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HQ 115984

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June 4, 2003

BOR-4-04-RR:IT:EC 115984 CK

CATEGORY: CARRIER

Jeremy Kahn, Esq.
Kahn & Kahn
1730 Rhode Island Ave., N.W.
Suite 810
Washington, D.C. 20036

Dear Mr. Kahn:

This is in response to your letter dated May 8, 2003, with enclosures, on behalf of Mercer Transportation Co., Inc. (“Mercer”), seeking Customs view as to the permissibility under § 123.14, Customs Regulations (19 CFR § 123.14) of certain practices relating to this company’s truck tractors. Our ruling on this matter is set forth below.

FACTS:

Mercer is a longtime interstate trucking company headquartered at Louisville, Kentucky. It has been involved in international trucking services between the U.S. and Canada since approximately 1992. Until last year, Mercer conducted international business only with U.S. equipment and U.S. drivers, but during the past year, Mercer has begun using some Canadian owner-operators with Canadian trucks. Mercer operates in the U.S. pursuant to operating authority issued by the Interstate Commerce Commission (now administered by the Federal Motor Carrier Safety Administration or “FMCSA”) in MC-143059 and in Canada pursuant to appropriate Canadian extra-Provincial operating authority.

Mercer’s primary business involves the transportation of commodities on flatbed trailers, a somewhat specialized undertaking. This business involves picking up a shipment at a shipper location and delivering it directly to the consignee.

Mercer operates exclusively with so called “owner-operators,” i.e., individuals who own their own trucks and lease those trucks with a driver to an authorized motor carrier. Mercer has entered into a formal lease agreement with all its owner-operators, whose conditions are prescribed by FMCSA regulations at 49 CFR 376, et seq. The regulations require that Mercer, as lessee, have exclusive control, possession, and use of the vehicle for the term of the lease. Also pursuant to FMCSA requirements, all of the leased vehicles Mercer operates display the “Mercer” name and its U.S. Department of Transportation number on their sides.

Today, Mercer operates approximately 1,300 truck tractors, all owned by owner-operators and leased to Mercer. Of these, 17 are leased from Canadian owner-operators. Each of the Canadian trucks is either of Canadian manufacture, or conceivably, if they originally may have been of U.S. manufacture, they have been formally entered into Canada for Customs purposes and are therefore now “Canadian” for Customs purposes. Each of the Canadian drivers is a Canadian citizen who permanently resides in Canada. Mercer sends compensation checks to the owner-operators at their homes in Canada, or in rare instances the owner-operator may request Mercer provide some compensation by crediting the owner-operator’s fuel credit card.

Although each owner-operator is an independent businessman, he does not maintain any formal place of business, as such. Rather, he has a home location at which his truck is registered, where he ordinarily parks his truck when it is not engaged in revenue service, and to which his compensation is ordinarily sent.

Mercer’s principal office is located at Louisville, Kentucky. There, it maintains all centralized administrative functions, including dispatch. However, it also maintains an agency office at Orillia, Ontario, Canada. That office engages in sales and the dispatch activities for the Canadian trucks. To maintain control of the use of Canadian trucks, the Orillia, Ontario office performs all dispatch functions for southbound loads from Canada to the U.S. and many of the northbound loads from the U.S. to Canada.

Mercer dispatches trucks from Canada to U.S. destination points; when they are empty, they are directed to pick up the next available load destined to Canada. Except for time spent in awaiting a return load or resting, Mercer’s Canadian trucks are not parked or garaged in the U.S. Instead, they are generally parked at the owner’s home in Canada.

All of Mercer’s Canadian trucks are registered in Canada in the province in which the owner-operator resides. Under the terms of the lease arrangement with each owner-operator (and consistent with FMCSA leasing rules), maintenance of the Canadian trucks is the sole responsibility of the owner-operator.

Although all Mercer’s Canadian trucks are registered in a Canadian province, all the Canadian trucks bear only an Illinois “International Registration Plan” apportioned license plate, and do not bear a license plate of their registration province.

Generally, when a Mercer Canadian truck enters the U.S. it is carrying a shipment loaded in Canada to be delivered in the U.S. and once unloaded in the U.S. it will carry a U.S. shipment to Canada. However, it is possible that in some instances a Canadian truck will enter the U.S. without a load for purposes of picking up a shipment in the U.S. for delivery to Canada, or having dropped off a load in the U.S., returning empty to Canada. There may also be an occasion where a truck loaded in Canada may transport a shipment in bond through a portion of the U.S. for delivery to another point in Canada.

The IRP is a registration reciprocity agreement among the states of the United States and provinces of Canada providing for payment of license fees on the basis of total distance operated in all jurisdictions. It was created and is administered by the American Association of Motor Vehicle Administrators (AAMVA), a group which deals with various transportation regulation and safety issues involving commercial carriers operating in the United States, Canada, and Mexico, and among the three jurisdictions. A goal of the group is the harmonization of practices and procedures affecting trucking.

According to the AAMVA, the unique feature of the IRP is that even though license fees are paid to the various jurisdictions in which fleet vehicles are operated, only one (1) license plate and one (1) cab card is issued for each fleet vehicle when registered under the IRP. A fleet vehicle is known as an apportionable vehicle and such vehicle, so far as registration is concerned, may be operated both interjurisdictionally and intrajurisdictionally.

For motor carriers operating under the IRP, registering a fleet of interjurisdictional vehicles becomes a one-stop process for motor carriers, with a simple, one-step registration. Motor carriers so registered can operate on an interjurisdictional basis in any IRP member jurisdiction displayed on the cab card, provided they have obtained proper operating authority. In an effort to provide increased efficiency to the IRP and to offer new services to member jurisdictions, the AAMVA Board of Directors voted to incorporate it in 1993.

As supporting evidence, Mercer has submitted copies of the following: “Illinois Apportionment Identification Card;” “the Ontario Registration Certificate;” “Owner Master Entry Printout;” Check Number Inquiry” (pay stub); and “Movement Display;” for two representative Canadian owner-operators.

ISSUE:

Whether the circumstances described above demonstrate that Mercer Canadian trucks have their “principal base of operations in a foreign country “ (i.e., Canada) for purposes of 19 CFR §123.14(a).

LAW AND ANALYSIS:

Instruments of international traffic enter the United States without the filing of a Customs entry and free of duty under the provisions of 19 U.S.C. 1322. To qualify as instruments of international traffic, trucks, buses and taxicabs having their "principal base of operations in a foreign country" must be arriving in the United States with merchandise or passengers destined for points in the United States, or arriving empty or loaded for the purpose of taking merchandise or passengers out of the United States. (See, section 123.14(a), Customs Regulations (19 CFR §123.14(a)).

It is the long-held position of the Bureau of Customs and Border Protection (CBP) that any determination as to a vehicle’s “principal base of operations” is dependent upon the evidence presented in each case. CBP has no specific criteria in this regard. As long as an operator has demonstrated the intention to establish a vehicle’s “principal base of operations” and operate out of a certain location, and presents sufficient evidence to support this intention, CBP will generally determine that point to be the vehicle’s base of operations. (CBP memorandum 108566, dated October 10, 1986; and CBP Ruling Letters HQ 115665, dated July 3, 2002; HQ 110785, dated October 12, 1990; HQ 111548, dated September 3, 1991; and HQ 112809, dated July 28, 1993)

With respect to Mercer’s trucks currently under consideration, it is readily apparent that they are owned, maintained, and are stored while not in use in Canada. It has been established that the Canadian owner-operators operate out of their residences and receive their compensation in Canada. Additionally, Mercer dispatches the Canadian trucks from its regional office in Orillia, Ontario, Canada. The vehicles bear only an Illinois IRP license plate and have been issued an attendant Illinois Apportioned Identification Card, which, although having the intended effect of harmonizing cross-border traffic, could possibly cast doubt on their “foreign-based” status. However, the provincial registration certificate for each of the illustrative Mercer trucks, taken in consideration with the other aforementioned factors, is probative of these vehicles having their “principal base of operations” in Canada. In this regard we note that for purposes of clarity and facilitation, the provincial registration certificate should accompany the Illinois Apportioned Identification Card in each Mercer truck so as to be readily displayed and/or available to U.S. Customs officials for examination at their discretion.

HOLDING:

Under the circumstances described above, Mercer’s Canadian trucks are considered to have their “principal base of operations in a foreign country” (i.e., Canada) for purposes of § 123.14, Customs Regulations (19 CFR § 123.14).

Sincerely,

Glen E. Vereb

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