2) there are no delivery points in the U.S.; and (3) the natural gas will only temporarily enter the U.S. from Canada by pipeline before exiting the U.S. by pipeline and returning to Canada for ultimate delivery. Insofar as your client does not intend to enter the merchandise into the commerce of the United States, but instead will transport the merchandise for exportation, your client will be required to obtain a bond for transportation and exportation.
Treasury Decision 96-18 explains, “to make it clear to the public that Customs Regulations pertaining to transportation in bond apply to transportation by pipeline, the definition of “common carrier” in 19 C.F.R. § 18.1(a)(1) is amended to specifically include a common carrier of merchandise owning or operating a pipeline.” CBP regulation 19 C.F.R. § 18.1(a)(1), provides in pertinent part:
Merchandise to be transported from one port to another in the United States in bond, except as provided for in paragraph (b) of this section, shall be delivered to a common carrier, contract carrier, freight forwarder, or private carrier bonded for that purpose. […] For the purposes of this section, the term “common carrier” means a common carrier of merchandise owning or operating a railroad, steamship, pipeline, or other transportation line or route.
Therefore, for purposes of importation, a pipeline is considered a carrier and your client, should it choose not to make entry, and instead only transport the natural gas through the U.S., will be required to obtain a bond and will be bound by CBP in bond regulations.
Title 19 C.F.R. § 123.31(b) governs merchandise in transit through the U.S. and states in pertinent part:
From one point in a contiguous country to another through the United States. Merchandise may be transported from point to point in Canada or in Mexico through the United States in bond in accordance with the procedures set forth in §§18.20 to 18.24 of this chapter except where those procedures are modified by this subpart or subparts E for trucks transiting the United States, F for commercial traveler's samples, or G for baggage.
Title 19 C.F.R. § 123.32(a) governs merchandise in transit and the presentation of documentation to CBP upon arrival into the United States. It states in pertinent part, “[t]hree copies of the transportation entry and manifest on Customs Form 7512 shall be presented upon arrival of merchandise which is to proceed under the provisions of this subpart.”
Your client proposes to transport natural gas by pipeline through the U.S. between points in Canada. Your client has indicated that it does not intend to enter the natural gas into the commerce of the U.S.; therefore, it will be required to procure a bond. Pursuant to 19 C.F.R. § 123.31(b), merchandise may transit the U.S. between points in Canada if under bond and pursuant to the procedures in 19 C.F.R. §§18.20 to 18.24. Title 19 C.F.R. § 123.32(a) indicates that upon arrival of merchandise in transit through the United States between two points in Canada, “three copies of the transportation entry and manifest on Customs Form 7512 shall be presented” to CBP. Therefore, insofar as your client intends to transport natural gas by pipeline in bond through the U.S. between two points in Canada, it will be required to provide “the transportation entry and manifest on Customs Form 7512” to CBP at the first port of arrival in the U.S., which will either be the Port of Pembina, North Dakota; the Port of Sault Sainte Marie, Michigan; or the Port of Port Huron, Michigan.
Issue Two: Reporting Requirements for Shipments of Natural Gas Scheduled to be Transported through the United States by Pipeline upon Exiting the United States
Your client proposes that it report the amount of natural gas being transported through the United States in a monthly summary. Precedent for a monthly reporting requirement can be found in the 1970 Circular ENT-1-AC (“1970 Circular”). The 1970 Circular implemented a monthly reporting requirement in order to better accommodate “the monthly entry of high volume, repetitive shipments of non-dutiable merchandise…in a manner which will facilitate entry and clearance.” This “monthly entry procedure” was only to be applied to “free and conditionally free merchandise, consigned from one shipper to one importer thru one port.” The 1970 Circular is distinguishable from the facts of the present case. Your client has stated that it does not intend to enter the merchandise into the commerce of the United States and the 1970 Circular specifically applies to merchandise intended for entry. Moreover, the 1970 Circular applies to merchandise moving through one port. In the present case, the subject merchandise is transiting the United States. This implies entry at one port and exit at a second port. Insofar as the subject natural gas will not enter the commerce of the United States and will move through two U.S. ports, the 1970 Circular is not applicable to the facts of the present case.
Recordkeeping for merchandise transported in bond by pipeline is governed by 19 U.S.C. § 1553a:
Merchandise in Customs custody that is transported by pipeline may be accounted for on a quantitative basis, based on the bill of lading, or equivalent document of receipt, issued by the pipeline carrier. Unless the Customs Service has reasonable cause to suspect fraud, the Customs Service may accept the bill of lading, or equivalent document of receipt, issued by the pipeline carrier to the shipper and accepted by the consignee to maintain identity. The shipper, pipeline operator, and consignee shall be subject to the recordkeeping requirements of sections 1508 and 1509 of this title.
Title 19 C.F.R. § 18.31 adopts current procedures for transportation in bond as applicable to transportation by pipeline and provides in pertinent part:
(a) General. Merchandise may be transported by pipeline under the procedures in this part, as appropriate and unless otherwise specifically provided for in this section.
(b) Bill of lading to account for merchandise. Unless Customs has reasonable cause to suspect fraud, Customs shall accept a bill of lading or equivalent document of receipt issued by the pipeline operator to the shipper and accepted by the consignee to account for the quantity of merchandise transported by pipeline and to maintain the identity of the merchandise.
(c) Procedures when pipeline is only carrier. When a pipeline is the only carrier of bonded merchandise and there is no transfer to another carrier, the bill of lading or equivalent document of receipt issued by the pipeline operator to the shipper shall be included with, and made a part of, the Customs in-bond document (see §18.2(b)). If there are no discrepancies between the bill of lading or equivalent document of receipt and the other documents making up the in-bond manifest for the merchandise, and provided that Customs has no reasonable cause to suspect fraud, the bill of lading or equivalent document of receipt shall be accepted by Customs at the port of destination or exportation (see §§18.2(d) and 18.7) as establishing the quantity and identity of the merchandise transported. The pipeline operator shall be responsible for any discrepancies, including shortages, irregular deliveries, or nondeliveries at the port of destination or exportation (see §18.8).
Title 19 C.F.R. § 18.7(a), concerns the lading of merchandise for exportation and is therefore inapplicable to the facts of the present matter. Title 19 C.F.R. § 18.2(d), which concerns carriers and in bond shipments, provides in pertinent part:
Promptly, but no more than 2 working days after the arrival of any portion of the in-bond shipment at the port of destination, the delivering carrier shall surrender the in-bond manifest (the in-bond document any related carnet) to the port director as notice of arrival of the merchandise. […]
(emphasis added).
Treasury Decision 96-18 (1996) states in pertinent part:
[T]he new § 18.31 adopts the current procedures for transportation in bond, as applicable to pipeline transportation. […] Delivery of the merchandise at the port of destination is required within 30 days after the date of receipt by the carrier at the port of origin […] Within 2 days of arrival of the merchandise at the port of destination, the delivering carrier is required to report the arrival to Customs by surrendering the in-bond manifest to Customs at that port. […]
(emphasis added).
Pursuant to 19 U.S.C. § 1553a and 19 C.F.R. § 18.31, merchandise in CBP custody that is transported in bond by pipeline may be accounted for on a quantitative basis. TransCanada claims that it is aware of the quantity of gas nominated for delivery. In addition, pursuant to 19 U.S.C. § 1553a and 19 C.F.R. § 18.31, merchandise transported in bond by pipeline shall be reported to CBP in the form of a bill of lading or other equivalent document of receipt issued by the pipeline carrier to the shipper. TransCanada claims that it is the operator of the interconnecting pipeline and a shipper on the GLGT; therefore, in the course of its business, your client would have access to this documentation. Finally, 19 C.F.R. § 18.31(c) states that this documentation is to be included with the in bond document and turned over to CBP at the port of destination pursuant to 19 C.F.R. § 18.2(d). Therefore, your client will be required to submit the in bond manifest to CBP at the port of destination.
Therefore, pursuant to 19 U.S.C. § 1553a and 19 C.F.R. §§ 18.31 and 18.2(d), your client is required to surrender the in bond manifest and report the quantity of merchandise transported through the United States by proffering “a bill of lading or equivalent document of receipt issued by the pipeline operator to the shipper and accepted by the consignee” to CBP at the port of destination, which in this case will either be the Port of Pembina, North Dakota; the Port of Sault Sainte Marie, Michigan; or the Port of Port Huron, Michigan.
HOLDING
TransCanada is required to provide CBP the transportation entry and manifest on Customs Form 7512 upon arrival of the natural gas at the port of entry in the U.S.
TransCanada is required to report the natural gas scheduled to be transported through the U.S. by pipeline within 2 days of arrival of the merchandise at the port of destination in the U.S. by surrendering the in bond manifest to CBP and reporting the quantity of merchandise transported through the U.S. by proffering “a bill of lading or equivalent document of receipt issued by the pipeline operator to the shipper and accepted by the consignee.”
Sincerely,
Lisa L. Burley
Chief/Supervisory Attorney-Advisor
Cargo Security, Carriers and Restricted Merchandise Branch
Office of International Trade, Regulations and Rulings
U.S. Customs and Border Protection