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HQ 226319




July 23, 1996

CON-13-02/WAR-2-01:RR:IT:EC 226319 PH

CATEGORY: WAREHOUSES

Peggy Chaplin, Esq.
Ober, Kaler, Grimes & Shriver
120 East Baltimore Street
Baltimore, Maryland 21202-1643

RE: Supplies and Equipment for Vessels or Aircraft; Customs Bonded Warehouse; Blanket Withdrawals; FIFO Accounting Procedures; 19 U.S.C. 1309; 19 U.S.C. 1555; 19 U.S.C. 1557; 19 CFR 10.62a; 19 CFR 19.6(d); 19 CFR 144.38; 19 CFR 144.39; C.S.D. 83-63

Dear Ms. Chaplin:

In your letter of July 27, 1995, on behalf of British Airways Plc., you request a ruling on the use of Customs Bonded Warehouse procedures and the provisions of 19 U.S.C. 1309 to spare parts and other supplies for the repair and maintenance of your client's aircraft. Our ruling follows.

FACTS:

You state that your client in this matter operates foreign aircraft between the United Kingdom and the United States. Your client maintains a collection of spare parts and other supplies for the repair and maintenance of its aircraft. You characterize the spare parts as being either rotable parts (subject to repair and reuse) and expendable parts (subject to a single use). You state that the spare parts and supplies are goods which are used in the normal operation of an aircraft and, with the proper certification required by 19 U.S.C. 1309, "... clearly fit under the duty-free treatment of [section 1309]."

You state that the aircraft spare parts which your client imports consist primarily of American-made parts, with a minority being foreign-made. It is possible that certain of the American-made parts which are rotable will be repaired outside the United States and returned, or repaired in the United States, as the occasion warrants. You state that your client is considering the use of bonded warehouses for its repair and maintenance operations in the United States.

You state that the above-described rotables are frequently loaned by one carrier to another in emergency situations. As an example of this, you state that your client may be storing a computer at a bonded warehouse facility when the computer on the aircraft of another air carrier becomes unserviceable during its flight to the airport where the bonded warehouse facility is located. The computer your client has would be loaned to the other air carrier and "ultimately returned". You cite the provisions of the Customs Regulations requiring the issuance of a permit by Customs before withdrawal and state that, because the need for these rotables may be immediate, waiting for the issuance of such a permit may be "commercially disastrous ..." You suggest implementation of a test program, under 19 CFR 101.9 (promulgated by T.D. 95-21), and state that your client would volunteer to be an entrant in such a test program.

You state that your client proposes to use first-in, first-out (FIFO) accounting procedures to account for fungible parts which are not identified with a serial number. You provide copies of the records which will be used for this purpose. These records are invoices for the part involved (with a part number on the invoice (the copy we have does not have a clear date, but we assume, for purposes of this ruling, that such invoices would have clear dates)); and a "station stock card" which shows the quantity of the same part (identified by the same part number) brought forward, additions to the inventory (an "in" column), removals from the inventory (an "out" column), with a "date" column for all changes, and a "consignee/consignor" column, in which there appear initials. You ask for Customs approval for this method of accounting for fungible merchandise.

You request that Customs permit your client to store its parts and equipment in a bonded warehouse without requiring the tariff classification upon entry of the parts into the warehouse. You request approval of such a procedure on the basis of reciprocity, in that you state that United Kingdom Customs and Excise permits American air carriers to store their parts and supplies without any tariff number. If Customs deems it necessary for your client to state a classification number at the time of entry into the warehouse, you ask that your client be permitted to use "... a single tariff number, namely HTS 8803.90.9050, Parts of goods of heading 8801 or 8802:... Other:... Other:... Other:'". You state that if any parts are withdrawn for consumption by an American air carrier, the correct tariff number will be assigned and the correct duty paid at the time of such withdrawal.

You state that your client intends to segregate non-bonded merchandise, label it as such, and store it in the bonded warehouse facility. You request confirmation that under 19 CFR 19.6(b)(2), your client may store such non-bonded merchandise, "... so long as non-bonded merchandise is segregated and physically marked to maintain its identity as non-bonded merchandise." If such storage of non-bonded merchandise is not allowed, you request Customs approval of the elimination as bonded space of sufficient storage area in each of your client's bonded warehouses to provide a non-bonded area within the facility in which your client may store non-bonded merchandise.

You state that Customs procedures regarding bonded warehouse are different in different districts (now ports). You ask that each of your client's bonded warehouses be subject to the same rules and procedures in order that a "nationwide guideline and procedure may be written and enforced by the company for its internal purposes."

You request a ruling on the issues listed in the ISSUES portion of this ruling.

ISSUES:

(1) May the filing with Customs of documentation for warehouse withdrawal follow withdrawal from warehouse for certain rotables loaned to other air carriers, including United States air carriers?

(2) May first-in, first-out (FIFO) accounting methods be used to account for fungible merchandise in your client's bonded warehouses?

(3) May the merchandise under consideration be entered into the your client's bonded warehouses without stating the tariff classification or, if not, may all of the merchandise be classified under subheading 8803.90.9050, HTSUS, at the time of entry into the warehouse?

(4) May non-bonded merchandise be stored in your client's bonded warehouses, so long as the non-bonded merchandise is segregated from bonded merchandise?

(5) Will Customs assure your client that its private bonded warehouses will be regulated uniformly throughout the United States?

LAW AND ANALYSIS:

Under 19 U.S.C. 1555, in part:

Buildings or parts of buildings and other inclosures may be designated by the Secretary of the Treasury as bonded warehouses for the storage of imported merchandise entered for warehousing .... Such warehouses may be bonded for the storing of such merchandise only as shall belong or be consigned to the owners or proprietors thereof and be known as private bonded warehouses. ... Except as otherwise provided in this chapter, bonded warehouses shall be used solely for the storage of imported merchandise and shall be placed in charge of a proper officer of the customs, who, together with the proprietor thereof, shall have joint custody of all merchandise stored in the warehouse ....

Under 19 U.S.C. 1557, in part:

(a) Any merchandise subject to duty ... may be entered for warehousing and be deposited in a bonded warehouse at the expense and risk of the owner, importer, or consignee. Such merchandise may be withdrawn, at any time within 5 years from the date of importation, for consumption upon payment of the duties and charges accruing thereon at the rate of duty imposed by law upon such merchandise at the date of withdrawal; or may be withdrawn for exportation or for transportation and exportation to a foreign country ... without the payment of duties thereon ... Provided, That the total period of time for which such merchandise may remain in bonded warehouse shall not exceed 5 years from the date of importation.

Under 19 U.S.C. 1309, in part:

(a) Articles of foreign or domestic origin may be withdrawn, under such regulations as the Secretary of the Treasury may prescribe, from any customs bonded warehouse, from continuous customs custody elsewhere than in a bonded warehouse, or from a foreign-trade zone free of duty and internal-revenue tax ... --

(1) for supplies (not including equipment) of ... (C) aircraft registered in the United States and actually engaged in foreign trade or trade between the United States and any of its possessions, or between Hawaii and any other part of the United States or between Alaska and any other part of the United Stats; or

...; or

(3) for supplies (including equipment), ground equipment, maintenance, or repair of aircraft registered in any foreign country and actually engaged in [the same trades as described in section 1309(a)(1) above], where trade by foreign aircraft is permitted. With respect to articles for ground equipment, the exemption hereunder shall apply only to duties and to taxes imposed upon or by reason of importation.

...

(c) Any article exempted from duty or tax, or in respect of which drawback has ben allowed, under this section or [19 U.S.C. 1317] and thereafter removed in the United States from any vessel or aircraft, or otherwise returned to the United States, shall be treated as an importation from a foreign country.

(d) the privileges granted by this section and [19 U.S.C. 1317] in respect of aircraft registered in a foreign country shall be allowed only if the Secretary of the Treasury shall have been advised by the Secretary of Commerce that he has found that such foreign country allows, or will allow, substantially reciprocal privileges in respect of aircraft registered in the United States. ...

The Customs Regulations issued under the above statutes are found in 19 CFR Parts 19 and 144 (warehouses) and 19 CFR 10.59 through 10.65 (withdrawal of supplies and equipment for vessels and aircraft).

Under 19 CFR 144.35, supplies and equipment for vessels and aircraft may be withdrawn from warehouse under the procedures set forth in subpart D of part 144 of the Customs Regulations and 19 CFR 10.59 through 10.65. Under 19 CFR 10.60 (as amended by T.D. 95-81), withdrawals from warehouse under 19 U.S.C. 1309 shall be made on Customs Form 7501, and under 19 CFR 144.38, a withdrawal for consumption is required to be filed on Customs Form 7501. Under 19 CFR 10.61, upon the filing of the withdrawal (under 19 CFR 10.59), and the execution of the bond, when required, the port director shall issue a permit on Customs Form 7501. Under 19 CFR 144.38(e), when the duties and other charges have been paid, and all other requirements of law and regulations have been met, a permit shall be issued by Customs and delivered to the person making the warehouse withdrawal (for consumption) and under 19 CFR 144.39, the applicant for withdrawal shall present the approved permit to the warehouse proprietor as evidence of Customs authorization of the withdrawal.

Thus, as you suggest, the above provisions require the issuance of a permit by Customs before withdrawal of the merchandise from warehouse. However, there are provisions in the Customs Regulations under which a permit is not required before each withdrawal from warehouse. Under 19 CFR 10.62a, a "blanket withdrawal" on Customs Form 7501 may be filed for all or part of any merchandise withdrawn from warehouse except fuel oil, for use on qualified vessels (i.e., qualified under 19 U.S.C. 1309). The Treasury Decision by which section 10.62a was promulgated (T.D. 69-177) makes it clear that these blanket withdrawal procedures are applicable to both supplies and equipment intended for use on qualified vessels (or aircraft; under 19 CFR 10.59(d) the procedures in 19 CFR 10.59 through 10.65 are made applicable to aircraft) (i.e., the first sentence of the first paragraph of the text of T.D. 69-77 reads, "[t]o facilitate withdrawals of articles under section 309 or 317 of the Tariff Act of 1930, as amended, for use as supplies or equipment on qualified vessels, the Bureau has decided to permit the optional filing of a blanket withdrawal ... for all or part of merchandise entered for warehouse which is intended for use on vessels", and the sentence immediately following the text of the amendment reads, "[a]s above indicated, the procedure authorized is optional and is intended to make it easier to effect duty-free withdrawals of supplies and equipment for vessels" (emphasis added)). (For the procedures regarding fuel oil, see T.D. 96-18.)

The procedures for the above-described blanket withdrawals are provided in 19 CFR 10.62a(b) and 19 CFR 19.6(d). Merchandise withdrawn under blanket withdrawals must be loaded or used on vessels or aircraft at the port where the warehouse is located (19 CFR 10.62a; 19 CFR 19.6(d)(1)). A withdrawer who desires a blanket permit to withdraw states in capital letters on the warehouse entry or warehouse entry/entry summary that "Some or all of the merchandise will be withdrawn under blanket permit per section 19.6(d), C.R." Customs acceptance of the entry constitutes approval of the blanket permit. A copy of the entry is delivered to the warehouse proprietor, after which merchandise may be withdrawn under the terms of the blanket permit.

Withdrawals under the blanket withdrawal procedure may be made without further Customs approval after Customs acceptance of the entry upon which the above statement is made. Each withdrawal is filed on Customs Form 7501, consecutively numbered and prefixed with the letter "B". Each withdrawal must state the quantity and value of each type of merchandise to be withdrawn, and must include a summary statement of the quantity in the warehouse account before withdrawal, the quantity withdrawn, and the quantity remaining, as provided in 19 CFR 144.32(a). Removal from the warehouse of merchandise covered by an entry for which a blanket permit was issued prior to the preparation of the withdrawal subjects the warehouse proprietor to liquidated damages as if the merchandise were removed without Custom permit. A copy of the withdrawal is retained in the records of the warehouse proprietor (in the permit file folder, as provided for in 19 CFR 19.12(a)(2)). The original of the withdrawal accompanies the merchandise withdrawn for certification by the Customs officer supervising loading or use of the merchandise, or the pilot of the aircraft (or authorized airline representative, see U.S. Customs Service Bonded Warehouse Manual, section 7.9(e)(3)) if a Customs officer does not physically supervise such loading or use.

When all merchandise covered by an entry on which a blanket permit to withdraw was issued has been withdrawn, including withdrawals for other purposes, the proprietor is required to prepare a report on a copy of Customs Form 7501 or a form on the letterhead of the proprietor, which provides an account of the disposition of the merchandise covered by the blanket permit (19 CFR 19.6(d)(4)). On this form, the proprietor certifies that the merchandise listed thereunder was withdrawn in compliance with section 19.6(d) and accounts for all of the merchandise withdrawn under blanket permit by HTSUS number, HTSUS quantity (where applicable), and value, with a separate listing and identification of merchandise withdrawn for the different purposes for which blanket withdrawals are authorized. The form is placed in the permit file folder and is treated as provided for in 19 CFR 19.12(a) (under section 19.12(a)(4) the warehouse proprietor is required to review the permit file folder to ensure that all necessary documentation is in the file folder accounting for the merchandise covered by the entry, notify Customs of any merchandise covered by the warehouse entry which has not been withdrawn or removed, and file the permit file folder with Customs within 30 business days after final withdrawal).

The above-described blanket withdrawal procedures may address the problem you describe (i.e., the delay which may occur while awaiting issuance by Customs of a permit for withdrawal of supplies or equipment from a warehouse), at least in part. Alternatively, this problem could be ameliorated by another provision of the Customs Regulations which you cite, 19 CFR 19.6(b)(2). Under section 19.6(b)(2), merchandise for which a permit for withdrawal has been issued, whether duty-paid or not, need not be physically removed from the warehouse, although it must be segregated or physically marked to maintain its identity as merchandise for which a withdrawal permit has been issued. Duty-paid or unconditionally duty-free merchandise which has been withdrawn, but not removed, from a warehouse is no longer deemed to be in Customs custody. All other goods which have been withdrawn, but not removed, remain in Customs custody until the end of the 5-year warehouse entry period.

Thus, the problem you describe could be addressed, insofar as withdrawal of supplies or equipment for aircraft qualifying for the treatment authorized by 19 U.S.C. 1309 are concerned, by use of blanket withdrawal procedures (in which case issuance by Customs of an individual permit prior to each withdrawal of merchandise from a warehouse is not required) or by use of the procedures in section 19.6(b)(2), under which your client could file a withdrawal under 19 CR 144.37 (for exportation) or 144.38 (for consumption) and, after the permit to withdraw is issued by Customs (19 CFR 144.38(e) and 144.39), the merchandise could be retained in the warehouse until the end of the 5-year warehouse entry bond period. However, the blanket withdrawal procedures may not be used for withdrawals of supplies or equipment for aircraft which do not qualify for treatment under 19 U.S.C. 1309. That is, under 19 CFR 19.6(d)(1), merchandise covered by an entry for which a blanket permit was issued may be withdrawn for purposes other than those for which blanket withdrawals are permitted (listed in section 19.6(d)(1)(i) through (iii)) if a withdrawal is properly filed as required in subpart D, part 144 of the Customs Regulations. As stated above, the provisions in subpart D, part 144, for withdrawals for consumption require the filing of a withdrawal and the issuance of a permit to withdraw prior to withdrawal (19 CFR 144.38 and 144.39; see above).

In regard to this issue, it should be noted that if supplies or equipment are withdrawn from a bonded warehouse for use on an aircraft not qualifying under 19 U.S.C. 1309 (e.g., if a computer were withdrawn from your client's warehouse for use on a domestic flight), such supplies or equipment would be subject to duty and would not be "deemed" exported under section 1309. This would be so regardless of whether the supplies or equipment were subsequently returned to your client.

In Customs Service Decision (C.S.D.) 83-63, Customs ruled on the issue of whether "[i]f fungible merchandise is commingled in storage in a Customs bonded warehouse, may FIFO accounting be applied to identify the merchandise in place of physical examination?" We ruled, citing rulings approving FIFO accounting for foreign trade zones (C.S.D. 81-62) and drawback (C.S.D. 82-35), that FIFO accounting could be so used for accounting for fungible merchandise commingled in storage in a warehouse. Ruling HQ 224237, January 26, 1993, copy enclosed, also concerned this issue. Under ruling HQ 224237, when FIFO procedures are used for this purpose, each inventory category shall be assigned a unique number or other identifier to distinguish it from all other inventory categories. All merchandise in a given inventory category shall be physically placed so as to be segregated from merchandise under other inventory categories or merchandise accounted for under other methods. The merchandise, its location, or the location where it is stored shall be marked with the unique identifier so as to clearly show the inventory category of each article.

Subject to the above requirements, and assuming that the records involved clearly identify the supplies and equipment (by unique number or other identifier), activity, and dates and that your client's records will establish the particulars of the use of the supplies or equipment so that qualification for 19 U.S.C. 1309 is established (e.g., the identity of the aircraft on which they were used, when they were used, the trade in which the aircraft engaged thereafter), FIFO accounting procedures may be used to account for fungible supplies and equipment commingled in storage in a bonded warehouse. (For general requirements and examples relating to FIFO and other accounting procedures, see 19 CFR Part 181, Appendix, Schedule X; see also T.D. 95-61.)

Under 19 CFR 144.11(a), the documentation (entry form, evidence of right to make entry, commercial invoice, packing list (if appropriate), other documentation, and identification of the United States buyer, if the merchandise is imported having been sold) required by 19 CFR 142.3 shall be filed at the time of entry of merchandise into a warehouse. Section 144.11(a) provides, as does section 142.3, that if the entry summary is filed at the time of entry for merchandise to be entered for warehouse, the entry summary shall serve as both the entry and entry summary and the entry form is not required. Section 144.11(a) provides that if the entry summary is not filed at the time of entry, it shall be filed within the time limit prescribed by 19 CFR 142.12 (10 working days after the time of entry). Under 19 CFR 144.12, the entry summary filed for merchandise entered for warehouse is required to "show the value, classification, and rate of duty as approved by the port director at the time the entry summary is filed [although] no deposit of estimated duties shall be required until the merchandise is withdrawn for consumption."

Thus, your proposal to store supplies and equipment in a bonded warehouse without stating the tariff classification upon entry of the supplies and equipment into the warehouse may not be approved. Insofar as your request that such a procedure be approved on the basis of reciprocity, we note that the reference to reciprocity in 19 U.S.C. 1309(d) provides only that the privileges granted in section 1309 shall be allowed only to aircraft of a foreign country which allows substantially reciprocal privileges in respect of United States-registered aircraft. In other words, reciprocity is only of the privileges provided for in section 1309 (and the proposed procedure is not provided for in section 1309).

Insofar as your request that your client be permitted to use subheading 8803.90.9050, HTSUS, for all of the supplies or equipment entered into the bonded warehouse, we have no authority to permit such a procedure (unless, of course, that is the correct classification for the merchandise). Indeed, in view of the concept of "shared responsibility" (between Customs and the trade community) provided for in the Customs Modernization Act (Public Law 103-182, 107 Stat. 2057, Title VI; House Report 103-361, 103d Cong., 1st Sess., 120, 136 (1993)), we believe that such a procedure would be inconsistent with the intent of changes made by that Act (in this regard, see also in the above-referenced legislative history the requirement that an importer use "reasonable care" in discharging the activities for which the importer has responsibility).

The provisions for establishment of a Customs bonded warehouse are found in 19 CFR 19.2. Under section 19.2(a), the owner or lessee desiring to establish a bonded warehouse facility is required to make a written application to the port director where the warehouse is to be located, describing the premises, giving the location, and stating the class of warehouse desired. Under section 19.2(b), when a part or parts of a building are to be used as the warehouse, a detailed description of the materials and construction of all partitions is required. Under 19 CFR 19.1(c), specific requirements are stated for the effective separation of bonded and nonbonded portions of a building, when only part of the building is to be used as a Customs bonded warehouse (as noted below, Customs has given notice that it is proposing the deletion of section 19.1(c)).

Under 19 CFR 144.1(a), "[a]ny merchandise subject to duty may be entered for warehousing [with exceptions not applicable in this case]." This provision was promulgated by Treasury Decision (T.D.) 84-149. Prior to T.D. 84-149, the corresponding provision was that "[a]ny merchandise may be entered for warehousing except [the same exceptions as currently] and unconditionally free merchandise." This change is explained in the background of T.D. 84-149 as follows:

Customs has determined that section 144.1(a) must be amended to: (1) eliminate the exception made for unconditionally free merchandise so as to allow unconditionally duty-free merchandise to be entered for warehouse; and (2) restrict the coverage of the regulation to "any merchandise subject to duty" so as to avoid an implication that domestic or duty-paid merchandise may be entered into or placed in a bonded warehouse.

Thus, it is clear that only merchandise subject to duty may be entered for warehousing (and domestic or duty-paid merchandise may not be entered for warehousing. The provision you cite in this regard, 19 CFR 19.6(b)(2), does not provide for the entry for warehousing of domestic or duty-paid merchandise (if that is what you mean by non-bonded merchandise); rather it provides for the retention in a bonded warehouse of merchandise properly in a warehouse after a permit for withdrawal has been issued (see discussion of section 19.6(b)(2) above).

If your proposal in this regard is for segregation of part of the building in which the bonded warehouse facility is located, so that there are bonded and non-bonded portions in the building, both the statute and the Customs Regulations clearly authorize this. That is, 19 U.S.C. 1555 authorizes the designation as bonded warehouses of "[b]uildings or parts of buildings" (emphasis added) and 19 CFR 19.2(b) specifically provides for approval of a part or parts of a building as a bonded warehouse, with 19 CFR 19.1(c) providing specific requirements for the effective separation of bonded and non-bonded portions of a building. If you are concerned with whether alternate (i.e., alternative to those described in the Customs Regulations) means of separating the bonded and non-bonded portions of a building are available, see ruling HQ 224820, October 26, 1993, copy enclosed, in which we noted that the waiver of specific references to the building materials described in section 19.1(c) has been authorized (see also, Notice of Proposed Rulemaking (NPRM) published in the Federal Register on June 6, 1996 (61 FR 28808), in which notice is given that Customs is proposing to delete section 19.1(c)).

Insofar as your request that Customs assure your client that its private bonded warehouses will be regulated uniformly throughout the United States is concerned, this ruling should serve that purpose. Unless there is some special reason for the port director, in his or her discretion, to treat a bonded warehouse in the port differently than indicated by this ruling (e.g., under 19 CFR 19.6(d)(1), a blanket withdrawal permit may be revoked by the port director in favor of individual applications and permits if the permit is found to be used for other purposes, of if necessary to protect the revenue or properly enforce any law or regulation), the procedures described herein should be applied uniformly to your client's bonded warehouses throughout the United States.

As an alternative to the bonded warehouse procedures, your client may wish to consider the use of other procedures. Enclosed is a copy of ruling HQ 224266, March 3, 1993, describing alternative procedures (Civil Aircraft Agreement, General Note 6, HTSUS; 19 CFR 10.183; and Temporary Importation under Bond (TIB), under heading 9813, HTSUS) which may be applicable to your client's operations.

In regard to the first issue discussed in this portion of the ruling (i.e., removal from warehouse of supplies or equipment without prior filing of a withdrawal and issuance of a permit by Customs under 19 CFR 144.38 and 144.39 (see above)), you ask that Customs initiate a test program, under 19 CFR 101.9, "... to determine the value to Customs and [your client], and ultimately the air carrier industry of amending the Customs Regulations concerning warehouse entries and withdrawals of aircraft parts and equipment and the best way to make and implement such amendments." As stated above, in the discussion of this issue, we believe that the problem you raise can be addressed by current regulatory provisions, insofar as the withdrawal of supplies or equipment for qualifying (under 19 U.S.C. 1309) aircraft is concerned. For withdrawals of supplies or equipment for non-qualifying aircraft, prior filing of a withdrawal and issuance of a permit is required. The change you propose (for withdrawals for non-qualifying aircraft) would constitute a major change to Customs warehouse procedures.

In regard to your request for the suspension, under a test program pursuant to 19 CFR 101.9, of the requirement for physical separation (between bonded and non-bonded portions of a building in which there is a bonded warehouse) in 19 CFR 19.1(c), we have advised the appropriate operational office of your interest in such a test program. As noted elsewhere in this ruling, Customs has recently issued an NPRM (primarily pertaining to duty-free stores under 19 U.S.C. 1555) under which section 19.1(c) would be deleted (published in the Federal Register on June 6, 1996 (61 FR 28808)). According to the background of the NPRM, "[w]hile language concerning warehouse security would be added to [section] 19.4(b)(6), warehouse construction requirements will not be set forth in the regulations. The warehouse construction is a factor that will be considered by the port director in deciding whether to approve the application." Note that the provision referenced in the above-quoted language (section 19.4(b)(6)) is proposed to be amended to specifically provide for "effective separation of the bonded and non-bonded merchandise" in a facility in which a portion is to be used for the storage of non-bonded merchandise by "painted line", among other alternatives.

Because of the above-described proposed deletion of 19 CFR 19.1(c), the operational office involved (to which we referred your proposal (see above)) has advised that it believes no test under 19 CFR 101.9 is necessary. Your client may wish to comment on the above-referenced NPRM. Instructions for making comments, and the identity of a Customs officer who will be able to provide further information about the proposal, are provided in the NPRM.

HOLDINGS:

(1) The usual procedures for withdrawal from a bonded warehouse of merchandise require filing of a withdrawal with Customs and issuance by Customs of a permit to withdraw prior to withdrawal (19 CFR 10.61, 144.38, 144.39). However, under the "blanket" withdrawal permit procedures in 19 CFR 10.62a and 19.6(d), if a withdrawer obtains approval for use of these procedures, withdrawals of equipment or supplies for a qualifying aircraft under 19 U.S.C. 1309 may be without further Customs approval by filing with the warehouse proprietor a withdrawal for the merchandise withdrawn on Customs Form 7501, as described in the LAW AND ANALYSIS portion of this ruling. Alternatively, under 19 CFR 19.6(b)(2), merchandise for which a permit for withdrawal has been issued may be retained in a bonded warehouse, if segregated or physically marked to maintain its identity as merchandise for which a withdrawal permit has been issued, until the end of the 5-year warehouse entry period. Blanket withdrawal procedures may not be used for withdrawals of supplies or equipment for aircraft which do not qualify for treatment under 19 U.S.C. 1309, in which case the usual requirements for filing of a withdrawal and issuance of a permit by Customs prior to withdrawal apply (19 CFR 19.6(d)(1), 144.38, and 144.39).

(2) First-in, first-out (FIFO) accounting methods may be used to account for fungible merchandise in your client's bonded warehouses, provided that each inventory category is assigned a unique number, each inventory category is physically segregated from merchandise in other inventory categories or merchandise accounted for under other methods, and that the requirements described in the LAW AND ANALYSIS portion of this ruling (referring to C.S.D. 83-63 and ruling HQ 224237, as well as, for general requirements and examples relating to FIFO and other accounting procedures, 19 CFR Part 181, Appendix, Schedule X, and T.D. 95-61) are complied with.

(3) The merchandise under consideration may not be entered into your client's bonded warehouses without stating the tariff classification (see 19 CFR 144.12), nor may all of the merchandise be classified under subheading 8803.90.9050, HTSUS, at the time of entry into the warehouses (unless that is the correct classification of the merchandise) (see authorities cited in this regard in the LAW AND ANALYSIS portion of the ruling).

(4) Domestic or duty-paid merchandise may not be entered for warehouse (19 CFR 144.1(a), as promulgated by T.D. 84-149). Merchandise for which a permit for withdrawal has been issued may be retained in the warehouse under 19 CFR 19.6(b)(2) (see above). A bonded warehouse facility may be in a building in which there are bonded and non-bonded portions of the building, provided that the bonded and non-bonded portions are effectively separated (see 19.CFR 19.2(b) and 19.1(c); see also discussion of the NPRM to delete the latter section).

(5) The procedures described in this ruling should be applied uniformly to your client's bonded warehouses throughout the United States unless there is some special reason for the port director, in his or her discretion, to treat a bonded warehouse in the port differently (see, e.g., 19 CFR 19.6(d)(1), regarding blanket withdrawal permits).

Sincerely,


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