HQ 114822 - Importation of gambling devices; 15 U.S.C. §§ 1171 et seq.; Foreign Trade Zones; Bonded Warehouses; Temporary Importations under bond - 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 > 2000 HQ Rulings > HQ 084357 - HQ 114893 > HQ 114822

Previous Ruling Next Ruling
HQ 114822

May 5, 2000

RES-2-10-RR:IT:EC 114822 CC

CATEGORY: ENTRY

Patrick C. Barthet, Esq.
Patrick C. Barthet Law Offices
200 South Biscayne Boulevard
Suite 1800
Miami, FL 33131

RE: Importation of gambling devices; 15 U.S.C. §§ 1171 et seq.; Foreign Trade Zones; Bonded Warehouses; Temporary Importations under bond

Dear Mr. Barthet:

This is in response to your letter of September 22, 1999, on behalf of Unidesa, U.S.A., Inc. (Unidesa) concerning the importation of gambling devices.

FACTS:

You describe the factual situation as follows:

Unidesa is the United States servicing agent for Universal de Desarrollos, S.A., a Spanish company which manufactures various types of gaming devices, including slot machines. Unidesa maintains offices in the South Florida area from which it processes contracts for the purchase of gaming devices. After a contract is executed and a delivery date determined, the goods are shipped from Spain through the ports of Miami, Florida for future shipment to their intended destinations. These destinations include the Caribbean, Latin America, and domestic locations where gaming is permitted. Domestically, the goods are delivered to gaming vessels or state jurisdictions where gaming is specifically authorized pursuant to the mandates of 15 U.S.C. §§ 1171 et seq. and applicable state and local regulations. You have also noted that pursuant to 15 U.S.C. §§ 1171 et seq., your client has obtained its Department of Justice registration to import and transport gaming devices.

In many cases, Unidesa immediately transports its gaming equipment to a purchaser at one of the above listed destinations. However, in certain instances Unidesa will have the need to temporarily store the equipment, for example, when a cruise ship is not scheduled to return to port to accept delivery for several days.

Separately, Unidesa anticipates a need to conduct certain tests of some imported components prior to shipping the equipment to its ultimate destination. In addition, some equipment will require minor adjustment prior to delivery. For example, a machine may require installation of a peripheral device to allow the user to vary the type of game he or she wishes to play.

You ask whether Unidesa can temporarily store and access its equipment without entering the commerce or jurisdiction of Florida, and thereby, avoid any violation of state laws. To accomplish this, you have identified three possible means which are temporary importation under bond, foreign trade zone, or a Customs bonded warehouse. Specifically, you ask the following questions:

Can Unidesa temporarily store, test, adjust and repair gaming devices within a U.S. Customs bonded warehouse, and do so without entering the jurisdiction of the state in which that bonded warehouse is located;

Can Unidesa temporarily store, test, adjust and repair gaming devices within a Foreign Trade Zone, and do so without entering the jurisdiction of the state in which that Foreign Trade Zone is located;

3) Can Unidesa temporarily store, test, adjust and repair gaming devices if those gaming devices are imported through a Temporary Importation under Bond. With respect to a Temporary Importation under Bond, does that procedure constitute a formal entry into the state where the subject goods are located? For example, if Unidesa posted a TIB, could it store gaming devices covered by the TIB in a private warehouse in Florida, without legally making entry into the state’s jurisdiction, given its expectation that such devices would be shipped to their eventual destination within the following twelve (12) months?

ISSUES:

Whether the subject gambling devices may be brought into the state of Florida under a TIB, or into a Foreign Trade Zone or bonded warehouse located in the state of Florida, without violating 15 U.S.C. §§ 1171 et seq. under the circumstances described.

Whether the subject gambling devices are subject to Flordia state law if brought into a Foreign Trade Zone or bonded warehouse in the state of Florida.

LAW AND ANALYSIS:

15 U.S.C. § 1172 provides in pertinent part the following:

It shall be unlawful knowingly to transport any gambling device to any place in a State or a possession of the United States from any place outside of such State or possession: Provided, That this section shall not apply to transportation of any gambling device to a place in any State which has enacted a law providing for the exemption of such State from the provisions of this section, or to a place in any subdivision of a State if the State in which such subdivision is located has enacted a law providing for the exemption of such subdivision from the provisions of this section, nor shall this section apply to any gambling device used or designed for use at and transported to licensed gambling establishments where betting is legal under applicable State laws: Provided, further, That it shall not be unlawful to transport in interstate or foreign commerce any gambling device into any State in which the transported gambling device is specifically enumerated as lawful in a statute of that State.

Subchapter XIII, Chapter 98 of the Harmonized Tariff Schedule of the United States (HTSUS) provides for the temporary importation under bond (TIB) of merchandise. There are fourteen subheadings under this subchapter which provide for TIB’s. For merchandise to be entered as a TIB, it must be eligible under one of those subheadings. The regulations for TIB’s are found in 19 CFR §§ 10.31-10.39.

A TIB entry is not an entry for consumption. See 19 CFR § 141.0a(f), which defines entered for consumption and 19 CFR § 10.31(f) which distinguishes between a TIB entry and an ordinary consumption entry. In addition, duty is not due on TIB’s, and they are not liquidated. Despite this, merchandise covered by TIB’s is released from Customs custody and is entered into the United States temporarily. The court in Titanium Metals Corp. v. United States, 19 CIT 1143, 1147 (1995), in examining the decision in Trans-Border Customs Services., Inc. v. United States, 843 F. Supp. 1482, 18 CIT 22 (1994) and quoting it, in part, stated, “The court noted that articles imported under the TIB provisions are entered into the United States on a temporary basis and are ‘not expected to be sold or consumed themselves but are to be used to facilitate other aspects of business or other purposes.’” As stated above, 15 U.S.C. § 1172 prohibits transporting any gambling device to any place in a State or a possession of the United States from any place outside of such State or possession. We assume from your submission that the subject gambling devises are not lawful in the state of Florida. If that is the case, importing the subject gambling devices under a TIB would be in violation of 15 U.S.C. § 1172.

Merchandise of every description except that which is prohibited by law may be brought into a Foreign Trade Zone. See 19 U.S.C. § 81c and 19 CFR § 146.31. In United States v. 420 Gambling Devices, 191 F.Supp. 111 (1961), and United States v. Prock, 105 F.Supp. 263 (1952), the courts found that 15 U.S.C. §§ 1171 et seq. does not apply to shipments of gambling devices in either intrastate or foreign commerce. Those decisions were based in part on the legislative history to 15 U.S.C. §§ 1171 et seq. You have stated that the gambling devices will be sent from Spain to a Foreign Trade Zone in Florida and from there to the Caribbean, Latin America, or another state. Those gambling devices sent from a Foreign Trade Zone to Latin America or a foreign country in the Caribbean would be in foreign commerce and thus would not be in violation of 15 U.S.C. §§ 1171 et seq. This conclusion is consistent with United States v. Prock, supra, in which goods sent from Texas to a Foreign Trade Zone in Louisiana and from there to Central America were found not to be in violation of 15 U.S.C. § 1172. For those devices that will be sent to a state or a possession or territory of the United States in the Caribbean, there would be no violation of 15 U.S.C. §§ 1171 et seq. if the gambling device is lawful in the state, possession, or territory to which it is sent.

19 U.S.C. § 1557 provides that merchandise, except for perishable merchandise and explosives, may be entered into a bonded warehouse. The Bonded Warehouse Manual states at page 4-1 concerning eligibility for entry for warehouse that “[m]erchandise whose importation is prohibited may not be entered for warehouse. However, merchandise whose entry into U.S. commerce is prohibited may be entered for warehousing for exportation or for manipulation to put it into condition to be eligible for U.S. consumption.” Concerning whether bringing the gambling devices into a bonded warehouse is a violation of 15 U.S.C. §§ 1171 et seq., our analysis is the same as that for Foreign Trade Zones. If the gambling devices are sent from the bonded warehouse to a foreign country or a state or U.S. possession or territory in which the subject gambling devices are lawful, then there is no violation of 15 U.S.C. § 1172.

You have stated that Unidesa may need to conduct certain tests of some imported components prior to shipping the equipment to its ultimate destination. In addition, some equipment will require minor adjustment prior to delivery. As an example, you state that a machine may require installation of a peripheral device to allow the user to vary the type of game he or she wishes to play.

Concerning activities permissible in a Foreign Trade Zone, 19 U.S.C. § 81c(a) provides that merchandise that may be brought into a zone may be “stored, sold, exhibited, broken up, repacked, assembled, distributed, sorted, graded, cleaned, mixed with foreign or domestic merchandise, or otherwise manipulated, or be manufactured” We are not aware of any other provisions in the Foreign Trade Zone Act which would be exceptions from the above permitted activities for the subject merchandise. Consequently, the activities you list would appear to be permitted in a Foreign Trade Zone.

Concerning permissible activities in a bonded warehouse, 19 U.S.C. § 1562 provides that imported merchandise may [with Customs permission and supervision] be “cleaned, sorted, repacked, or otherwise changed in condition, but not manufactured, in bonded warehouses “ The Court of International Trade discussed the meaning of the term manufactured within the context of 19 U.S.C. § 1562 in Tropicana Products, Inc. v. United States, 789 F.Supp. 1154, 1158 (1992). The court stated that while the term manufactured commonly connotes a transformation of an import to a new and different article, for purposes of section 1562, a low threshold of transformation satisfies the meaning of manufactured. The court referred to the evident legislative intent of the statute to permit only very minor or rudimentary manipulations in bonded warehouses akin to the exemplars (cleaning, sorting and repacking).

We do not have sufficient information in order to make a determination whether the activities you list would be considered manufacturing and thus not permitted in a bonded warehouse. Testing would probably be considered a manipulation and be permitted. For what you term are minor adjustments, we would need more detailed information in order to make a determination.

Concerning whether the subject gambling devices will be subject to state law in a Foreign Trade Zone, 19 U.S.C. § 81i provides that the Foreign Trade Zone Board shall cooperate with the State, subdivision, and municipality in which the zone is located in the exercise of their police, sanitary, and other powers in and in connection with the free zone. Generally, state and local laws are applicable in zones, except to the extent they are preempted by Federal laws or the Constitution. See, the U.S. Customs Foreign Trade Zones Manual, Chapter 2, page 6.

The law of preemption arises because of the principle of federalism, that is that our country has state and federal laws which coexist. When there is a conflict between a state and federal law, the federal law controls. See the Supremacy Clause of the U.S. Constitution, Article VI.

Your concerns appear to be that any Florida law prohibiting gambling devices will apply to those brought into a Foreign Trade Zone and prohibit gambling devices from being brought into a Foreign Trade Zone. Without knowing the applicable Florida law, we are unable to comment on whether Federal law might preempt Florida law. In addition, we do not have jurisdiction to interpret Florida law. We can suggest the following. First, you contact the state of Florida, which may determine that bringing the subject gambling devices into a Foreign Trade Zone or a bonded warehouse does not violate its laws. If that is the case, then whether federal law preempts the Florida law would not be at issue since there would be no conflict between state and federal law. Specifically, we direct you to the Florida Statutes, Title XLVI, Chapter 849, 849.231, which although it outlaws the manufacture, sale, purchase or possession of gambling devices, appears to contain an exception for those gambling devices being held, sold, transported, or manufactured by persons who have registered pursuant to 15 U.S.C. §§ 1171 et seq., subject to certain conditions, e.g. the merchandise is not sold for use in Florida. Again, we do not have jurisdiction to interpret this statute and suggest that you contact the state of Florida. Second, we suggest that you contact the Foreign Trade Zones Board to ensure that it would not prohibit or restrict bringing in the subject gambling devices into a Foreign Trade Zone or any activity related thereto.

Concerning the issue of whether state law applies to the gambling devices in a bonded warehouse, the same issue arises as to whether Florida state law is preempted by federal law. Consequently, our analysis is the same as that for Foreign Trade Zones, discussed above. Our suggestions remain the same also, that you contact the state of Florida and the Foreign Trade Zones Board.

Finally, we note that any importation of gambling devices into the United States must comply with the requirements contained in 15 U.S.C. §§ 1171 et seq., e.g., the registration requirements.

HOLDINGS:

The subject gambling devices may be brought into a Foreign Trade Zone or a bonded warehouse within the state of Florida without violating 15 U.S.C. §§ 1171 et seq., if they are subsequently exported, or sent to a state, or territory or possession of the U.S. in which the gambling devices are legal.

Florida state law will apply to the gambling devices brought into a Foreign Trade Zone or bonded warehouse located in the state of Florida unless preempted by federal law.

Sincerely,

Previous Ruling Next Ruling