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HQ 113679




November 12, 1996

BOR-4-07/CON-2-03-RR:IT:EC 113679 GOB

CATEGORY: CARRIER

Carl D. Cammarata, Esq.
Law Offices of George R. Tuttle
Three Embarcadero Center
Suite 1160
San Francisco, CA 94111

RE: Containers; Instruments of International traffic; 19 CFR 10.41a; 19 CFR 10.41b; Withdrawal or Diversion; Entry

Dear Mr. Cammarata:

This is in response to your letters of March 2, 1994 and June 3, 1994 on behalf of Matson Leasing Company, Inc. ("MLC").

FACTS:

In your letter of March 2, 1994, you state as follows, in pertinent part:

On behalf of this MLC, a ruling is requested confirming that MLC or its lessees may from time to time divert to domestic use without entry, or alternatively by single entry or periodic entries, its foreign-built containers used as instruments of international traffic...
...
Pursuant to 19 C.F.R. ?177, et seq., the specific ruling or information letter requested, is for batch clearance without entry or the payment of duty for all MLC's foreign-built serially numbered substantial containers as "instruments of international traffic" (hereafter "I.I.T.'s"), provided they are in compliance with 19 C.F.R. ?10.41b(a), (c)(2), (e), and (h). Alternatively, authority is requested for MLC to enter its foreign-built containers on one entry through one port pursuant to 19 C.F.R. ?10.41a(d). This entry would include containers presently in international service, providing this would allow the containers to be subsequently leased to domestic carriers without further domestication and/or continue to be used as I.I.T.'s. As a third choice, if both of the above proposals are not acceptable to the Customs Service, MLC requests permission to file with Customs annual or semi-annual entries of its foreign-built shipping containers that are, or have been, used as I.I.T.'s but were leased during the period throughout the United States to carriers for use in the domestic trade. After diversion, these containers may again be used as I.I.T.'s. [Footnotes omitted.]

ISSUES:

1. Whether MLC may divert to domestic use without entry its foreign-built containers used as instruments of international traffic.

2. If MLC must enter the foreign-built containers upon their diversion, may it make a "single batch entry of all of its containers at one time" or may it make annual or semi-annual filings of all domesticated containers during the previous period.

LAW AND ANALYSIS:

Issue One

19 U.S.C. 1322(a) states in part:

Vehicles and other instruments of international traffic, of any class specified by the Secretary of the Treasury, shall be excepted from the application of the customs laws to such extent and subject to such terms and conditions as may be prescribed in regulations or instructions of the Secretary of the Treasury.

The Customs Regulations issued under the authority of 19 U.S.C. 1322 are contained in 19 CFR 10.41a. 19 CFR 10.41a(a)(1) designates lift vans, cargo vans, shipping tanks, skids, pallets, caul boards, and cores for textile fabrics as instruments of international traffic.

19 CFR 10.41a(a)(1) also authorizes the Commissioner of Customs to designate as instruments of international traffic such additional articles or classes of articles as he shall find should be so designated. Instruments so designated may be released without entry or the payment of duty, subject to the provisions of 19 CFR 10.41a. Instruments so designated are also stated to be duty-free in subheading 9803.00.50, Harmonized Tariff Schedule of the United States.

19 CFR 10.41a(d) provides in pertinent part that if an instrument of foreign origin is released under section 10.41a and is subsequently diverted to point-to-point local traffic within the United States, or is otherwise withdrawn in the United States from its use as an instrument of international traffic, it becomes subject to entry and the payment of any applicable duties.

19 CFR 10.41a(e) provides in pertinent part that the person who filed the application for release under paragraph 19 CFR 10.41a(a)(1) shall make the appropriate notification to a port director if the instrument of international traffic is diverted or withdrawn, in which event he shall file a consumption entry and pay duties due.

There is no authority under which we are able to permit the subject foreign-built containers used as instruments of international traffic to be diverted to domestic use without entry. 19 CFR 10.41a is the controlling provision. 19 CFR 10.41a(d) clearly states that foreign-built instruments of international traffic which are diverted to point-to-point local traffic (i.e., domestic use) are subject to entry and the payment of duty.

Your correspondence cites 19 CFR 10.41b, subsection (a) of which provides:

?10.41b Clearance of serially numbered substantial holders or outer containers.

(a) The holders and containers described in this section may be released without entry or the payment of duty, subject to the provisions of this section.

It is our position that, with respect to foreign- manufactured holders or containers, 19 CFR 10.41b only applies where entry of those holders or containers has previously been made. This is evident from an examination of T.D. 86-13, which amended 19 CFR 10.41b.

Accordingly, 19 CFR 10.41b is not applicable here with respect to foreign-manufactured instruments of international traffic for which entry has not been made.

Issue Two

If the containers are required to be entered pursuant to 19 CFR 10.41a(d) and (e), entry must be made pursuant to the applicable statute and regulations.

There is no statutory or regulatory provision or authority with respect to the filing of annual or semi-annual entries.

19 CFR 10.41a(e) provides in pertinent part that the person who filed the application for release under 19 CFR 10.41a(a)(1) shall promptly notify a port director of a diversion or withdrawal and shall file a consumption entry and pay all import duties due. Thus, each time that an instrument of international traffic (or a group of instruments of international traffic) is diverted, entry must be made.

With respect to instruments of international traffic that have been previously diverted and for which entry has not been made in a prompt manner, we see no reason why those instruments of international traffic cannot be entered on one entry at one port. However, this statement only applies to instruments of international traffic which have not been entered in a prompt manner. (As stated supra, 19 CFR 10.41a(e) provides for prompt notification to a port director, filing of a consumption entry, and payment of duties upon diversion or withdrawal.) The requirement of prompt notification and subsequent entry would limit the containers to be filed on one entry to those containers which have been the subject of a withdrawal or diversion at a particular time. Where a withdrawal or diversion occurs at two different times (e.g., two withdrawals or diversions separated by more than a few days), the prompt notification requirement of 19 CFR 10.41a(e) would preclude the entry of the instruments of international traffic from the two diversions or withdrawals at the same time.

Thus, the only situations where a party could make one entry of instruments of international traffic which have been the subject of two different withdrawals or diversions would be: (a) where the party has failed to make prompt notification and entry as required by 19 CFR 10.41a(e); and (b) where the withdrawals or diversions occur within a very close time frame, i.e., within a few days of each other.

HOLDINGS:

1. a. Pursuant to 19 CFR 10.41a(d), foreign-built containers which are instruments of international traffic and which are diverted to point-to-point local traffic (i.e., domestic use) are subject to entry and the payment of duty. b. With respect to foreign-manufactured holders or containers, 19 CFR 10.41b is only applicable where entry of those holders or containers has previously been made.

2. When required, entry must be made pursuant to the statutory and regulatory requirements. There is no authority or provision for entry on an annual or semi-annual basis. 19 CFR 10.41a(e) provides for prompt notification to a port director, filing of a consumption entry, and payment of duties upon diversion or withdrawal of an instrument of international traffic.

Sincerely,

Chief,
Entry and Carrier Rulings Branch

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