HQ 226574 - International Traffic; Broken or Inoperative Aircraft Parts and Equipment; T.D. 55507(3); 19 U.S.C. ? 1322(a) - United States International Trade Commision Rulings

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HQ 226574

November 19, 1996

BOR-4-07/AIR-4-07-RR:IT:EC 226574 GEV

CATEGORY: CARRIER

Munford Page Hall, II
Dorsey & Whitney LLP
1330 Connecticut Avenue, N.W.
Suite 200
Washington, D.C. 20036

RE: International Traffic; Broken or Inoperative Aircraft Parts and Equipment; T.D. 55507(3); 19 U.S.C. ? 1322(a)

Dear Mr. Hall:

This is in response to your letters of November 10, 1995, and July 1, 1996, on behalf of your client, Northwest Airlines, Inc. ("NWA"), requesting a ruling regarding a specific aspect of their operations. Our ruling on this matter is set forth below.

FACTS:

NWA is an air carrier engaged in the international transportation of passengers and cargo. Currently, NWA has an average of 521 flights weekly to and from 35 foreign destinations in 17 different foreign countries. Most of the aircraft operated internationally by NWA were originally manufactured by Boeing or McDonnell-Douglas in the United States. Certain components for the aircraft may have been manufactured outside the United States but were imported by Boeing or McDonnell-Douglas and incorporated into the aircraft prior to delivery to NWA. Some of the aircraft were originally manufactured by Airbus in Europe and are used in domestic service or on flights to Canada, Mexico, and the Caribbean.

Most repairs to aircraft in NWA's international fleet are performed at NWA's home base in Egan, Minnesota. However, NWA also maintains repair facilities or has arranged for the repair of their aircraft in numerous foreign locations. Attachment A to your letter of November 10, 1995, is a list of NWA's worldwide repair arrangements. Parts for repairs to aircraft in the United States are sourced by NWA from both domestic and foreign vendors. Irrespective of where they are made, most parts purchased for Boeing and McDonnell-Douglas aircraft are obtained through U.S. suppliers.

Equipment used on aircraft in NWA's international fleet is purchased from both domestic and foreign vendors. Irrespective of where the equipment is manufactured, most of the suppliers of equipment for Boeing and McDonnell-Douglas aircraft are located in the United States. Attachment B to your letter of November 10, 1995, is a list of the most commonly used parts and equipment and the vendors from which the equipment is sourced.

The vast majority of international flights by NWA aircraft are "in-service", that is, the purpose of the flight is to transport passengers or cargo abroad or to return passengers or cargo from abroad to the United States. On an infrequent basis, however, NWA aircraft will fly abroad for the purpose of repair or maintenance. To the maximum extent possible, the delivery flight to the foreign repairer would be an "in-service" flight, and the return flight might be as well. Only approximately 12 NWA aircraft flights abroad annually are specifically for the purpose of repair or maintenance. Also, from time to time, an "in-service" flight of an NWA aircraft will involve scheduled repair or maintenance while the aircraft is abroad.

Your letter of November 10, 1995, set forth the following three issues for our determination: (1) whether several scenarios described therein regarding the international operations of NWA come within the purview of 19 U.S.C. ? 1322(a) and/or T.D. 55507(3); (2) what documentation NWA would be expected to have to support its claim of both entry and duty-free treatment of the subject merchandise under each of these scenarios pursuant to the aforementioned authority; and (3) what Customs would consider to be a "prompt return" as that term is used in T.D. 55507(3).

In addition to Attachments A and B referenced above, copies of the following were enclosed in your letter of November 10, 1995: the full text of T.D. 55507(3) and that of Customs ruling letters 101629, 104967 and 555397. Furthermore, your letter also requested a meeting with the Customs officials involved in the deliberation of this ruling prior to its issuance.

Per your request, the aforementioned meeting was held at Customs Headquarters on March 7, 1996. The following NWA officials were also in attendance: Maureen R. Mahowald, Senior Law Clerk, Legal Department; Barbara Vatier, Manager, Customs Administration and Regulatory Compliance; and Cameron F. Hinkle, Director, Facilitation & International Coordination. As a result of the discussions that took place during the course of the meeting, you were to submit a supplemental ruling request narrowing the scope of your original inquiry as well as any additional supporting documentation. The meeting also afforded you the opportunity to submit a notebook binder containing the following background materials: the Trade Agreements Act of 1979 and attendant legislative history (Part I); 19 U.S.C. ? 1322(a) (Part II); 19 U.S.C. certain sections of the Harmonized Tariff Schedule of the United States (HTSUS) you felt were relevant to this matter (Part IV); additional copies of the aforementioned Customs ruling letters (101629, 104967, and 555397) and T.D. 55507(3) (Part V); and various Federal Register notices pertaining to Customs Regulations governing aircraft (Part VI).

Your letter dated July 1, 1996, which constituted the above-mentioned supplemental ruling request, narrowed the scope of your inquiry to requesting entry and duty-free treatment for broken or inoperative aircraft parts and equipment brought to the United States subsequent to their removal abroad from NWA aircraft engaged in international traffic (i.e., "in-service" flights as described above, rather than flights the sole purpose of which is to obtain foreign repairs or maintenance and not carry passengers or cargo on either the outward or inward trip which are considered to be withdrawn from international traffic pursuant to ORR Ruling 1083-70, dated January 3, 1971). Such parts and equipment are not first-time importations, are not entered into the commerce of a foreign country, and are typically returned to service within seven days of their receipt at the repair shop. The letter also suggests the use of an NWA-created "Aircraft Removals Declaration" (Attachment A to the July 1, 1996, letter) as documentation sufficient for Customs purposes in tracking the subject parts and equipment, and provides further information not only with respect to your position that the parts and equipment in question are instruments of international traffic, but also that a "prompt return" as that term is used in T.D. 55507(3) should be interpreted by Customs to mean a return of the aforementioned parts and equipment to the United States within 45 days of their removal abroad.

ISSUE:

Whether broken or inoperative aircraft parts and equipment, manufactured in, or previously imported into, the United States, and not entered into the commerce of a foreign country, are subject to entry and the assessment of duty when brought to the United States subsequent to their removal abroad from NWA aircraft engaged in international traffic.

LAW AND ANALYSIS:

Title 19, United States Code, ? 1322(a) (19 U.S.C. ? 1322(a)), provides as follows:

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 in- structions of the Secretary of the Treasury. The authority delegated to the Secretary by this subsection shall not extend to communications satellites and components and parts thereof.

Customs ruling letter dated August 10, 1961 (file no. 511.4) is interpretive of 19 U.S.C. equipment of United States aircraft which, while the planes are on foreign flights in international traffic, are found to be damaged, defective, or worn and are consequently removed abroad in the course of making repairs and subsequently returned to the United States aboard the same or a different aircraft. This decision was abstracted in Treasury Decision (T.D.) 55507(3) (96 Treas. Dec. 384) and provides as follows:

T.D. 55507(3) Domestic aircraft, and domestic parts and equipment therefor, which, while being used abroad in international traffic, are withdrawn from such service because of accident, breakdown, or other emergency may, upon prompt return to the United States and their identity being established, be admitted without entry or payment of duty. The term "domestic" as used herein would include planes, equip- ment, and parts manufactured in, or regularly imported into, the United
States, and not subsequently cleared through foreign customs into another country, nor used in foreign local traffic otherwise than as an incident of international traffic. Bureau letter dated August 10, 1961 (511.4)

Pursuant to Customs Ruling letter 101629, dated September 18, 1975, the scope of T.D. 55507(3) was expanded to include domestic aircraft engines which, while an aircraft is being used in international traffic, are temporarily installed in the United States in order for the aircraft to return to a foreign country and which are withdrawn from the aircraft in the foreign country. This ruling held that upon the prompt return of such engines to the United States and their identity being established, they may be admitted without entry or payment of duty. It further provided that the return of these operational engines to the United States within 96 hours would be considered a "prompt return" for purposes of T.D. 55507(3). In addition, the identity of the engines would be satisfactorily established by listing them on Customs Form (CF) 4457 (the Certificate of Registration for Personal Effects Taken Aboard) and presenting the form, in duplicate, to a Customs officer for initialing prior to departure of the aircraft and presentation of the duplicate to a Customs officer at the time these engines are returned to the United States. Movement of the engines through Canada from the place of removal from the aircraft to the border under Canadian temporary procedures would not be considered clearance through foreign customs into Canada.

We note that Customs information letter 555397, dated June 9, 1989, advised NWA that both T.D. 55507(3) and Customs ruling letter 101629 remain in effect under the HTSUS.

With respect to the NWA ruling request under consideration, the applicable legal authority under which it must be analyzed is 19 U.S.C. ? 1322(a) and the Customs regulations and rulings promulgated thereunder. This authority specifically addresses the exception of instruments of international traffic from the "application of the customs laws" (including, but not limited to, the entry of merchandise pursuant to 19 U.S.C. ? 1484 and payment of applicable duty pursuant to 19 U.S.C. ? 1202 (HTSUS)). The remaining authority submitted for our consideration (specifically, 19 U.S.C. ? 1466(f) and Customs ruling 104967) is inapplicable to NWA's request in view of the fact that it pertains to the exemption from the 50 percent ad valorem duty assessed on repair expenditures incurred to civil aircraft in a foreign country, not the return to the United States of broken or inoperative aircraft parts and equipment necessitating such repair expenditures. As the Supreme Court has stated, "[w]here Congress explicitly enumerates certain exceptions to a general prohibition, additional exceptions are not to be implied, in the absence of evidence of a contrary legislative intent." Andrus v. Glover Const. Co., 446 U.S. 608 (1980). The legislative
history of 19 U.S.C. ? 1466(f) (see Parts I and III of the notebook binder you submitted at our meeting of March 7, 1996) evidences no intent on the part of Congress to address any entry and/or duty consequences of broken or inoperative aircraft parts and equipment returned to the United States subsequent to their removal abroad.

Accordingly, the subject broken or inoperative parts and equipment are within the purview of 19 U.S.C. ? 1322(a) as interpreted by the Customs ruling letter of August 10, 1961, and abstracted in T.D. 55507(3) in view of the fact that they are "domestic" as that term is described therein (i.e., manufactured in, or regularly imported into the United States, and not subsequently cleared through foreign customs into another country, nor used in foreign local traffic otherwise than as an incident of international traffic), and withdrawn while being used abroad in international traffic due to accident, breakdown, or other emergency. However, in order for such parts and equipment to be accorded the treatment afforded by T.D. 55507(3) (i.e., admission without entry or payment of duty) they must possess and/or meet the remaining requisite criteria specified therein: prompt return to the United States; and the establishment of their identity.

In regard to what is considered to be a "prompt return" as that term is used in T.D. 55507(3), we note that Customs has previously addressed this issue in Ruling letter 101629 which you reference, and in Ruling letter 102959, dated September 7, 1977, wherein Customs held, inter alia, that under the facts of that case a return of an aircraft engine from West Germany to the United States within 192 hours (8 days) is a "prompt return" within the meaning of T.D. 55507(3). Notwithstanding these rulings, you suggest that Customs adopt a 45-day period for purposes of satisfying that criterion. You cite as the basis for your suggestion General Note 16(e), HTSUS, which currently exempts from the provisions of the HTSUS:
articles exported from the United States which are returned within
45 days after such exportation from the United States as undeliverable and which have not left the custody of the carrier or foreign customs service

This authority is neither binding nor persuasive on Customs in this matter. Section 101.1, Customs Regulations (19 CFR ? 101.1) defines "exportation" as a "severance of goods from the mass of things belonging to this country with the intention of uniting them to the mass of things belonging to some foreign country." Since it is not the intention of NWA to unite the subject parts and equipment to the mass of goods belonging to a foreign country (either before or after they are broken or rendered inoperative), they are not considered to be "exported" within the meaning of General Note 16(e), HTSUS. Furthermore, they cannot be considered "undeliverable" within the meaning of this provision since it was never the intent of NWA to deliver them to a foreign destination in the first place.

We note that ? 53 of the Miscellaneous Trade and Technical Corrections Act of 1996 (Public Law 104-295) amended General Note 16, HTSUS, by adding a new subdivision (f) to adopt the 45-day period you suggest. However, in view of the fact that the transactions in question occurred prior to the enactment of this legislation, and since this legislation contains no provision for retroactive application, it is not pertinent to this matter.

In the absence of further authority cited in your letters to support the 45-day period you suggest, we are left to examine that legal authority which is instructive in this regard.

The legal definition of the word "prompt" is, "To act immediately, responding on the instant." Black's Law Dictionary. 5th Edition, at p. 1093. The courts have provided further guidance with respect to the meaning of this term. "Synonyms for the word prompt, as commonly used, are punctual, ready, expeditious and quick." Pearson v. Washington Pub. Co., 98 F.2d 245, 248 (1938). "Promptly does not have any exact definition that can be regulated with respect to a period of time. It depends, of course, in its definition largely on the circumstances surrounding the facts which are adduced in each case,..." Irvin v. Koehler, 230 F. 795, 797 (1916)

Accordingly, in view of the above authority, we decline to impose a specific length of time for purposes of satisfying the "prompt return" criterion of T.D. 55507(3). Rather, Customs personnel at the ports of entry where the subject broken or inoperative parts or pieces of equipment are returned to the United States will determine whether such returns are "prompt" for purposes of T.D. 55507(3) on a case-by-case basis. Upon reviewing the totality of the circumstances surrounding each such return (including, but not limited to, such factors as the date the part or equipment broke or was rendered inoperative, the length of time that lapsed between that date and the return date, NWA's corporate policy to return within 180-190 hours, etc.), the aforementioned personnel will decide whether this criterion has been met.

Parenthetically, we note that the subject parts and equipment must be returned to aircraft engaged in international flights rather than domestic flights in order to remain within the purview of T.D. 55507(3).

The final criterion of T.D. 55507(3) in question in this case concerns the establishment of the identity of the subject parts and equipment. To that end the necessity for adequate documentation arises. As previously noted, Custom ruling letter 101629 addressed this issue providing that the identity of operational aircraft engines temporarily installed in the United States, removed in a foreign country, and returned to the United States would be satisfactorily established by listing them on Customs Form (CF) 4457 (the Certificate of Registration for Personal Effects Taken Aboard) and presenting the form, in duplicate, to a Customs officer for initialing prior to departure of the aircraft and presentation of the duplicate to a Customs officer at the time these engines are returned to the United States.

With respect to the converse factual situation presented by this ruling request (i.e., broken or inoperative parts and equipment removed from the aircraft in a foreign country and returned to the United States), you state that the current entry procedures are as follows. Carriers submit an inward General Declaration to Customs for each international flight. Attached to the General Declaration are hard-copies of the Air Cargo Manifest (which is also transmitted to Customs electronically via the Automated Manifest System ("AMS")), and the Stores List (a manual list of all stores, such as liquor, on board). NWA ships any parts or equipment to the United States on a master air waybill, which, in addition to being in hard-copy, appears on the AMS Air Cargo Manifest.

In the alternative, NWA proposes the following entry procedures. In order to enable both the carrier and Customs to differentiate between (a) parts and equipment which, pursuant to T.D. 55507(3), are not required to be entered, and (b) first-time importations of aircraft parts which are required to be entered, NWA proposes that importations exempted under (a) be manifested and declared on a new attachment to the General Declaration entitled as "Aircraft Removals Declaration". (Attachment A to your letter of July 1, 1996) The information in the Aircraft Removals Declaration would be derived from NWA's records kept in the ordinary course of business. The Aircraft Removals Declaration would not be transmitted to Customs via AMS, but rather would be handled manually.

NWA proposes the following system for record retention. Local Customs and NWA would continue to retain copies of the General Declaration and its attachments. The Aircraft Removals Declaration would simply be an additional page attached to the existing manifest packet (akin to the Stores List referenced in 19 CFR ? 122.47). In addition, NWA would continue to retain its usual records for the tracking of the removal, repair, and installation of parts and equipment. NWA intends to continue to use its "World Wide Shipping" invoice (Attachment B to your letter of July 1, 1996), a computer system designed in cooperation with Customs officials to produce customs invoices for international shipments to and from all stations in the NWA system, for internal purposes. This document would be retained in the ordinary course of business. If required to substantiate claims, parts and equipment can be traced from the Aircraft Removals Declaration to the "World Wide Shipping" invoice by reference to the air waybill number.

With respect to the establishment of the identity of the subject parts and equipment for purposes of T.D. 55507(3), we will again defer to the Customs personnel at the ports of entry where these items are returned to the United States. Such personnel will determine what documentation they deem sufficient in order to satisfy this criterion.

HOLDING:

Pursuant to T.D. 55507(3), broken or inoperative aircraft parts and equipment, manufactured in, or previously imported into, the United States, and not entered into the commerce of a foreign country, are not subject to entry and the assessment of duty when brought to the United States subsequent to their removal abroad from NWA aircraft engaged in
international traffic provided Customs personnel at the ports of entry where these items are returned to the United States are satisfied that their return was "prompt" and their identity has been established.

Sincerely,

Chief

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