HQ 0110965 - Canadian Rail Cars; International Traffic - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1991 HQ Rulings > HQ 0110804 - HQ 0111053 > HQ 0110965

HQ 110965

July 9, 1990

BOR-7-03-CO:R:P:C 110965 GV

CATEGORY: CARRIER

Michael F. Mitri, Esq.
Donohue and Donohue
1177 Summer Street
Stamford, Connecticut 06905

RE: Canadian Rail Cars; International Traffic

Dear Mr. Mitri:

This is in response to your letter dated March 27, 1990, on behalf of Exxon Chemical Americas ("ECA"), requesting a ruling to determine the dutiability of rail cars under 19 CFR 123.12(a).

FACTS:

ECA plans to import chemical resins from Canada in rail cars for delivery to its U.S. customers. ECA will be the importer of record, although particular customers of ECA may be listed on the transportation documents as the ultimate consignees. The rail cars are owned or leased by Esso Chemical Canada ("ECC"), an affiliate of ECA. The cars are of either Canadian or U.S. manufacture, and those cars produced in the U.S. have been formally entered and cleared through Canadian Customs. The cars are used by ECC primarily for local traffic in Canada and will be used on shipments to the U.S., to be returned to Canada promptly after unloading.

The rail cars will be loaded with resin at ECC's plant in Sarnia, Ontario, Canada. The route which the cars will take from the plant to the U.S. will almost always (i.e., approximately 95% of the time) be as follows: in Canada, the cars will be routed over the Canadian National Railroad and will cross the border into the U.S. at Port Huron, Michigan. In the U.S., they will travel over the Grand Trunk Western Railway from Port Huron to South Bend, Indiana and then will be transported by Conrail to East St. Louis, Missouri. This route is subject to modification when required by U.S. customers.

In East St. Louis, the rail cars will be temporarily stored at ECA's lease track prior to final delivery to the U.S. customer. Normally, the cars will be shipped to the customer within 2 to 4 weeks after arrival, although occasionally cars may
remain at the lease track for up to 6 months due to lack of customer demand, product supply, or other reasons. Also, in some cases, ECA may be required to direct the cars from the lease track to U.S. customers other than those initially named as consignees. However, in all cases, the cars will not be unloaded until they reach their final U.S. destination.

After unloading at the customer's site, the rail cars will be returned empty to ECC's plant in Sarnia. Most cars will be "reverse-routed" through Port Huron on the outward trip, although cars which have been delivered to customers in outlying areas of the U.S. may cross the Canadian border at other points. In all cases, the cars will depart promptly and will travel by the most economical and direct route available. ECA does not anticipate that any of the subject rail cars will be used for local U.S. traffic on the return to Canada. Any such local use would in all cases be consistent with the cars' economical and prompt return to Canada.

ISSUE:

Whether the use of foreign railroad equipment as described above constitutes an engagement in local traffic in violation of 19 CFR 123.12(a)(1) or (2).

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 laws or regulations from the requirements for entry. Since the foreign rail cars in question are not exempted under General Note 4, Harmonized Tariff Schedule of the United States (HTSUS; 19 U.S.C. 1202, as amended), they are 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 title 19, United States Code, section 1322 (19 U.S.C. 1322). To qualify as instruments of international traffic, foreign railroad equipment other than locomotives may proceed on the inward trip to the place of complete unloading for any merchandise imported therein (see section 123.12(a)(1), Customs Regulations (19 CFR

In addition, section 123.12(a)(2), Customs Regulations (19 CFR 123.12(a)(2)) 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).

Section 10.41(d), Customs Regulations (19 CFR 10.41(d)), 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 section 123.12(a), is subject to treatment as an importation of merchandise from a foreign country and a regular Customs entry therefore shall be made. Section 123.12(c), Customs Regulations (19 CFR 123.12(c)), provides that any violation of section 123.12, is subject to forfeiture under section 592, Tariff Act of 1930, as amended (19 U.S.C. 1592).

In regard to the facts under consideration, we note that on the inward trip although the Canadian rail cars will be stopping temporarily at an intermediary point (i.e., ECA's lease track yard in East St. Louis), no merchandise will be loaded at that point, nor will the cars be unloaded until they reach their final U.S. destination. It is therefore apparent that this movement constitutes a movement in international traffic as permitted by section 123.12(a)(1).

In addition, in view of the fact that after their unloading the subject rail cars will be returned empty to ECC's plant in Sarnia, Ontario (either "reverse-routed" through Port Huron or by the most economical and direct route available), their outward trip is in compliance with the provisions of section 123.12(a)(2). Although ECA does not anticipate that any of the subject rail cars will be used for local U.S. traffic on the return trip to Canada, it should be noted that in the event such a movement does take place, the above facts are also in accord with the provisions of section 123.12(a)(2).

HOLDING:

The use of foreign railroad equipment as described above does not constitute an engagement in local traffic in violation of 19 CFR 123.12(a)(1) or (2).

Sincerely,

B. James Fritz

Previous Ruling Next Ruling