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HQ 116101

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February 12, 2004

BOR-4-04 RR:IT:EC 116101 CK

CATEGORY: CARRIER

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

RE: Principal base of operations; Canadian trucks; 19 U.S.C. §1322; 19 CFR

Dear Mr. Kahn:

This is in response to your ruling request on behalf of your client, Climan Transportation Services (“Climan”) dated December 30, 2003. You seek our opinion as to whether Climan’s “principal base of operation” is foreign pursuant to section 123.14(a) of the Customs Regulations (19 CFR §123.14(a)). Our reply follows.

FACTS:

Climan, legal name, 2747-7173 Quebec Inc., d/b/a Climan Transportation Services, is incorporated in Canada. Its principal office is located in Lachine, Quebec, Canada. Climan has been in international trucking services since approximately 1989.

Climan operates approximately 100 truck tractors in its international trucking business. These trucks are either owned by Climan or are leased by Climan from one or more Canadian companies engaged in the commercial truck leasing business. All Climan’s trucks are of Canadian manufacture or are Canadian duty-paid imports.

Climan’s only office facility is located in Lachine, Quebec. That office includes administrative offices where Climan performs all administrative functions, including dispatch. The terminal includes 48 loading docks and dock space for transferring freight. The terminal includes full garage and maintenance facilities for all Climan’s motor carrier equipment, and approximately 8 acres for parking equipment. All maintenance (except for minor, on-the-road maintenance) is performed at the Lachine terminal or in some instances at a nearby Canadian repair facility.

Each of Climan’s Canadian drivers is a Canadian citizen who permanently resides in Canada. Climan employs its drivers, rather than using the services of independent contractors. Climan receives payment at its office in Lachine for transportation it performs. Climan maintains its payroll and pays each driver from Lachine, including deduction of certain employment taxes according to Quebec requirements.

In the ordinary course of its operations, Climan dispatches trucks from Canada to U.S. destination points (or occasionally Mexico); when they are empty, they are directed to pick up at an U.S. location the next available load destined to Canada. Except for time awaiting a return load or time spent resting to comply with Department of Transportation “hours of service” safety requirements, Climan’s trucks are not parked or garaged in the U.S. All of Climan’s operations consist of international moves from a point in the U.S. to a point in a foreign country. In the vast majority of instances, the “foreign country” is Canada, but in a few instances, it is Mexico.

Today, and in the past, Climan’s trucks are registered with the Province of Quebec, and each bears a Quebec license plate. However, for business reasons, Climan now proposes to have all its Canadian trucks bear only a South Carolina apportioned license plate, issued by South Carolina through that state’s participation in the “International Registration Plan” (IRP).

ISSUE:

Whether Climan’s Canadian trucks have their “principal base of operations in a foreign country” (i.e., Canada) pursuant to 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 U.S. 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 115984, dated June 4, 2003; 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)

In the present case, Climan’s only office, which controls both truck dispatch and payroll is in Quebec, Canada. Climan’s trucks are Canadian manufactured or duty-paid Canadian trucks. Climan’s trucks are driven by Canadian citizens, and employed directly by Climan. Climan pays both its Canadian drivers and Canadian employment taxes out of its only office located in Quebec, Canada. Climan’s trucks are repaired and maintained in Canada. The vehicles currently have a Canadian license plate and are registered in Canada. These factors taken together clearly show that Climan’s trucks have their “principal place of operations” in Canada. In regard to Climan’s proposal to have the trucks bear only South Carolina IRP apportioned license plates, this action alone would not have the effect of nullifying the “foreign-based” status of the trucks. (See, HQ 115665, cited above) We note that for purposes of clarity and facilitation, the Canadian registration certificate should accompany any South Carolinian paperwork or identification card in each Climan truck so as to be readily displayed and/or available to any CBP officials for examination at their discretion.

HOLDING:

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

Sincerely,

Glen E. Vereb
Chief

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