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HQ 226034




February 23, 1996

CON-9-RR:IT:EC 226034 JRS

CATEGORY: BONDS ENTRY

Port Director of Customs
U.S. Customs Service
1000 Second Avenue, Suite 2200
Seattle, WA 98104

RE: Request for Internal Advice on the computation of the TIB amount; Bond calculation concerning special programs; 19 CFR 10.31(f); General Note 6, HTSUS; Aircraft temporary free entry; IA 9/95

Dear Sir:

This is in response to your internal advice request dated February 10, 1995 (FILE: CLA 1-01:SE:C:E SAD), regarding the bond calculation under a TIB entry for aircraft parts. Our advice follows.

FACTS:

Questions have arisen in your district concerning the proper bond calculation on temporary importations under bond (TIB) entries for aircraft parts under subheadings 9813.00.0540 and/or 9813.00.30, HTSUS.

You state that brokers admit merchandise under subchapter XIII, Chapter 98, HTSUS, which may be classifiable, for example, under such subheadings as 8411.12.4000; 8525.10.6020; 9032.89.6075; 9032.90.6080; 9401.10.8000; and 9403.20.0030, HTSUS, and claim that the bond charge be calculated at the free duty rate found in the "Special" subcolumn of Column 1, HTSUS, since such merchandise is "ordinarily" entered under the special program of the Civil Aircraft Agreement.

ISSUE:

Whether the TIB bond amount is properly calculated using the free rate of duty ("Free (C)") of the special program for Civil Aircraft or the "general" rate of duty of Column 1, HTSUS, without regard to any special program indicator for special duty-free tariff treatment.

LAW AND ANALYSIS:

Section 10.31(f) of the Customs Regulations (19 CFR 10.31(f)) provides, in pertinent part:

With the exceptions stated herein [exceptions not relevant in this case], a bond shall be given on Customs Form 301, containing the bond conditions set forth in ?113.62 of this chapter, in an amount equal to double the duties, including fees, which it is estimated would accrue (or such larger amount as the port director shall state in writing or by the electronic equivalent to the entrant is necessary to protect the revenue) had all the articles covered by the entry been entered under an ordinary consumption entry.

Section 10.39(e)(4) of the Customs Regulations (19 CFR 10.39(e)(4)) provides, in pertinent part, that the port director may cancel the liability for the payment of liquidated damages:

Upon the payment of an amount equal to double the duty which would have accrued on the articles had they been entered under an ordinary consumption entry, ... .

We traced the bond requirement for the temporary free entry of articles to the Tariff Act of October 3, 1913 (subsection 4, paragraph J, of Section IV). The implementing Customs Regulations of 1915 (Art. 379) and 1923 (Art.407) required that bonds be given "in a penal sum equal to double the estimated duty." The Customs Regulations of 1931 (Art. 428(d)) and 1937 (Art. 435(d)) required that "a bond shall be given in an amount equal to one and one-quarter times the estimated duties which would have been required to be deposited had the articles been entered for consumption."

A review of current section 19 CFR 10.31(f) back to the Customs Regulations of 1943 has revealed that the language regarding the use of an "ordinary consumption entry" when calculating the bond amount has remained unchanged, although the amount chargeable has been amended over the years. The Customs Regulations of 1943, section 10.31(c), stated that: "A bond shall be given in an amount equal to one and one-quarter times the duties which it is estimated would accrue had all the articles covered by the entry been entered under an ordinary consumption entry (emphasis added)." See T.D. 51868 (Feb. 18, 1948).

When aircraft parts are entered "duty-free" under the Civil Aircraft Agreement, it is only a "conditionally" free entry. See General Note 6, HTSUS. The entry bond in that case is calculated as if the aircraft were entered using the Column 1 rate of duty for an ordinary consumption entry. Aircraft parts entered for consumption under subheading 8411.12.4000, HTSUS, have a 5 percnt rate of duty unless the importer requests the conditionally free rate of duty under the special program (Free (C)).

Likewise, the TIB bond calculation is based on an ordinary consumption entry as stated in 19 CFR 10.31(f). The basis for the computation of the amount of a temporary importation bond is the estimated duties determined in accordance with sections 141.90 and 141.103 of the Customs Regulations. The full Column 1 general duty rate for each tariff classification applies (see 19 CFR 141.90 and 141.103), including any applicable ADD/CVD and fees, without regard to any special program considerations. This duty rate is used for bond purposes and liquidated damages if a violation of the TIB occurs under 19 CFR 10.39(d)(1).

The Temporary Importation under Bond classification is a special program itself under the tariff schedule. See Subchapter XIII, Chapter 98, HTSUS. Since a TIB entry is a special program for "temporary" duty-free treatment, additional special program benefits do not apply. An importer at the time of entry may choose either to present the merchandise under a TIB provision or under a consumption entry obtaining, if he so requests, special duty-free tariff treatment under the Agreement on Trade in Civil Aircraft, but the importer cannot do both.

If the importer chooses to admit the merchandise under the provisions of subchapter XIII, Chapter 98, he must produce a bond calculation based on the TIB requirements of 19 CFR 10.31(f), regardless of any other special trade programs or provisions for which the merchandise might qualify. To hold otherwise and permit a zero rate of duty under a special program would not protect the revenue as required by the law (19 U.S.C. 1202; General Note 1, HTSUS) and regulations (19 CFR 10.31 through 10.40).

HOLDING:

The TIB bond calculation is properly based on the Column 1 "general" rate of duty, without regard to any "special" program rate found in the "Special" subcolumn of Column 1, HTSUS.

The Office of Regulations and Rulings will take steps to make this decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels 60 days from the date of this decision.

Sincerely,

Director, International

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