HQ 229546 - Foreign trade zone; transfer of merchandise from one zone to another; within same port; appropriate form; 19 CFR 146.21; 19 CFR 146.66; 19 CFR 146.71; bonded carrier - United States International Trade Commision Rulings

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HQ 229546

September 3, 2002

FOR-2-05-RR:CR:DR 229546 IOR

CATEGORY: FOREIGN TRADE ZONE

Laurence J. Lasoff, Esq.
John B. Brew, Esq.
Collier Shannon Scott, PLLC
3050 K Street, NW
Washington DC 20007-5108

RE: Foreign trade zone; transfer of merchandise from one zone to another; within same port; appropriate form; 19 CFR 146.21; 19 CFR 146.66; 19 CFR 146.71; bonded carrier

Dear Mr. Lasoff and Mr. Brew:

We are in receipt of the ruling request dated May 29, 2002, on behalf of Metro International Trade Services Inc. (“Metro”), pertaining to the transfer of merchandise from one zone to another, within the same port. Our decision is based on documentation and information provided in follow-up submissions made on behalf of Metro, dated June 25, 2002, and August 23, 2002.

FACTS:

Metro is a foreign trade zone (“FTZ”) operator, and this ruling request concerns its facilities in the Ports of Long Beach, California and New Orleans, Louisiana. Metro currently warehouses merchandise at the subject facilities and one of its customers has requested that significant volumes of merchandise be transferred to another zone facility with a different operator at the same port. The customer has informed Metro that the use of the CF 7512 is burdensome on the movement of the merchandise. Metro is proposing the use of alternative documentation of the transfer under 19 CFR 146.66.

Metro has provided the following documentation pertaining to a recent transfer from one zone to another zone in the Port of Long Beach

 It is not clear from the submissions whether the documented transfer was within the same port. However both CF 214’s set forth the same port code in Block 2, which would indicate that the transfer occurred within the same port.:

1. Invoice from the Chilean exporter of the merchandise, to Metro, for 2.142 bundles of electrorefined copper cathode, dated November 19, 2000, and referencing contract no. ZUOC102.

2. A certificate of quality dated November 18, 2000 certifying that 2.142 bundles of electrorefined copper cathode, referencing contract no. ZUOC102, is according to ASTM specifications.

3. A bill of lading for the shipment of 2.142 bundles of electrorefined copper cathode from Chile, erroneously consigned to Metro’s facility, FTZ No. 2, at New Orleans, LA (the merchandise should have been consigned to Metro’s facility, FTZ No. 50, in Long Beach). The port of discharge is indicated as Long Beach. The merchandise was said to be “clean on board” on November 19, 2000.

4. CF 214, for admission of 2,142 bundles of electrorefined copper cathode in NPF status, at Port 2704 (Long Beach). The zone number and location in Block 1 is No. 50, in the Long Beach area. The referenced bill of lading number in Block 9 does not correspond to any number on the bill of lading by which the merchandise was exported from Chile. The applicant for admission is Metro, whose application is signed and dated in Blocks 24-27. In Blocks 28-30 there is an FTZ operator’s signature dated December 1, 2000, certifying agreement to receive merchandise into the zone. In Blocks 31-36, there are Customs signatures permitting the transfer of the merchandise and granting the requested status, dated December 1, 2000. In Blocks 38-39, there is the December 1, 2000 signature of the Customs Officer at the station from which the goods were to be transported to the zone, authorizing such transport. In the permit to transfer section, in Blocks 42-45 there is a driver’s signature for Metro, dated December 1, 2000, certifying the merchandise was received for transfer to the zone. In Blocks 47-49 the operators receipt date is December 4, 2000. The zone admission number is ZLB09665.

5. CF 216, application for FTZ activity permit, dated December 14, 2000, for the physical splitting of 46 bundles of copper cathodes into 92 bundles, in lot 9665, for stock purposes, in FTZ No. 50. The applicant is Metro. The zone admission number is difficult to read but appears to be ZLB09665, and the application date is December 21, 2000. The activity has been certified by Customs on December 28, 2000.

6. A Metro bill of lading, no. 409511, for seven units of copper cathodes, dated April 12, 2002. The bill of lading contains a carrier signature and a “CONT./TRL #”, both of which are illegible. The Shipper is identified as “A”, a metals exchange, which is not the owner of the merchandise at any time, and the merchandise is to be shipped to “B”, the FTZ operator of zone No. 202, the transferee zone. The document indicates that the merchandise has been “sold to” a third party, “C”, a metals trader.

7. A CF 7512 for immediate transportation, indicating an entry date of December 4, 2000, for the April 5, 2002 shipment of seven bundles of copper cathodes imported by “B” and consigned to “B”. The merchandise is said to be currently located at Metro’s FTZ facility. The shipment is to be via H&M Terminals Inc. The document specifies that the shipment is under NPF status and is from FTZ No. 50 to FTZ No. 202. The document also references bill of lading no. 409511.

8. A blank delivery ticket, CF 6043. The information that is provided for on this form includes from where the goods are delivered, the location to which the goods are being delivered, the bill of lading no., description of the merchandise, truck number, signature of cartman or lighterman, and signature of the receiving proprietor.

9. CF 214 dated April 2, 2002, for an intrazone transfer of 3607 bundles of copper cathode, from lots # 9665 and 9678, in NPF status. The zone number in Box 1 is cut off of our copy, however, according to counsel for Metro, the zone No. in Block 1 is 202. Instead of a bill of lading number in Block 9, “N/A” is indicated. “N/A” has been placed In Blocks 11-13, pertaining to the in bond transfer. In Blocks 24-27, the applicant is company “B” as named on the bill of lading and CF 7512, above. In Blocks 28-30 there is an FTZ operator’s signature dated April 2, 2002, certifying agreement to receive merchandise into the zone. In the permit to transfer section, in Blocks 42-45, there is a driver’s signature for H&M Terminals Transport, dated April 2, 2002, certifying the merchandise was received for transfer to the zone. There is no permit to transfer by Customs, no Customs grant of the requested status, and no zone operator’s receipt in blocks 31-36, 38-41 and 47-49. The zone admission number is 00-MO41.

Documents 6, 7 and 9 pertain to the transfer of the merchandise. According to Metro, the CF 7512 is for its records, and will not be signed upon receipt into the receiving zone. The CF 6043 was submitted only as an exhibit for the documentation used for a transfer between zones involving the same port and the same operator. Metro requests a ruling as to whether the documentation submitted, specifically without any signature from the receiving/transferee zone, is a sufficient record of the transfer for Metro’s inventory management under 19 CFR 146.21, and to absolve Metro of liability to Customs for duty once the merchandise has left Metro’s facility, or whether Metro is required to have a record indicating the receipt of the merchandise by the transferee zone.

ISSUE:

Whether the documentation submitted in place of the CF 7512 is sufficient documentation of the transfer of merchandise to another zone with a different operator at the same port, for purposes of 19 CFR 146.21 and 19 CFR 146.66.

LAW AND ANALYSIS:

Under the foreign trade zone statute, merchandise sent from a zone into the Customs territory of the U.S. is subject to the laws and regulations of the U.S. affecting imported merchandise. The Customs Regulations provide for the transfer of merchandise to another zone with a different operator in the same port, in 19 CFR 146.66(a), as follows:

(a) At the same port. A transfer of merchandise to another zone with a different operator at the same port (including a consolidated port) will be by a licensed cartman or a bonded carrier as provided for in § 112.2(b) of this chapter or by the operator of the zone for which the merchandise is destined under an entry for immediate transportation on Customs Form 7512 or other appropriate form with a Customs Form 214 filed at the destination zone.

The regulations require that the transfer be “under an entry for immediate transportation”, and either a CF 7512 or other form may be used. An entry for immediate transportation requires the transportation of merchandise in bond. 19 CFR 18.10(a).

For delivery of merchandise from a foreign trade zone to a bonded carrier, the supervision of lading is to be accomplished in accordance with 19 CFR 146.71(a). 19 CFR 18.2(a)(4). Section 146.71(a) provides for “release and removal of merchandise from zone”, and requires a Customs permit for the transfer of merchandise from a zone. The issuance of a permit authorizes delivery of the merchandise only to the operator “who then may release the merchandise to the importer or carrier.” Paragraph (b) of section 146.71 provides for liability of any discrepancy, when the transfer is not physically supervised by a Customs officer, as follows:

When a transfer is not physically supervised by a Customs officer, the operator will be relieved of responsibility only for the merchandise in a zone in the condition and quantity as shown on the entry, withdrawal, or other appropriate form. The operator will be relieved of responsibility only if it receives the signed receipt on the document of the importer or the carrier named in that document. The responsibility of the operator may be adjusted by any discrepancy report made jointly by the operator and the bonded cartman, lighterman, or carrier, or the importer, and signed by the above or an authorized representative within 15 days after transfer of the merchandise from the zone. Any adjustment must be noted on the permit copy of the entry, withdrawal, or other appropriate form or document. A copy of any joint report of discrepancy must be submitted to the port director within 10 working days of signing by the parties.

According to the documents submitted, Metro would not be relieved of liability for the merchandise identified on the CF 214, dated April 2, 2002, document 9 in the FACTS above, although the carrier has signed for the merchandise because, in accordance with 19 CFR 146.71(a), prior to release of the merchandise to the carrier, the permit to transfer must be completed by Customs in Blocks 38-41. No permit was obtained. We note that on the CF 214 for the initial admission of the merchandise to the zone, document 4 in the FACTS above, the permit to transfer was given by Customs on December 1, 2000, after the merchandise had been released to the carrier. The permit to transfer should have been obtained prior to the release to the carrier.

Carriers and cartmen are required to be bonded, as set forth in 19 CFR 112.2. An FTZ operator may engage in cartage or lighterage under his bond for merchandise destined to his FTZ. 19 CFR 112.2(b). The liability of the bonded carrier or cartman is provided for in 19 CFR 125.41(a). The cartman or carrier conveying the merchandise is liable under his respective bond for “its prompt delivery in sound condition”. The liability of the FTZ operator is provided for in 19 CFR 125.41(b). The FTZ operator who picks up merchandise to transport to his own facility is liable under his bond for the merchandise as soon as he collects the merchandise. The merchandise must be receipted by the FTZ operator as soon as it is picked up.

Based on the regulations, it is the obligation of the transferring FTZ operator, Metro in this case, (1) to obtain a permit to transfer from Customs, (2) to verify that the merchandise is being delivered to a bonded carrier, cartman, or the operator of the transferree/receiving FTZ, and (3) to obtain a signature and legible identification of the carrier, cartman or FTZ operator, as required on the CF 214, in Blocks 42-45. Failure to do so, could result in liability for the merchandise on the part of the transferring FTZ operator.

In this case the documentation submitted with respect to the transfer lacks the Customs permit to transfer. The receipt for the transfer on the CF 214 appears sufficient, assuming that the named carrier is a bonded carrier. The Metro bill of lading, no. 409511 is not consistent with the CF 214. First, the bill of lading is on Metro letterhead as opposed to that of the carrier identified on the CF 214. Second, the quantities of merchandise, while somewhat illegible, appear to identify seven bundles of merchandise to be shipped, while the CF 214 describes a total of 3607 bundles. Third, the “carrier” signature on the bill of lading is not the same as that of the driver on the CF 214, and no company is identified as the carrier. The CF 7512 does not appear to be completed accurately. The importer of the merchandise is identified as the receiving FTZ operator, and we understand from your submission that the importer was Metro on behalf of another company. Such discrepancies would have to be explained to the satisfaction of Customs in the event of any question regarding the audit trail of the merchandise.

With respect to the recordkeeping requirements in 19 CFR 146.21 and 146.24, the transferring zone must keep a record of transferred merchandise within the inventory control and recordkeeping system. This does not require that the transferring zone have a record of the subsequent admission of the merchandise into the receiving zone. This decision does not address the obligation of the transferring zone to forward the merchandise history under 19 CFR 146.66(c) or the receiving zone operator’s obligations with respect to the admission of merchandise.

HOLDING:

Properly completed documentation in the form of a bill of lading and CF 214, in accordance with the above, is sufficient documentation of a transfer of merchandise from a zone to another zone with a different operator at the same port, for the records of the transferring zone, for the purpose of 19 CFR 146.21 and 146.66.

Sincerely,

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