HQ 0112766 - Instruments of International Traffic; Canadian-based Trucks; Local Traffic; 19 U.S.C. 1322 - United States International Trade Commision Rulings

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HQ 112766

July 8, 1993

VES-7-04-CO:R:IT:C 112766 GEV

CATEGORY: CARRIER

William H. Shawn, Esq.
Shawn, Mann & Niedermayer
1850 M Street, N.W. Suite 280
Washington, D.C. 20036

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

Dear Mr. Shawn:

This is in response to your letter dated June 15, 1993, on behalf of your client, Gershman Transport International Ltd., requesting a ruling concerning the proposed use of Canadian-based trucks in the United States. Your letter enclosed highway maps delineating the proposed use under consideration. Our ruling on this matter is set forth below.

FACTS:

Gershman Transport International Ltd. ("Gershman") of Winnipeg, Manitoba, Canada, conducts international transport operations between the United States and Canada. It holds operating authority issued by the Interstate Commerce Commission (ICC) and various Canadian provincial regulatory authorities. It provides scheduled and non-scheduled service between points in the United States and Canada and presently conducts a number of scheduled weekly international operations to and from various points in the United States. Presently, Gershman does not provide any service for local traffic between points on these regularly scheduled routes. However, Gershman wishes to participate in domestic U.S. traffic where such traffic is directly on the currently existing international routes and where Gershman's equipment transporting international merchandise shipments is available for such limited participation.

Gershman currently transports merchandise in international traffic, in regularly scheduled weekly service, between Winnipeg, Manitoba, Canada, and specified U.S. destinations on seven specified routes. The international origins and destinations of those routes are as follows:

Route No. 1: Winnipeg, Manitoba - Oklahoma City, Okla.

Route No. 2: Winnipeg, Manitoba - Florida service points (Apopka, Daytona Beach, Ft. Lauderdale, Ft. Myers, Jacksonville, Miami, Orlando,
Palm Beach, St. Petersburg, and Tampa)

Route No. 3: Winnipeg, Manitoba - Charlotte, N.C.

Route No. 4: Winnipeg, Manitoba - Sandersonville, Ga.

Route No. 5: Winnipeg, Manitoba - Los Angeles, Calif.

Route No. 6: Winnipeg, Manitoba - San Francisco and Sacramento, Calif.

Route No. 7: Winnipeg, Manitoba - Denver, Colo.

Gershman's proposed local traffic would take place when their trucks are engaged in the above scheduled weekly international movements through locations on the current international routings. The proposed local traffic would include the following points on the corresponding identified routes:

Route No. 1: Kansas City, Mo. - Omaha, Neb. - Sioux City, Iowa - Fargo and Grand Forks,
N.D.

Route No. 2: Atlanta, Ga. - Nashville, Tenn. - Chicago, Ill. - Milwaukee, Wisc. - Minneapolis -
St. Paul, Minn.

Route No. 3: Charlotte, N.C. - Knoxville, Tenn. - Minneapolis - St. Paul, Minn. - Fargo, N.D.

Route No. 4: Atlanta, Ga. - Chattanooga, Tenn. - Nashville, Tenn. - Minneapolis - St. Paul, Minn.

Route No. 5: Los Angeles, Calif. - Las Vegas, Nev. - Salt Lake City, Utah

Route No. 6: Oakland, Calif. - Reno, Nev. - Salt Lake City, Utah

Route No. 7: Denver, Colo. - Grand Island, Lincoln and Omaha, Neb. - Sioux City, Iowa

The domestic traffic points specified above which are located on the existing, regularly scheduled routes are entirely dependent upon the availability of scheduled international equipment traversing such locations and available capacity on
such trailers to handle any such domestic movements. Domestic freight is thus subject to equipment availability and capacity on a "stand-by" basis.

It is stated that customers located at such domestic points are immediately adjacent to the present international routes Gershman traverses. Each such point includes existing international traffic customers of Gershman. Many such shipping origins and destinations will involve international pick-ups or deliveries to those same customers.

ISSUE:

Whether the domestic movement of merchandise by Canadian- based trucks as described above constitutes "local traffic" within the permitted exception set forth in 19 CFR 123.14(c)(1).

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 trucks 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, 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 - 4 -
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 departure for a foreign country. Customs has interpreted this to mean in the general direction of the country of origin, or to the home route junction point, over a route which the equipment would otherwise travel empty. 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 of 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 ICC licenses held by Gershman and the applicable Customs regulations are easily reconciled. The former authorizes a carrier to transport general commodities between points in the United States while the latter applies the statutory requirements that govern such movements.

In regard to the proposed local traffic under consideration, we note that in all seven scenarios the domestic movement of merchandise is pursuant to regularly scheduled (i.e., weekly) international trips. Furthermore, assuming arguendo, the lack of any "backhauls" between domestic points during the itineraries under consideration (which are not evident from the information submitted), the proposed domestic routes as delineated on the highway maps submitted indicate that the domestic movement of merchandise would follow the same routes as the merchandise moving in international traffic. Accordingly, the local traffic in question is in compliance with 19 CFR 123.14(c)(1).

HOLDING:

The domestic movement of merchandise by Canadian-based trucks as described above constitutes "local traffic" within the permitted exception set forth in 19 CFR 123.14(c)(1).

Sincerely,

Acting Chief

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