HQ 0111176 - Instruments of International Traffic; Canadian-based Trucks; 19 U.S.C. 1322 - United States International Trade Commision Rulings

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HQ 111176

September 12, 1990

BOR-7-04-CO:R:P:C 111176 GV

CATEGORY: CARRIER

Edward J. Kiley, Esq.
Grove, Jaskiewicz & Cobert
1730 M Street, N.W., Suite 501
Washington, D.C. 20036-4579

RE: Instruments of International Traffic; Canadian-based Trucks; 19 U.S.C. 1322

Dear Mr. Kiley:

This is in response to your letter dated July 13, 1990, regarding the proposed use of Canadian-based trucks in the United States. Our ruling is set forth below.

FACTS:

Preferred Transport Limited ("Preferred") is a Canadian- based for-hire motor carrier operating in domestic Canadian commerce, international commerce between the United States and Canada, and in domestic United States commerce. Preferred holds appropriate operating licenses from, among others, the Interstate Commerce Commission ("ICC") authorizing the aforementioned operations.

Preferred presently conducts extensive services on commodities moving between the United States and Canada in international commerce, and involving such ports of entry as Detroit, Michigan/Windsor, Ontario and Buffalo, New York/Ft. Erie, Ontario. These services involve transportation of Canadian-origin goods to U.S. destinations and U.S.-origin goods to Canadian destinations.

Preferred now proposes to commence operations between essentially Michigan points and those in upstate New York via an Ontario routing. Preferred tractor-trailer units would be used to pick up loads in Michigan, and would enter Canada at Detroit/Windsor or Port Huron/Sarnia. Reentry into the U.S. would be at Ft. Erie/Buffalo or Niagara Falls/Niagara Falls. In some cases, the Preferred tractor-trailer unit which originated the traffic in Michigan would reenter the U.S. at the Ontario/New York border, and in other cases the Preferred trailer would be switched in Ontario and brought into the United States by another
carrier using a U.S.-based tractor. In all cases the goods would remain in Preferred's trailer from origin to destination. After delivery and unloading in New York, the equipment would be used to transport goods from the U.S. back to Canada. It is noted that the Preferred tractor-trailer units to be used in this service are also regularly used in handling shipments from the U.S. to Canada and from Canada to the U.S.

ISSUES:

1. Whether there is a movement in local traffic in violation of 19 CFR 123.14(c)(1) when a Canadian-based tractor- trailer unit which, after hauling merchandise between two United States points via Canada, is then reloaded at the second United States point and proceeds to transport merchandise back to Canada.

2. Whether there is a movement in local traffic in violation of 19 CFR 123.14(c)(1) or (2) when a Canadian-based tractor-trailer unit hauls merchandise from a United States point to a point in Canada where the trailer would be separated from the tractor, hitched to a U.S.-based tractor which would then proceed to haul it into the United States and, after unloading, would then be reloaded to transport merchandise back to Canada.

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 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), 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 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)).

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 sections 123.14(a), (b), and (c)(1), Customs Regulations (19 CFR

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 section 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.

Section 123.14(c)(2), Customs Regulations (19 CFR 123.14(c)(2)), 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 section 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 section 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 section 123.14, is subject to forfeiture under section 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 the aforementioned ICC authority issued to Preferred and the applicable Customs Regulations are easily reconciled. The former authorizes a carrier to transport general commodities or passengers between points in the United States, while the latter applies the statutory requirements that govern such movements.

In regard to the first issue under consideration, the Canadian truck transporting merchandise from a point in the United States to a second point in the United States via Canada would not be considered an instrument of international traffic within the meaning of section 123.14(a). 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. Furthermore, the record is devoid of evidence that at the time the proposed service is to occur the local traffic involved (Michigan to New York) is pursuant to both a regularly scheduled trip and incidental to the international schedule (New York to Canada) as required by section 123.14(c)(1).

Accordingly, the truck involved in the first issue is considered to have been engaged in "local traffic" within the meaning of section 123.14(c)(1), Customs Regulations and not within any of the exceptions noted thereunder regardless of the fact that the goods would remain in Preferred's trailer from origin to destination.

In regard to the second issue, there is a movement in local traffic in violation of section 123.14(c)(2) regarding Preferred's trailer which, after being hauled from the U.S. to Canada is switched to a U.S.-based tractor which then hauls it to its U.S. destination. Pursuant to section 123.14(c)(2), a foreign-based truck trailer may carry merchandise between points in the United States only if such local traffic is reasonably incidental to its economical and prompt departure for a foreign country. The Canadian-based trailer in question is on an inbound trip and therefore does not meet these criteria. We note, however, that neither the Canadian nor the U.S.-based tractors involved are considered to be used in local traffic in violation of section 123.14(c)(1).

HOLDINGS:

1. There is a movement in local traffic in violation of 19 CFR 123.14(c)(1) when a Canadian-based tractor-trailer unit which, after hauling merchandise between two United States points via Canada, is reloaded at the second United States point and used to transport merchandise back to Canada.

2. There is a movement in local traffic in violation of 19 CFR 123.14(c)(2) when a Canadian-based tractor-trailer unit hauls merchandise from a United States point to a point in Canada where the trailer would be separated from the tractor and hitched to a U.S.-based tractor which then proceeds to haul it into the United States and, after loading, would then be reloaded to transport merchandise back to Canada.

Sincerely,

B. James Fritz

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