HQ 114538 - Instruments of International Traffic; Shipping Containers; Entry; - United States International Trade Commision Rulings

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HQ 114538

December 9, 1998

BOR-4-07-RR:IT:EC 114538 GEV

CATEGORY: CARRIER

Michael K. Tomenga, Esq.
Lawrence J. Bogard, Esq.
Neville, Peterson & Williams
1233 20th Street, N.W.
Suite 500
Washington, D.C. 20036

RE: Instruments of International Traffic; Shipping Containers; Entry;
19 U.S.C. ? 1322; 19 CFR ? 10.41a

Dear Messrs. Tomenga and Bogard:

This is in response to your letter of November 10, 1998, on behalf of your client, the Institute of International Container Lessors ("IICL"), the trade association for the container leasing industry, requesting a ruling as to the party responsible for making entry for consumption pursuant to ? 10.41a(g)(3), Customs Regulations (19 CFR ? 10.41a(g)(3)) for shipping containers deemed to be instruments of international traffic ("IITs") when such shipping containers remain in the United States for a period longer than 365 days. Our ruling on this matter is set forth below.

FACTS:

International shipping containers are used by the shipping industry, i.e., common carriers. They may enter the United States at any ocean, rail or motor vehicle port of entry. About 50% of such containers, which are IITs, are owned directly by the carriers who use them in the operation of their business to transport cargo. About 46% are owned by members of the container leasing industry, who lease them to shipping companies for use in transporting merchandise. The remaining 4% are owned by a variety of owners including railroads, shippers and others. At any given time an indeterminate number of these containers, which are IITs within the meaning of the United States for a period exceeding 365 days, thereby triggering the entry requirement imposed by ? 10.41a(g)(3).

Fundamentally, members of the leasing industry have no control over the movement of the containers that they own, they merely lease them to the shipping lines that use the containers and do control their movement. For these reasons, members of the leasing industry do not request release of the containers pursuant to ? 10.41a(a), nor do they post the bond required for such release pursuant to ? 10.41a(c). In addition, because movement of the containers is controlled by others, leasing industry members do not know when the 365-day period triggering the entry requirement imposed by ? 10.41a(g)(3) may begin or may end with respect to any particular container or group of containers. This is true even if the containers have been returned to them.

ISSUE:

What party is responsible for making entry for consumption pursuant to ? 10.41a(g)(3), Customs Regulations (19 CFR ? 10.41a(g)(3)) for shipping containers deemed to be IITs when such shipping containers remain in the United States for a period longer than 365 days?

LAW AND ANALYSIS:

Title 19, United States Code, ? 1322(a) (19 U.S.C. ? 1322(a)), provides that "[v]ehicles 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 applicable Customs Regulation regarding the use of the subject shipping containers in international traffic is issued under the authority of 19 U.S.C. ? 1322(a) and found at ? 10.41a, Customs Regulations (19 CFR ? 10.41a). This regulation relates to articles in use or to be used in international traffic and that have been designated as IITs by the Commissioner of Customs. If so designated, such instruments may be released without entry or the payment of duty, subject to the provisions of ? 10.41a.

Section 10.41a(c), Customs Regulations (19 CFR ? 10.41a(c)), provides, in part, that the IITs designated in ? 10.41a(a) may be released only after the applicant for release has filed a bond on Customs Form (CF) 301, containing the bond conditions set forth in ? 113.66, Customs Regulations (19 CFR ? 113.66). These conditions include, among other things, the requirement that the bond principal, "[p]romptly enter the [IIT] unless exempt from entry." Customs has held that the principal on an IIT bond must be the applicant for release of the holder or container designated as an IIT. (Customs ruling letter 220204, dated March 29, 1988)

Section 10.41a(g)(3), Customs Regulations (19 CFR ? 10.41a(g)(3)) provides that a container designated as an IIT which "...does not exit the United States within 365 days of the date on which it is admitted shall be considered to have been removed from international traffic, and entry for consumption must be made..."

Accordingly, with respect to those shipping containers under consideration, in the event any such container remains in the United States in excess of 365 days, it must be entered by the principal on the IIT bond. As noted above, the principal on such a bond must be the applicant for release referenced in ? 10.41a.

We note the statement in your letter that, "Typically, the applicant for release' of a leased container is the shipping company that is using the container." (Emphasis added) You further state that, "[t]he applicant would be the owner-lessor of the container only if the lessor were repositioning the container to the U.S., a circumstance which does not often occur and certainly does not occur under today's economic conditions." Consequently, we are precluded from holding, as you request, that the owner-lessor of leased containers is not the party responsible for making entry in the event such action is warranted under ? 10.41a(g)(3). It is readily apparent that there may be instances, however remote, when the aforementioned owner-lessor would be the above-referenced principal/applicant for release and therefore would be required to enter the subject containers pursuant to ? 10.41a(g)(3).

HOLDING:

The principal on the bond filed pursuant to ? 10.41a(c), which is also the applicant for release of an IIT within the purview of ? 10.41a, Customs Regulations (19 CFR ? 10.41a), is responsible for making entry for consumption pursuant to ? 10.41a(g)(3), Customs Regulations (19 CFR ? 10.41a(g)(3)) for shipping containers deemed to be IITs when such shipping containers remain in the United States for a period longer than 365 days.

Sincerely,

Jerry Laderberg
Chief
Entry Procedures and Carriers

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