HQ 114398 - Instruments of International Traffic; Canadian-based Trucks; Intermodal Transportation; - United States International Trade Commision Rulings

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HQ 114398

July 31, 1998

BOR-4-03/04-RR:IT:EC 114398 GEV

CATEGORY: CARRIER

Rick Drinkwater
Manager, Multimodal Division
Yanke Group of Companies
2815 Lorne Ave.
Saskatoon, Saskatchewan, Canada S7J 0S5

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

Dear Mr. Drinkwater:

This is in response to your letter dated June 24, 1998, requesting clarification with respect to intermodal (i.e., truck/rail) movements of cargo from Canada to the United States. Our ruling on this matter is set forth below.

FACTS:

Yanke Group of Companies ("Yanke"), a Canadian-based motor carrier, seeks to utilize CP Railway service inbound and outbound via Chicago, Illinois, to Canada and vice versa. The two scenarios it is currently contemplating are as follows:

(1) A load originating in Canada is destined to the U.S. (Bensenville, IL,
CP Terminal). Yanke would use the railway for its linehaul into the
U.S. A Yanke truck would subsequently pick up the load from the rail and deliver it to Yanke's customer.

(2) A U.S. customer has two loads to be transported to Canada. A Yanke truck takes one load to the rail terminal and it is railed to Canada.
The truck then returns to the customer to pick up another load that is transported to Canada by the truck.

In both of the above scenarios, the Yanke truck would also pick up a road load and deliver it in Canada.

ISSUE:

Whether the use of Canadian-based trucks in the intermodal transportation of merchandise described above is violative of ? 123.14, Customs Regulations (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 trucks in question are 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)).

In addition, pursuant to 19 U.S.C. ? 1625(c)(1), Customs published a notice in the October 1, 1997, Customs Bulletin, Volume 31, Number 40, advising interested parties that Customs is revoking all prior rulings inconsistent with its change in interpretation of the Customs Regulations regarding the admission into the United States of certain foreign-based trucks as instruments of international traffic. The notice stated that effective December 1, 1997, Customs position regarding this matter is that whether the movement of such vehicles is considered to be international or domestic for purposes of the administration of ? 123.14, Customs Regulations (19 CFR ? 123.14) is dependent upon the origin and destination of the merchandise carried. Such vehicles engaged, in whole or in part, in the carriage of merchandise originating in one country and terminating in another country shall be considered to be engaged in international traffic. In addition, the movement of such vehicles without a payload between two points in the same country shall not be considered a domestic movement.

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, you should know that Customs recent change in interpretation set forth in the October 1, 1997, Customs Bulletin cited above applies solely to truck traffic. Intermodal (e.g., truck/rail or truck/vessel) movements of merchandise, including the ones you pose, were not contemplated by the petition Customs received from the American Trucking Associations requesting the aforementioned interpretive change. Consequently, the use of Yanke trucks in the intermodal scenarios you pose would be violative of 19 CFR ? 123.14 inasmuch as the subject trucks would be considered to be engaged in local traffic (i.e., pickups and deliveries to and from the U.S. rail terminal) not permitted within that regulatory authority.

HOLDING:

The use of Canadian-based trucks in the intermodal transportation of merchandise described above is violative of ? 123.14, Customs Regulations (19 CFR ? 123.14).

Sincerely,

Jerry Laderberg

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