HQ 0112164 - Instruments of International Traffic; Trucks; Rail; Intermodal Transportation; 19 U.S.C. 1322 - United States International Trade Commision Rulings

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HQ 112164

April 6, 1992

BOR-7-03/04-CO:R:IT:C 112164 GEV

CATEGORY: CARRIER

Forest Ayer
Maine Packers Inc.
RFD 3 Box 50
Caribou, Maine 04736

RE: Instruments of International Traffic; Trucks; Rail; Intermodal Transportation; 19 U.S.C. 1322

Dear Mr. Ayer:

This is in response to your letter dated March 27, 1992, requesting a ruling on a proposed intermodal (truck/rail) transportation of merchandise between two United States points via Canada. Our ruling on this matter is set forth below.

FACTS:

Maine Packers Inc. proposes to load potatoes in North Dakota on Canadian trailers. These trailers will be delivered to Winnipeg, Manitoba, Canada, by either U.S. or Canadian tractors. These trailers will then be loaded onto Canadian rail cars (i.e., the "piggyback" procedure) for transportation to Montreal, Quebec, Canada.

Upon arrival in Montreal, the trailers will be off-loaded from the rail cars and then be hauled by different Canadian or U.S. tractors to various points in Maine.

ISSUES:

Whether the intermodal (i.e., truck/rail) transportation scenarios described above constitute movements in local traffic in violation of 19 CFR 123.12 and/or 123.14.

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), it is 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)). To receive the same consideration, foreign railroad equipment other than locomotives may proceed on the inward trip to the place of complete unloading for any merchandise imported therein (see 123.12(a)(1), Customs Regulations).

In addition, 123.12(a)(2), Customs Regulations, 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).

Generally speaking, 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 123.14(a), (b), and (c)(1), Customs Regulations (19 CFR 123.14(a), (b), and (c)(1)).

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 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, 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 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 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 123.14, is subject to forfeiture under 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 123.14 is applicable only to those vehicles which have their "principal base of operations in a foreign country." Customs has no specific requirements for determining a vehicle's base of operations. As long as an operator has the intention to establish his base of operations in a certain place and operate out of that location, and presents sufficient evidence to support this intention, Customs will consider that as his base of operations. In the event a vehicle is not found to be foreign-based thereby rendering 123.14 inapplicable, it may nevertheless be in violation 10.41(d), Customs Regulations, if it is foreign-owned and carrying merchandise between points in the United States for hire or as an element of a commercial transaction without having made a formal Customs entry. Failure to make entry in this situation, just as in the case of failure to enter a foreign-based vehicle before use in local traffic, is subject to penalty under 19 U.S.C. 1592.

Assuming, arguendo, that the Canadian vehicles in the scenarios under consideration are Canadian-based, our findings are as follows.

At the outset it should be noted that the Canadian railroad equipment involved is used only in the movement of the trailers between Canadian points (Winnipeg - Montreal). Accordingly, this leg of the transportation does not constitute a violation of 19 CFR 123.12.

Focusing on the proposed use of Canadian trailers we note that the mere fact that a truck trailer is transported on a rail car (i.e., the "piggyback" procedure) does not render the trailer railroad equipment, nor does it exempt it from the applicable entry requirements accorded those vehicles not designated as instruments of international traffic. (C.I.E. 77/56, and ruling letter DB 514.112 1, dated June 18, 1964) Accordingly, there is a movement in local traffic in violation of 123.14(c)(2) regarding the Canadian trailer which, after being loaded in the U.S. is hauled to Canada, placed aboard a Canadian rail car, transported to a second Canadian point, then hauled by a tractor to its final U.S. destination. Pursuant to 123.14(c)(2), Customs Regulations, a foreign-based truck trailer may carry merchandise between points in the United States only on its departure for a foreign country and only if such local traffic is reasonably incidental to its economical and prompt departure for a foreign country. The route of the Canadian-based trailers in question (i.e., U.S.-Canada-U.S.) does not meet these criteria.

In regard to the use of different Canadian or U.S. tractors on either end of the transportation in question, we note the following.

The use of U.S. tractors on either or both end legs of the the transportation would incur no violation of 19 CFR 123.14 as to the tractors. However, the same cannot be said with respect to the use of Canadian tractors. Customs has long-held that the termination of transportation in Canada by a foreign truck which hauled merchandise to Canada with the present existing intention by the shipper that the merchandise would ultimately be transported to the U.S. and the subsequent use of a different foreign truck in hauling the merchandise from Canada to the U.S., whether by the same or a different trucking firm, would not constitute a break in the continuity of the transportation between points in the U.S. to the extent that each truck would be considered as operating in international traffic rather than solely in local traffic. (Ruling 100323) Accordingly, the movement of Canadian tractors on both ends of the transportation constitutes an engagement in local traffic not within the permitted exceptions of section 123.14(c)(1), Customs Regulations.

Furthermore, the use of a Canadian tractor only on the first leg of the transportation (North Dakota - Winnipeg) would be in violation of 123.14(c)(1), Customs Regulations. This Canadian truck (i.e., tractor-trailer unit) would not be considered an instrument of international traffic within the meaning of 123.14(a), Customs Regulations. 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. Accordingly, the Canadian truck involved in the first leg of the transportation is considered to have been engaged in "local traffic" within the meaning of 123.14(c), Customs Regulations, and not within any of the exceptions noted thereunder regardless of the fact that the tractor did not take the load to its final destination in the United States. The fact that the tractor separated from the trailer in Winnipeg does not exculpate it from the prohibitions of 123.14(c)(1), Customs Regulations.

In addition, the use of a Canadian tractor on the final leg of the transportation (Montreal - Maine) would constitute a violation of 19 CFR 123.14(a) inasmuch as it is transporting merchandise that is not in international traffic. Furthermore, it is the intent of both 19 CFR 123.14 and 19 U.S.C. 1322 to prevent the movement of merchandise between two U.S. points by either a single foreign-based carrier or a combination thereof.

In your telephone conversation of March 31, 1992, with Mr. Glen E. Vereb of my staff you alternatively proposed using only U.S.-based tractors and trailers owned by your company in the transportation under consideration. The use of U.S.-based equipment in the manner you propose would not constitute a violation of 19 CFR 123.14. Furthermore, you should know that Customs has ruled that when a U.S. tractor-trailer unit originating from a U.S. point proceeds to Canada where the trailer is transferred to a Canadian-based tractor which subsequently hauls the trailer to its U.S. destination, the Canadian-based tractor hauling solely from a point in Canada to a point in the U.S. is in international traffic and cannot be considered imported merchandise subject to Customs entry solely because it is transporting merchandise on an international leg of a movement of the merchandise between U.S. points. (see Customs Rulings DB 542.112 40283, dated December 19, 1958; 101235 dated February 27, 1975; and 111285, dated October 21, 1990; copies attached)

HOLDING:

The intermodal (i.e., truck/rail) transportation scenarios under consideration constitute movements in local traffic in violation of 19 CFR 123.14 with the exception of those scenarios noted above.

Sincerely,

B. James Fritz

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