HQ 0225078 - Withdrawal of merchandise in less than full cartons from a bonded warehouse; 19 U.S.C. 1562; T.D. 53654; 19 CFR 144.33; T.D. 69-126; 56 FR 41159; CIS HB 2100-01. - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1994 HQ Rulings > HQ 0224837 - HQ 0544644 > HQ 0225078

HQ 225078

May 2, 1994

WAR-3-01-CO:R:C:E 225078 AJS

CATEGORY: WAREHOUSES

District Director of Customs
U.S. Customs Service
1000 Second Avenue, Ste. 2200
Seattle, WA 98104

RE: Withdrawal of merchandise in less than full cartons from a bonded warehouse; 19 U.S.C. 1562; T.D. 53654; 19 CFR 144.33; T.D. 69-126; 56 FR 41159; CIS HB 2100-01.

Dear Sir:

This is in reply to your letter of November 3, 1993, concerning Tasco Sales, Inc. (Tasco), and its bonded warehouse operations.

FACTS:

Tasco operates a bonded warehouse and uses the inventory control procedure of first-in and first-out (FIFO) based on both entry and model numbers. Tasco claims to be using Customs Form (CF) 3499 to manipulate master cartons into a total piece count and then withdraw goods from its warehouse in less than full carton quantities. An approved CF 3499 was submitted to this office as evidence of this fact. This CF 3499 merely indicates that 5,720 pieces of optical goods will be manipulated. To avoid possible confusion in the future, Tasco should indicate on each CF 3499 the total quantity by model number of each optical good included within the total piece count (e.g., 500 model A riflescopes, 1000 model B telescopes etc.). Tasco's computer system segregates the manipulated merchandise by entry and model numbers, and then keeps track of this merchandise by assigning it a lot number. In addition, goods remained stored in their master cartons after manipulation is complete.

Tasco claims that all its inventory software is set up to account for the FIFO inventory method. It also claims to have established a record with the Port of Seattle as a well-
run bonded facility and to have undergone numerous audits. Tasco asserts that if not permitted to operate in the above manner, two transactions would be required for each export order. After the CF 7512 was completed, it claims that any product remaining in the master carton would have to be withdrawn for consumption in order to comply with the "no less than full case quantity" requirement. In each case, Tasco claims the above paperwork would need to be completed by hand instead of computer. It claims that this process would require the hiring of additional employees. In addition, Tasco claims that changing its current procedure would cost a great deal for the reprogramming of its computer system.

ISSUE:

Whether the withdrawal of merchandise in less than full master carton quantity is permissible in this case.

LAW AND ANALYSIS:

19 U.S.C. 1562 provides "[u]nless by special authority of the Secretary of the Treasury, no merchandise shall be withdrawn from bonded warehouse in less quantity than an entire bale, cask, box, or other package . . ." The Secretary of the Treasury transferred to the Commissioner of Customs all powers and duties vested in the Secretary by the Tariff Act of 1930 in T.D. 53654. There are exceptions to this transfer, but the authority listed under section 1562 is not listed as one of these exceptions. Because of this delegation the Customs Regulations state that "[u]nless by special authority of the Commissioner of Customs, merchandise shall not be withdrawn from bonded warehouse in quantities less than an entire bale, cask, box, or other package . . ." 19 CFR 144.33.

The Commissioner, by Customs delegation Order No. 1 (Revision 1)(T.D. 69-126) delegated the authority delegated to him by T.D. 53654 to the Director, Office of Regulations and Rulings (the Director). Specifically listed is the authority to decide legal questions concerning bonded warehouses. T.D. 69- 126 A(c)(3). The Director was also given authority to redelegate and delegate authority to the appropriate Division Director and Branch Chief. The Director, by Federal Register Notice (56 FR 41159) of August 19, 1991, stated that the Commercial Rulings Division (CRD) is responsible for legal aspects of the warehousing system, including the establishment, administration and operation of Customs bonded warehouses, the entry and withdrawal of
merchandise from warehouse, and other warehouse transactions. The unit quantity of a warehouse withdrawal would be included within one of these areas. This authority regarding the CRD was set forth in the Mission and
Organization of the Customs Service, CIS HB 2100-01, Page 406, as changed, No. 22 of August 1992. Therefore, the Director of the CRD is the proper officer to make the decision regarding the unit quantity of a warehouse withdrawal under 19 CFR 144.33.

Tasco requests permission to withdraw goods from its bonded warehouse in less than full carton quantities. It claims to have been performing operations at its warehouse in the FIFO method since the warehouses inception, and that all inventory software is set up to account for this inventory procedure. It also claims to have established a record as a well-run bonded facility and to have undergone numerous audits. Conversations by this office with Customs Inspectors appear to support this assertion. Tasco asserts that if not permitted to operate in the above manner, two transactions would be required for each export order. In each case, the two transactions would need to be completed by hand instead of computer. It claims that this process would require the hiring of additional employees. In addition, Tasco claims that changing its current procedures would cost a great deal in computer reprogramming.

Under the above specific circumstances, the granting of special authority for Tasco to withdraw merchandise from its warehouse in less than full carton quantities is appropriate. Requiring Tasco to withdraw merchandise in full cartons would appear both burdensome and unnecessary in this case. A with- drawal in full cartons would be burdensome because it would require Tasco to reprogram its computer system, process additional transactions and paperwork, and hire additional employees. Such a withdrawal would also be unnecessary in- asmuch as Customs does not appear to have had any previous problems with Tasco's warehouse operations. In addition, Tasco's use of the FIFO inventory method and the filing of a CF 3499 for manipulation of its merchandise should enable Customs to both protect the revenue as well as not interfere with the efficient conduct of customs business. We note, however, that the special authority granted in this case must be sought in each case involving any other warehouses.

In a letter to the Collector of Customs at Norfolk, VA, dated July 25, 1941, Customs addressed the issue of withdrawals from warehouse under 19 U.S.C. 1562. This letter involved an application on CF 3499 for permission to withdraw
as samples two bobbins of cigarette paper from each of 17 cases of such paper. Customs concluded that this type of withdrawal was not precluded by section 1562, and was permitted under the Customs regulations provided it could be accomplished with safety to the revenue and without interference with the efficient conduct of customs business. Consequently, we find this decision instructive for determining that the withdrawal in question is also not precluded by section 1562.

HOLDING:

Special authority is granted pursuant to 19 CFR 144.33 for the withdrawal of merchandise from the subject bonded warehouse in less than full carton quantity under the above described circumstances.

Sincerely,

John Durant, Director
Commercial Rulings Division

Previous Ruling Next Ruling