HQ 0112011 - Instruments of International Traffic; Busses; Transfer Point; 19 U.S.C. 1322 - United States International Trade Commision Rulings

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HQ 112011

February 11, 1992

BOR-7-04-CO:R:IT:C 112011 GEV

CATEGORY: CARRIER

Dennis Friesen
Quick Coach Lines Ltd.
6975 - 18th Avenue
Burnaby, British Columbia, Canada V3N 4L1

RE: Instruments of International Traffic; Busses; Transfer Point; 19 U.S.C. 1322

Dear Mr. Friesen:

This is in response to your letters dated November 18, 1991, and January 23, 1992, regarding a proposed extension of your existing bus service between the United States and Canada. Our ruling on this matter is set forth below.

FACTS:

Quick Coach Lines, a Canadian-based carrier, has been operating as a public service transportation company since August 1, 1987. After considerable research Quick Coach Lines discovered that many Canadian travel agents were booking their clients on flights departing from Bellingham International Airport and Seattle-Tacoma International Airport. At that time there was no direct means of transportation for these Canadian passengers traveling from Vancouver, British Columbia, Canada to the United States, and return.

In response to this needed service, Quick Coach Lines has established a daily schedule of six (6) busses traveling south from Vancouver to Seattle-Tacoma and the same schedule traveling northbound. To date the company has completed approximately 5,675 round trips. In 1992 it is estimated that the company will complete an additional 2,880 round trips from the Vancouver area.

In 1990 Quick Coach Line learned that Canadian travel agents in the Fraser Valley of British Columbia were booking their clients on flights departing from Bellingham International Airport and Seattle-Tacoma International Airport. There is currently no direct means of transportation from this area to the United States. The Fraser Valley has a population of
approximately 200,000 people and Quick Coach Lines proposes to offer the same service to the people in this area as it offers the people in the Vancouver area. The details of this proposal are set forth below.

1) Passengers would board the shuttle bus from various areas in the Fraser Valley of British Columbia.

2) The passengers would receive a ticket which identifies them as traveling to Bellingham International Airport, Downtown Seattle, or the Seattle-Tacoma International Airport.

3) The Fraser Valley shuttle bus will cross the U.S.-Canada border at the Sumas, Washington, or Lynden, Washington, ports of entry. Customs hours of operation will determine which border crossing will be used. These border crossings would allow the most direct route.

4) Dispatch notifies the driver traveling the current route (Vancouver to Seattle-Tacoma International Airport) of the passenger count on the Fraser Valley shuttle bus.

5) At Bellingham International Airport the passengers traveling to Downtown Seattle or the Seattle-Tacoma International Airport would then transfer from the shuttle bus to the Vancouver-Seattle-Tacoma Airport bus. They would then continue along the current regular route being used by Quick Coach Lines until they arrived at Downtown Seattle and the Seattle-Tacoma International Airport.

6) The same system would apply for the return portion of the trip. Only passengers traveling from Canada to the United States or vice versa will be authorized to transfer busses. All authorized passengers will be accounted for and confirmed by two- way radio communication.

ISSUE:

Whether there is a movement in "local traffic" in violation of 19 CFR 123.14(c)(1) when a Canadian-based bus company operating a regularly scheduled international service between Vancouver, British Columbia, Canada, and Seattle-Tacoma International Airport, extends that service by operating a shuttle bus between the Fraser Valley of British Columbia which picks up passengers in Canada and transports them into the United States to Bellingham International Airport where they will transfer to the Vancouver - Seattle-Tacoma International Airport bus already on its regularly scheduled international route.

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 busses in question are 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, busses having their principal base of operations in a foreign country must be arriving in the United States with passengers and/or merchandise destined for points in the United States, or arriving empty or loaded for the purpose of taking passengers and/or merchandise out of the United States (see 19 CFR 123.14(a)). Customs has long interpreted the phrase "taking out" as meaning destined to a foreign country and does not cover passengers and/or merchandise whose intended destination is a second point in the United States.

Section 123.14(c), Customs Regulations, states that with one exception, a foreign-based bus, 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. For purposes of section 123.14, Customs interprets the term "local traffic in the United States" as referring to the transportation of passengers or merchandise between any two points in the United States.

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 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 therefor 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).

The Customs Simplification Act of 1953 (Pub. L. 67-243) added section 322 to the Tariff Act of 1930 (19 U.S.C. 1322) to grant to international traffic the generally recognized customary exceptions from Customs requirements. Although 19 U.S.C. 1322 does not define "customary exceptions," the legislative history is explicit in stating that the customary exceptions referred to are those mentioned in the "United States Import Duties" (1952), at page 269. Senate Report No. 632, 83rd Congress, 1st Session, page 12, states "It (19 U.S.C. 1322) does not change the customary exceptions as set out in...United States Import Duties (1952) p. 269." The intent of Congress is also apparent from House Report No. 760, 83rd Congress, 1st Session, page 13. These provisions now appear, essentially without change, in sections 10.41(d) and 123.14 referred to above.

It is noted that although Public Law 98-573, section 127(b) (effective October 30, 1984) amended 19 U.S.C. 1322(a) by substituting the words "shall be excepted" for "shall be granted the customary exceptions", the legislative history of this amendment clearly states that its purpose is to provide for the duty-free entry of repair parts, accessories and equipment of temporarily admitted containers thereby bringing United States treatment into conformity with the Customs Convention on Containers, 1972.

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 and/or passengers in international traffic is the key; the domestic movement of merchandise and/or passengers 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 and/or passengers moving in international traffic.

In regard to the proposal under consideration, we note that the shuttle bus is engaging solely in international traffic (Canada - Bellingham International Airport). The local traffic in question (Bellingham - Seattle-Tacoma International Airport) is performed by a bus that is currently operating on its regularly scheduled international route and this domestic movement follows the same basic route as the passengers moving in international traffic (Vancouver - Seattle-Tacoma International Airport). Accordingly, the proposal as described above would not constitute a violation of 19 CFR 123.14(c)(1).

HOLDING:

There is no movement in "local traffic" in violation of 19 CFR 123.14(c)(1) when a Canadian-based bus company operating a regularly scheduled international service between Vancouver, British Columbia, Canada, and Seattle-Tacoma International Airport, extends that service by operating a shuttle bus between the Fraser Valley of British Columbia which picks up passengers in Canada and transports them into the United States to Bellingham International Airport where they will transfer to the Vancouver - Seattle-Tacoma International Airport bus already on its regularly scheduled international route.

Sincerely,

B. James Fritz

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