HQ 114196 - Instruments of International Traffic; Canadian-based Trucks; 19 U.S.C. ? 1322 - United States International Trade Commision Rulings

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HQ 114196

January 5, 1998

BOR-4-04-RR:IT:EC 114196 GEV

CATEGORY: CARRIER

William H. Shawn, Esq.
Shawn, Mann & Steinfeld, L.L.P.
1850 M Street, N.W., Suite 280
Washington, D.C. 20036

RE: Instruments of International Traffic; Canadian-based Trucks; 19 U.S.C. ? 1322

Dear Mr. Shawn:

This is in response to your letter dated December 9, 1997, on behalf of your client, Les Etablissements Dubois Ltee of Napierville, Quebec, Canada, requesting a ruling regarding the proposed use of its trucks (tractor-trailer units) in local traffic in the United States. Our ruling is set forth below.

FACTS:

Les Etablissements Dubois Ltee ("LEDL") is a Canadian-based motor carrier which holds a permit, issued by the Interstate Commerce Commission (now the Surface Transportation Board), authorizing it to transport general commodities in interstate or foreign commerce between points in the United States. Presently, LEDL's trucks deliver aluminum sheet and scrap from vendors in Quebec and Ontario to Texarkana, Texas. Depending upon the specific origin in Ontario and Quebec of the aluminum products, LEDL's trucks enter the United States through New York, Michigan, or Vermont. After the aluminum is unloaded in Texarkana, the trucks return empty to Canada.

One Texas company to which LEDL delivers goods from Canada has requested that it provide domestic U.S. point-to-point hauling on the return leg of LEDL's international movements. Specifically, LEDL has been requested to load its terminating inbound trucks with outbound loads of finished aluminum products and deliver such products to the following locations: (1) Detroit, MI; (2) Pittsburgh, PA; (3) Ambridge, PA; (4) Shelbyville, KY; (5) Rochester, NY; (6) Wallingford, CT; (7) Minneapolis, MN; (8) Anoka, MN; (9) Coon Rapids, MN; and (10) Dallas, TX. You have enclosed maps depicting the routes to be taken by LEDL's trucks on the aforementioned itineraries and describe them as follows:

1. Detroit

LEDL's vehicles would depart Texarkana and travel northeast, directly on Interstate Routes 30 and 40. The trucks would turn north on Interstate 65, traveling to Louisville, Kentucky. From Louisville, the trucks would then travel east on Interstate 64 until it intersected Interstate 75. After unloading in Detroit, the trucks would cross the International border and return to Napierville.

2. Pittsburgh, PA

LEDL's vehicles would depart Texarkana and travel northeast, directly on Interstate Routes 30 and 40. The trucks would turn north on Interstate 65 to Louisville, Kentucky. From Louisville, the trucks would then travel east on Interstate 64 to Interstate 79, the intersection of which is Charleston, West Virginia. The vehicles would head north on Interstate 79. The Pittsburgh corporate city limits are within a few miles of Interstate 79. After unloading in Pittsburgh, the trucks would continue on Interstate 79 until they reach Interstate 90. The vehicles would then take Interstate 90 northeast through New York, until they reach Interstate Route 87. The trucks would travel north on Interstate 87, cross the international border at Rouses Point, and proceed to Napierville.

3. Ambridge, PA

LEDL's vehicles would depart Texarkana and travel northeast, directly on Interstate Routes 30 and 40. At the appropriate juncture, the trucks would take Interstate 65 to Louisville, Kentucky. From Louisville, the vehicles would then travel east on Interstate 64 to Interstate 79 north. Ambridge is just over ten (10) miles from Interstate 79. After unloading in Ambridge, the trucks would continue on Interstate 79 until they reached Interstate 90. The vehicles would then travel Interstate 90 north and east through New York until reaching Interstate 87. The trucks would proceed north on Interstate 87, cross the international border at Rouses Point, and proceed to Napierville.

4. Shelbyville, KY

LEDL's vehicles would depart Texarkana and travel northeast, directly on Interstate Routes 30 and 40. The trucks would turn north on Interstate 65, traveling to Louisville, Kentucky. From Louisville, the trucks would then travel east on Interstate 64. Shelbyville is less than five (5) miles from Interstate 64. After unloading in Shelbyville, the trucks would continue along Interstate 64 to Interstate 79 north. They would continue on Interstate 79 until they reached Interstate 90. The vehicles would then travel Interstate 90 north and east through New York until reaching Interstate 87. The trucks would proceed north on Interstate 87, cross the international border at Rouses Point, and proceed to Napierville until it intersected Interstate 75.

5. Rochester, NY

LEDL's vehicles would depart Texarkana and travel northeast, directly on Interstate Routes 30 and 40. The trucks would turn on Interstate 65 towards Louisville, Kentucky. From Louisville, they would travel east on Interstate 64 to Interstate 79. The trucks would continue north on Interstate 79 until they reached Interstate 90. The vehicles would then take Interstate 90 northeast. Rochester is just over ten (10) miles from Interstate 90. After unloading in Rochester, the trucks would proceed along Interstate 90 to Interstate 87, and travel Interstate 87 to Rouses Point, where the vehicles would cross the international boundary and return to Napierville.

6. Wallingford, CT

LEDL's vehicles would depart Texarkana and travel northeast, directly on Interstate Routes 30 and 40. The trucks would remain on Interstate 40 as it turns into Interstate 81 heading north. At the intersection of Interstate Routes 81 and 380, the trucks would follow Interstate 380 briefly to Interstate 84, which the vehicles would take northeast through New York until they reached Interstate 91 north. Wallingford is approximately five (5) miles from Interstate 91. After unloading in Wallingford, the vehicles would remain on Interstate 91 north, switching to Interstate 89 where Interstate 91 branches off, cross the border at Vermont, and return to Napierville.

7. Minneapolis, MN

LEDL's vehicles would travel directly north on U.S. Highway 71 to its intersection with Interstate 35. On Interstate 35, the vehicles would proceed directly north to the Minneapolis metropolitan area. After unloading in Minneapolis, the vehicles would continue north on Interstate 35 to U.S. Highway 61. The trucks would traverse Highway 61 north, through Duluth, until the vehicles crossed the international border at Thunder Bay, Ontario, and return to Napierville.

8. Anoka, MN

LEDL's vehicles would travel directly north on U.S. Highway 71 until it intersects with Interstate 35. On Interstate 35, the vehicles would proceed directly to the Minneapolis metropolitan area. Once in Minneapolis, the trucks would proceed directly to Anoka on U.S. Highway 52, which is less than twenty (20) miles from Minneapolis. After unloading in Anoka, the vehicles would return to Interstate 35 and continue heading north to U.S. Highway 61. The trucks would traverse Highway 61 north, through Duluth, until the vehicles crossed the international border at Thunder Bay, Ontario, and return to Napierville.

9. Coon Rapids, MN

LEDL's vehicles would travel directly north on U.S. Highway 71 until it intersects with Interstate 35. On Interstate 35, the vehicles would proceed directly to the Minneapolis
metropolitan area. Once in Minneapolis, the trucks would proceed directly to Coon Rapids on U.S. Highway 52, which is approximately fifteen (15) mile from Minneapolis. After unloading in Coon Rapids, the vehicles would return to Interstate 35 and continue heading north to U.S. Highway 61. The trucks would traverse Highway 61 north, through Duluth, until the vehicles crossed the international border at Thunder Bay, Ontario, and return to Napierville.

10. Dallas, TX

LEDL's vehicles would depart Texarkana and travel west on Route 30. After unloading in Dallas, the vehicles would travel east directly on Interstate Routes 30 and 40. The trucks would then turn north on Interstate 65 through Kentucky and then take the Blue Grass Parkway (U.S. Highway 62) to the intersection with Interstate 64. They would then travel east on Interstate 64. The trucks would continue along Interstate 64 until it intersected Interstate 75. The trucks would proceed north on Interstate 75 directly to Detroit, cross the international border, and proceed to Napierville.

With respect to the above-described scenarios, you state that they would be repeated in accordance with the needs of the shipper and, therefore, each scenario is but one of a series of similar and related transactions.

ISSUE:

Whether any of the above-described scenarios involving the use of a Canadian-based truck (tractor-trailer unit) in local traffic are violative of 19 CFR ? 123.14.

LAW AND ANALYSIS:

Section 141.4, Customs Regulations (19 CFR ? 141.4), provides that entry as required by title 19, United States Code, importation whether free or dutiable and regardless of value, except for intangibles and articles specifically exempted by law or regulations from the requirements for entry. Since the foreign-based equipment in question is not within the definition of intangibles as shown in General Note 4, Harmonized Tariff Schedule of the United States (HTSUS; 19 U.S.C. ? 1202, as amended), they are subject to entry and payment of any applicable duty if not specifically exempted by law and regulations.

Instruments of international traffic may be entered without entry and payment of duty under the provisions of 19 U.S.C. ? 1322. To qualify as instruments of international traffic, trucks having their principal base of operations in a foreign country must be arriving in the United States with merchandise destined for points in the United States, or arriving empty or loaded for the purpose of taking merchandise out of the United States (see 19 CFR ? 123.14(a)). Further-more, certain foreign-based vehicles engaged, in whole or in part, in the domestic carriage of merchandise that either originates from a location outside the United States or will be sub-
sequently moved to a destination outside the United States, or such vehicles moving without a payload between two points in the same country, shall be considered as engaged in international traffic. (See Customs Bulletin of October 1, 1997, Vol. 31, No. 40, at pp. 7-13.)

A foreign truck tractor which arrives in the United States in international traffic towing a foreign trailer, either empty or loaded, constitutes a foreign "truck" as that term is used in

Section 123.14(c), Customs Regulations, states that with one exception, a foreign-based truck, admitted as an instrument of international traffic under ? 123.14, shall not engage in local traffic in the United States. The exception, set out in ? 123.14(c)(1), states that such a vehicle, while in use on a regularly scheduled trip, may be used in local traffic that is directly incidental to the international schedule.

A carrier may be considered as engaged in regularly scheduled service whether trips are scheduled hourly, daily, weekly, etc., provided the trips are regular, not varied, and are over an established route. Trips made if and when a load is available do not qualify.

Section 123.14(c)(2), Customs Regulations (19 CFR ? 123.14(c)(2)), provides that a foreign-based truck trailer admitted as an instrument of international traffic may carry merchandise between points in the United States on the return trip as provided by ? 123.12(a)(2) which allows use for such transportation as is directly incidental to its economical and prompt departure for a foreign country. Section 123.14(c)(2) applies only to trailers and not to tractor-trailer units which, as was stated earlier, are considered trucks as that term is used in the Customs Regulations.

Section 10.41(d), Customs Regulations provides, in part, that any foreign-owned vehicle brought into the United States for the purpose of carrying merchandise between points in the United States for hire or as an element of a commercial transaction, except as provided for in merchandise from a foreign country and a regular Customs entry therefore shall be made. Section 123.14(d), Customs Regulations provides that any vehicle used in violation of ? 123.14, is subject to forfeiture under ? 592, Tariff Act of 1930, as amended (19 U.S.C. ? 1592).

Whether the use of an instrument of international traffic constitutes a diversion from international traffic is based on the facts in each case. The transportation of merchandise in international traffic is the key. In those instances where merchandise has either not originated from outside the United States or will not be moved to a destination outside the United States, or where there is no movement without a payload between two points in the United States, the domestic movement of merchandise must be secondary to the international movement and meet other criteria. There must be a regular international schedule and the domestic movement must follow the same basic route as the merchandise moving in international traffic.

With respect to your inquiry, at the outset we note that since the domestic transportation in question (i.e., finished aluminum products loaded in Texarkana, Texas, for delivery to the above-listed ten (10) U.S. locations) is to be effected by Canadian-based tractor-trailer units (i.e., "trucks" as discussed above), the provisions of ? 123.14(c)(1), not ? 123.14(c)(2), are applicable. As such, we note that although the information contained within your letter is indicative of an international schedule with respect to LEDL's current deliveries (Quebec or Ontario to Texarkana), it fails to establish the requisite regularity of such trips. We further note that with the exception of those itineraries involving Detroit and Dallas, your letter indicates that the LEDL trucks would be deviating between 5-20 miles from Interstate highways for the purpose of unloading their Texarkana-origin merchandise. These deviations are suggestive of local traffic not directly incidental to an international schedule (i.e., not following the same route as the merchandise moving in international traffic). Accordingly, in the absence of evidence to the contrary, it is our position that the domestic movements of LEDL's trucks proposed in your letter are local traffic that is not within the permitted exception set forth in ? 123.14(c)(1).

HOLDING:

The above-described scenarios involving the use of a Canadian-based truck (tractor-trailer unit) in local traffic are violative of 19 CFR ? 123.14(c)(1).

Sincerely,

Jerry Laderberg
Chief

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