VES-3-06-OT:RR:BSTC:CCR H307742 AMW
Mr. Lawrence M. Friedman, Esq.
Barnes, Richardson & Colburn LLP
303 East Wacker Drive, Suite 305
Chicago, IL 60601
RE: 19 U.S.C. §§ 1552-1553; 19 CFR §§ 18.1(c) and 18.2(a)(1); Ford Motor Company; In-Bond Transportation.
Dear Mr. Friedman:
This is in response to your December 20, 2019, correspondence on behalf of your client, Ford Motor Company (“Ford”), in which you request a ruling determining whether bonded merchandise can be carried by non-bonded parties in instances where a bonded carrier does not take physical delivery of the merchandise but obligates its bond to a non-bonded carrier. Our decision follows.
FACTS
The following facts are from your ruling request and follow-up information provided to this office on February 21, 2020. Ford is an automobile and truck manufacturer with production facilities in the United States, Canada, Mexico, and elsewhere. For logistical purposes, Ford often ships vehicles manufactured in Canada through the United States to destinations world-wide. Presently, you state that Ford uses a bonded carrier to move the Canadian-manufactured vehicles in-bond through the United States to a Foreign Trade Zone (“FTZ”) via an Immediate Transportation (“IT”) bond. The vehicles are then transported under an Immediate Exportation (“IE”) bond to a port of export for shipment abroad. The vehicles are not intended to enter the commerce of the United States, and are not subject to further processing while in the United States.
You have requested a determination that merchandise is properly bonded when a bonded carrier accepts responsibility for a shipment without ever taking physical delivery of the underlying merchandise. Specifically, you state that Ford has received a proposal from [ ] (“Company A”), a third-party logistics provider to consolidate the bonding of its IT and IE processes. Under this proposal, Company A, which has a strategic partnership with [ ] (“Company B”), would act as Ford’s agent to file IT and IE transportation entries in CBP’s Automated Commercial Environment (“ACE”) and to obligate Company B’s bond for the transportation of the subject vehicles to a rail carrier (“Company C”). Company C would then transport each shipment of vehicles under Company B’s bond from Canada through the United States to an FTZ near each port of export. You state that Company C would be the physical carrier, although its bond (if one exists) would not be obligated for the IT or IE transportation entries covering the subject vehicles.
ISSUE
Whether the subject vehicles are properly bonded when a bonded carrier accepts responsibility for the shipment without ever taking physical possession of the underlying vehicles.
LAW AND ANALYSIS
All merchandise imported into the U.S. is required to be entered, unless specifically excepted. The general statutory provisions governing transportation in bond (i.e., entry for immediate transportation and entry for transportation and exportation) are provided at sections 552 and 553, Tariff Act of 1930, as amended (19 U.S.C. §§ 1552-1553)).
The general Customs regulation governing in-bond entries, 19 CFR § 18.1, states in pertinent part:
General requirement. In order to transport merchandise in-bond (transport imported merchandise, secured by a bond, from one port to another prior to the appraisement of the merchandise and without payment of duties), an in-bond application . . . is required.”
In addition, 19 CFR § 18.2(a)(1), which outlines the requirements for transportation of merchandise in-bond by bonded carriers, stipulates that merchandise delivered to bonded carriers may subsequently be transported by non-bonded carriers:
[M]erchandise to be transported from one port to another in the United States in-bond must be delivered to a common carrier, contract carrier, freight forwarder, or private carrier, each of which must be bonded for that purpose. Such merchandise delivered to a bonded common carrier, contract carrier, or freight forwarder may be transported with the use of facilities of other bonded or non-bonded carriers; however, the responsibility for the merchandise will remain with the common carrier, contract carrier, or freight forwarder that obligated its bond for that purpose.
CBP has not directly considered whether a bonded carrier may obligate its bond to a non-bonded carrier for the purposes of IT or IE transportation entries without physically receiving and transferring the underlying merchandise. The available Customs rulings, however, indicate that a bonded carrier must physically receive and transfer merchandise to a non-bonded carrier. In C.S.D. 79-13 (June 20, 1973), for instance, Customs considered whether a Canadian corporation could use private bonded carriers (i.e., “private vehicles”) to transport merchandise through the United States for export overseas. In discussing the applicability of 19 CFR §§ 18.1-18.2, Customs stated, “[t]he only possible administrative solution…is the authority found in sections 18.1 and 18.2 of the Customs Regulations for the subsequent transfer of merchandise in transit from the bonded common carrier or contract carrier to ‘other bonded or nonbonded carriers.’” (Emphasis added). To gain protection under these provisions, however, Customs reasoned, “your clients can transport through the United States in their own vehicles merchandise which has first been delivered to a bonded common carrier or contract carrier.” (Emphasis added). In C.S.D. 82-82 (Dec. 11, 1981), furthermore, Customs indicated that a physical transfer of merchandise must occur, writing: “[o]nly after a bonded carrier signs for a shipment and assumes liability for it under its carriers bond can it be ‘transported with the use of other bonded…carriers.’”
In support of your request, you cite to CBP’s response to a comment regarding the agency’s 2017 changes to the in-bond process. See 82 FR 45366 (Sept. 28, 2017). Specifically, CBP agreed with several commenters that CBP’s ACE system is “designed to allow an approved bonded carrier that has a CBP-approved ACE account to allow restricted or unrestricted use of its bonds…. [T]hat carrier can log into its account and select the other parties that are authorized to obligate its bond.” Id. at 45374. You state that this passage is evidence that “[ACE] was clearly designed to allow bond holders to authorize third parties to obligate their bonds.” We note, however, that CBP’s response is not in itself a binding regulation, nor is it a ruling issued in response to a specific factual scenario. The response, furthermore, does not contradict the analysis above. Indeed, this ruling recognizes that several scenarios exist in which a bonded carrier may obligate its bond to a third-party carrier (e.g., after physical transfer of merchandise to a non-bonded carrier for subsequent transportation).
As outlined above, your client proposes to transport vehicles from Canada to various ports of export in the United States utilizing a non-bonded carrier; the applicable bond will instead by obligated by a third-party bonded carrier that will otherwise play no role in the physical transportation of the vehicles. Pursuant to the procedures in 19 CFR § 18.2(a)(1), merchandise delivered to a bonded carrier may subsequently “be transported with the use of facilities of other bonded or non-bonded carriers.” We find that the proposed transaction is not compliant with 19 CFR § 18.2(a)(1) as interpreted in prior Customs rulings because the subject merchandise would not be physically delivered to the bonded carrier and subsequently transferred to a non-bonded carrier for transportation.
HOLDING
The subject vehicles are not properly bonded when a bonded carrier accepts responsibility for the shipment without ever taking physical possession of the underlying vehicles.
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