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HQ 223423
December 2, 1991

ENT-1-03-CO:R:C:E 223423 DHS

CATEGORY: ENTRY

Thomas M. Melone, Esq.
Hunton & Williams
200 Park Avenue
New York, New York 10166-1036

RE: Withdrawal of aircraft from international traffic; Importation of aircraft into the U.S. Customs territory; 19 CFR 10.41; 19 CFR 122; 19 CFR 10.31; 19 CFR 10.183

Dear Mr. Melone:

This is in reference to your letter of August 22, 1991 and your supplemental submissions dated September 27, 1991, October 29, 1991 and October 30, 1991, on behalf of your client, Public Service Resources Corporation (PSRC) regarding the purchase of a McDonnell-Douglas MD-11 aircraft. Our ruling follows.

FACTS:

On May 22, 1991, China Eastern Airlines, a Chinese airline ("CEA") took delivery of a McDonell-Douglas MD-11 aircraft from McDonnell-Douglas Corporation, in Long Beach, California. On May 24, 1991, the aircraft was ferried by CEA to Los Angeles, California. On May 25, 1991, CEA ferried the aircraft to Shanghai, China.

Title to the aircraft is held by TAAL(CEA) I, a Cayman Islands special purpose corporation (hereinafter, TAAL). TAAL purchased the aircraft from the Civil Aviation Authority of China ("CAAC"). The aircraft is on lease to China Aircraft Supplies Corporation ("CASC") and is operated by CEA. Since its delivery, the aircraft has been used by CEA to carry passengers and cargo between Shanghai and Los Angeles (via Anchorage occasionally) and other destinations outside the U.S..

At some future date, CEA will transport the aircraft either as a regularly scheduled commercial flight carrying passengers and cargo from Shanghai to Los Angeles, or as a nonrevenue ferry flight. While on the ground at the U.S. airport, TAAL will sell the aircraft to PSRC. PSRC will immediately, thereafter, lease the aircraft back to CEA (or CASC) for a period of approximately 12 years. Both before and after the sale and lease, the aircraft will be registered and documented under the laws of China. Shortly after the sale and lease (within 48 hours thereafter), the aircraft will leave the U.S. on a scheduled commercial passenger flight or a nonrevenue flight. The aircraft will continue to be used in CEA's international airline business.

ISSUE:

Whether or not a sale of an aircraft, to a U.S. purchaser, upon arrival from a flight in international traffic into a U.S. airport and subsequently reentered into international traffic is subject to treatment as imported merchandise.

LAW AND ANALYSIS:

A foreign aircraft arriving in the U.S. in international traffic and to be used solely in international traffic while in the U.S. is not considered as imported merchandise and is eligible for admission without payment of duty under 19 CFR 10.41. See 19 U.S.C. 1322(a) and HRL 297003. However, if withdrawn from use solely in international traffic for use in this country the aircraft would become imported merchandise and subject to the payment of duties. See 19 CFR 10.41(d) and T.D. 54826(1), (2) and (3). (emphasis added)

Specifically, 19 CFR 10.41(c) provides that a foreign aircraft is subject to treatment under 19 CFR 122 (air commerce regulations) unless entered under 19 CFR 10.31 (temporary importation under bond (T.I.B.)), 10.183 (the "Civil Aircraft Agreement") or 10.41(d) (transportation of passengers or cargo domestically). The application of these sections to the situation at hand follow.

Presently, the aircraft in question would not be eligible for entry under a T.I.B. since: (1) it is not being entered into the U.S. to be used in any of the specified ways provided for under Chapter 98, subchapter XIII, Harmonized Tariff Schedules of the U.S. (HTSUS); and (2) it is to be brought into the U.S. for the purpose of sale.

Additionally, the importer could enter the aircraft under 19 CFR 10.183 and qualify for duty-free treatment under Heading 8802, HTSUS. Since the aircraft is in international traffic however, there is no requirement to enter it into the U.S. Customs terrritory.

Finally, section 10.41(d) would not be applicable under the circumstances since the aircraft will not be utilized in the U.S. to carry merchandise or passengers between points in the U.S. for hire or as an element of a commercial transaction. A sale of the aircraft, under the circumstances, in and of itself would not be significant enough to constitute a diversion from its use in international traffic. (See generally HRL 106404 (containers).)

From the facts presented, the aircraft in question is used in international traffic since it will be coming to the U.S. from a foreign port and flown as a regularly scheduled flight between Shanghai and Los Angeles - Los Angeles and Shanghai. In the event the flight schedule does not coincide with the date of sale requiring the aircraft to be ferried to the U.S. or to Shanghai, its status as a flight in international traffic would not be altered. Customs therefore, would not consider the aircraft to be imported and entered into the U.S. Customs territory.

If, however, the importer chooses to enter the aircraft under the Civil Aircraft Agreement or the aircraft is diverted from its use in international traffic, then entry of the merchandise into the U.S. Customs territory would be required and duty-free treatment would be extended to the aircraft. Under these circumstances, the procedures for arrival, entry and clearance of the aircraft must comply with 49 U.S.C. App. 1509(c) (1988), 19 U.S.C. 1644 (1988), 19 U.S.C. 1433 (1988), 19 CFR 122.41 et. seq. (1990). (See, HQ 111395.)

HOLDING:

Based upon the foregoing, the aircraft in question would not be withdrawn from international traffic and imported into the U.S. Customs territory unless the above events occur.

Sincerely,

John Durant, Director

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