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HQ 115880

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February 10, 2003

TRA-6-RR:IT:EC 115880 GEV

CATEGORY: BONDS

Cynthia J. Hurwitz, Esq.
David P. Street, Esq.
Galland, Kharasch, Greenberg, Fellman
& Swirsky, P.C.
1054 Thirty-First Street, N.W.
Suite 200
Washington, D.C. 20007

RE: Bonds; In-Bond; 19 CFR § 113.63

Dear Ms. Hurwitz and Mr. Street:

This is in response to your letter dated December 13, 2002, on behalf of your client, Yellow Transportation, Inc. (“Yellow”), requesting a ruling as to whether shipments of in-bond merchandise transported by Yellow must be placed in a Customs bonded warehouse or container freight station (CFS) rather than Yellow’s own storage facilities under its custodial bond. Our ruling on this matter is set forth below.

FACTS:

Yellow is one of the largest motor carrier fleets in the United States, and also operates throughout Mexico and Canada. It maintains a custodial bond in the amount of $300,000 to cover bonded merchandise it transports. Yellow wishes to hold such in-bond merchandise at its own facilities pending Customs release or export. These facilities are not licensed and bonded by Customs as warehouses or CFSs and do not have facility codes.

ISSUE:

Whether Yellow may hold in-bond merchandise at its own facilities under its own custodial bond pending Customs release or export if such facilities are not Customs bonded warehouses or CFSs.

LAW AND ANALYSIS:

The Customs Regulations governing warehouses and CFSs are found at Part 19, Customs Regulations (19 CFR Part 19). The Customs Regulations setting forth custodial bond conditions are set forth in § 113.63, Customs Regulations (19 CFR § 113.63). None of these regulatory provisions mandate the placement of in-bond merchandise transported by Yellow into a Customs bonded warehouse or CFS as opposed to Yellow’s unbonded facilities. To the contrary, as discussed below, a collective review of certain of these relevant regulations supports Yellow’s position in this matter.

At the outset we note that the termination of carrier liability with respect to the transfer of unentered merchandise into a bonded CFS (as opposed to Yellow’s unbonded facilities) is addressed in § 19.44(a), Customs Regulations (19 CFR § 19.44(a)). That regulation provides that an importing carrier shall remain liable under the terms of its bond for the proper safekeeping and delivery of the merchandise until it is formally receipted for by the CFS operator, if the merchandise is transferred directly to a CFS from an importing carrier. Since a carrier’s obligations in such circumstances terminate upon formal receipt by the CFS operator, by implication, absent such receipt the carrier’s bond liability continues. This position finds judicial support in the case of Inland Waterways Corporation v. Standard Commercial Tobacco Co., 65 F.2d 715 (5th Cir. 1933) wherein the court held that the liability for goods commences upon receipt by the carrier and is discharged by delivery and acceptance of the goods by a succeeding carrier.

With respect to the aforementioned bond liability, as noted above the basic custodial bond conditions required of a carrier transporting unentered merchandise are provided for in § 113.63, Customs Regulations (19 CFR § 113.63). Of particular note is § 113.63(a)(1) which provides that with respect to the receipt of such merchandise, the principal agrees:

To operate as a custodian of any bonded merchandise received, including merchandise collected for transport to his facility, and to comply with all regulations regarding the receipt, carriage, safekeeping, and disposition of such merchandise. (Emphasis added)

Accordingly, in view of the above-referenced regulatory and judicial authority, it is the position of the Customs Service that liability for in-bond merchandise remains with the bonded carrier until another party (i.e., another carrier, warehouse, CFS or importer) accepts responsibility under its own bond. The bonded carrier is not compelled by the aforementioned authority to place the unentered merchandise it is transporting into a Customs bonded warehouse or CFS. However, if liability for a shipment is not transferred, the bonded carrier will remain liable.

HOLDING:

Yellow may hold in-bond merchandise at its own facilities under its own custodial bond pending Customs release or export if such facilities are not Customs bonded warehouses or CFSs.

Sincerely,

Georgina Grier

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