HQ 114333 - Instruments of International Traffic; Canadian-based Trucks; New and Different Product; - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1998 HQ Rulings > HQ 114268 - HQ 114493 > HQ 114333

Previous Ruling Next Ruling
HQ 114333

April 23, 1998

BOR-4-04-RR:IT:EC 114333 GEV

CATEGORY: CARRIER

Thomas A. Morgan
Morgan Lumber, Inc.
P.O. Box 624
Bingham, Maine 04920

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

Dear Mr. Morgan:

This is in response to your letter dated April 10, 1998, with respect to the proposed use of Canadian-based trucks in the United States. Our ruling on this matter is set forth below.

FACTS:

Morgan Lumber, Inc. ("Morgan") of Bingham, Maine, custom saws logs exclusively for Rene Bernard Inc., ("Bernard") of Beauville, Quebec. One hundred percent of the wood cut by Morgan Lumber, Inc. is exported to Quebec where it is run through a planer and graded, then shipped throughout the world.

At the present time Bernard's trucks bring lumber into the United States East Coast market. On the return trip to Quebec these trucks stop in the New England States and pick up logs to haul back to St. Zachary, Quebec. It is proposed that instead of hauling these logs to St. Zachary, the trucks would deliver them to Bingham to be custom sawed and pick up lumber to go back to Quebec.

ISSUE:

Whether the use of Canadian-based trucks as described in the above scenario is violative of 19 CFR ? 123.14(c).

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), it is 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, upon reviewing the use of Bernard's Canadian-based trucks as described above, we note that by transporting logs between New England States and Bingham these vehicles would be engaged in local traffic notwithstanding the custom sawing they would obtain for the logs at Bingham and their subsequent transportation to Canada. This determination is based on the fact that the logs would not have a prior movement from an origin (i.e., point of loading) outside the United States and will not be subsequently moved to a destination (i.e., point of delivery) outside the United States. (See Customs Bulletin of October 1, 1997, Vol. 31, No. 40, at pp. 7-13). The custom sawing that would take place at Bingham would create a new and different product having a new name, character and use from those logs originally delivered to Bingham. Further support for this conclusion is found in the fact that under the Harmonized Tariff Schedule of the United States (HTSUS), the subject logs would be classified under heading 4403 whereas the sawn wood would be classified under heading 4407. This sawing therefore breaks the continuity of the transportation between points in the United States and Canada. (See also, Anheuser-Busch Brewing Association v. United States, 207 U.S. 556 (1908), and American Maritime Association v. Blumenthal, 590 F. 2d 1156 (1978), regarding Customs position with respect to the creation of a new and different product through processing).

Accordingly, the use of Bernard's vehicles as proposed would be prohibited by Customs administration of 19 CFR ? 123.14.

HOLDING:

The use of Canadian-based trucks as described in the above scenario is violative of 19 CFR ? 123.14(c).

Sincerely,

Jerry Laderberg
Chief
Entry Procedures and Carriers

Previous Ruling Next Ruling