BOR-4-04-RR:IT:EC 114160 GEV
F.R. Damm, Esq.
Clark Hill P.L.C.
500 Woodward Avenue
Suite 3500
Detroit, Michigan 48226-3435
RE: Instruments of International Traffic; Canadian-based Trucks;
19 U.S.C. 1322
Dear Mr. Damm:
This is in response to a memorandum dated November 4, 1997,
from the Fines, Penalties & Forfeitures (FP&F) Officer, U.S.
Customs Service, Detroit, Michigan, forwarding your request for a
ruling on behalf of your client, Gerth Transport, Inc. ("Gerth"),
with respect to the proposed use of their vehicles in the United
States. Our ruling on this matter is set forth below.
FACTS:
Gerth possesses both Canadian (Ontario and Quebec), United
States (U.S. Department of Transportation) and Mexican operating
authority as a motor carrier. Its business involves the
transport of international shipments of freight between Canada,
the United States and Mexico. In doing so, it utilizes both
Canadian and United States-based equipment and drivers.
On November 30, 1996, and December 5, 1996, Customs officers
at the Blue Water Bridge, Port Huron, Michigan, seized two (2)
tractors registered to Gerth under the authority of 19 U.S.C.
1594 for engaging in local traffic in the United States in
violation of 123.14(c), Customs Regulations (19 CFR 123.14).
On December 27, 1996, counsel for Gerth deposited $10,000.00 per
tractor for their release. This amount equals the maximum
penalty provided for in Part 171, Appendix B, (C)(1)(c),
Customs Regulations.
In response to Customs Seizure and Pre-Penalty Notices, on
February 20, 1997, counsel claimed the subject vehicles were not
in violation of 123.14(c) and provided information allegedly
supporting Gerth's position that the vehicles in question were on
regularly scheduled
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trips and any local traffic was incidental to the vehicles'
international schedule. By memorandum dated February 24, 1997,
from the FP&F Officer, Detroit, to the Chief, Penalties Branch,
Customs Headquarters, which was subsequently forwarded to this
office for review, internal advice was requested with respect to
counsel's response to the Seizure and Pre-Penalty Notices. Upon
our review of counsel's position, we determined that the vehicles
in question had in fact engaged in local traffic not within the
permitted exception set forth in 123.14(c)(1). (Customs
memorandum 113875, dated March 20, 1997) This determination was
due, in large part, to a lack of clarity with respect to the
information Gerth provided to Customs. Counsel was notified of
our decision telephonically by the FP&F Officer in Detroit on
April 18, 1997, and by letter dated July 7, 1997.
Pursuant to a letter dated August 28, 1997, counsel to Gerth
informed Customs that Gerth had decided not to pursue its
appeal/petition rights on the instant penalties and consented to
the retention of the penalty amounts by Customs. However,
counsel further stated that Gerth still wished to pursue a ruling
with respect to the proposed routes of its vehicles as described
in its letters to the FP&F Officer in Detroit dated February 20,
1997, May 23, 1997, and August 26, 1997.
By letter dated September 29, 1997, the FP&F Officer in
Detroit advised Gerth that Customs had applied the penalty
amounts to the above-referenced penalty cases (Detroit case nos.
1997-3802-0003701 and 1997-3802-0003501) and that those cases
were now closed. Furthermore, the letter advised Gerth that
their prior submissions requesting a ruling on the proposed use
of their vehicles would be forwarded to Customs Headquarters for
review. In addition, pursuant to a letter dated October 14,
1997, to the FP&F Officer in Detroit, Customs was notified that
the firm of Damm and Tauscher, P.C. which had been representing
Gerth in this matter had been dissolved and that the firm of
Clark Hill P.L.C. would now act as Gerth's counsel. The letter
requested that Customs change its records to reflect same and
reiterated the aforementioned ruling request regarding Gerth's
proposed routes which are set forth below.
A.
In regard to southbound transportation, the primary points
of entry/departure from Ontario, Canada, to the United States are
as follows: (1) Detroit/Windsor; (2) Port Huron/Sarnia; (3)
Niagara/Niagara and/or Buffalo/Port Erie; and (4) Alexandria
Bay/Ivy Lea. Its primary points of entry/departure between the
United States and Mexico are at Laredo/Nuevo Laredo and McAllen/
Reynosa. Gerth has in excess of 50 scheduled departures every
week from various points in Ontario through Detroit/Windsor or
Port Huron/Sarnia to Laredo/Nuevo Laredo and on to customers in
Mexico. These are three country moves, from Canada in transit
through the United States to Mexico. Departures are on
Wednesday, Thursday and Friday, with arrivals in Mexico two or
three days later. The general routes used are as follows:
(1) Entry at Detroit/Windsor, S I-75 through MI/OH, W
US-24 in
OH/IN, S I-69 in IN, W I-70 in IN/IL, S I-57 in IL/MO,
S I-55 in
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MO/AR, W I-40 in AR, W I-30 in AR/TX, W I-20 in TX, S
US-77
in TX, and S I-35 in TX to Laredo, departure to Nuevo
Laredo,
Mexico.
(2) Entry at Port Huron/Sarnia, W I-94 in MI, S I-69 in
MI, W I-94
in MI/IN/IL, W I-80 in IL, S I-57 in IL/MO, with the
remainder of
the route as in the prior example.
The above-described loads, after clearance by Mexican
Customs, then continue on to their final destination in Mexico.
B.
Gerth likewise has numerous regularly scheduled
international shipments from customers in Mexico to consignees in
the United States and/or Canada. These northbound departures
follow established routes and occur on Monday, Tuesday and
Wednesday with subsequent arrival in the northern United States
and Canada two or three days later. Examples of such shipments
include the following:
(1) Departure from Guanajuato, Mexico, entry at Nuevo
Laredo/Laredo,
after entry at Nuevo Laredo/Laredo the shipment goes N
I-35 to Ft.
Worth/Dallas. The driver completing this international
shipment would
then pick up another international shipment in Ft.
Worth/Dallas consigned
to Mississauga, Ontario. The route would be N I-30
through TX/AR, N
I-40 through AR, N I-55 through AR/MO, N I-57 through
MO/IL, E I-70
through IL/IN, N I-69 in IN, E US-24 through OH, N I-75
through OH/MI
to departure through Detroit/Windsor and onto
Mississauga, Ontario. This
is the reverse of the Windsor to Laredo route described
above.
(2) Departure from Mexico City, Mexico, entry at Nuevo
Laredo/Laredo
N I-35 in TX, and US-77 in TX, E I-20 in TX, E I-30 in
TX/AR, E I-40
in AR, N I-55 in AR/MO/TN, N US-51 in TN/KY, E via
Parkways in KY
to Dawson Springs and deliver the international
shipment from Mexico.
The driver completing this shipment would then continue
E on Western
Kentucky Parkway and I-65 to Louisville and pick up an
international
shipment consigned to Waterloo, Ontario; this shipment
would go N I-71
through KY/OH, and N on I-75 through OH/MI to
Detroit/Windsor and
on to Waterloo.
(3) Departure from Monterrey, Mexico, entry at Nuevo
Laredo/Laredo,
then N I-35 in TX, N US-75 in TX/OK, N US-69 in OK, E
I-44 in OK/MO,
N I-270 in MO/IL for delivery of a scheduled
international shipment to Hart-
ford, IL. After delivery of the international shipment
in Hartford, IL, the driver
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would be assigned a scheduled international shipment
consigned to Ontario,
Canada, along the following route: N I-55/I-80 in IL to
Chicago Heights to
pick up an international shipment consigned to
Oakville, Ontario, thereafter
E I-90 in IL, E I-94 in IN/MI and entry to Canada at
Detroit/Windsor, there-
after to delivery at Oakville.
(4) Departure from Monterrey, Mexico, entry at Nuevo
Laredo/Laredo,
then N I-35 in TX, N US-75 in TX/OK, N US-69 in OK, E
I-44 in OK/MO,
N I-270 in MO/IL for delivery of a scheduled
international shipment to
Hartford, IL. After delivery of the international
shipment in Hartford, IL,
the driver would be assigned a scheduled international
shipment consigned
to Ontario, Canada, along the following route: N I-55/I-80 in IL to Harvey
to pick up an international shipment consigned to
Stratford, Ontario, there-
after E I-80 in IL/IN, E I-94 in IN/MI, N I-69 in MI
and entry to Canada
at Port Huron/Sarnia, thereafter to delivery at
Stratford.
(5) An international shipment from Apodaca, Mexico,
consigned to Channelview,
TX, entry at Nuevo Laredo/Laredo, N I-35 TX, E I-10 TX
delivery of inter-
national shipment. After delivery of this
international shipment the driver would
pick up an international shipment consigned from
Houston, TX to Richmond Hill, Ontario, by the following
established route: E I-10 TX/LA, N I-55 LA/MS/TN, E I-40
TN, N I-65 TN/KY, N I-71 KY/OH, N I-75 OH/MI and entry into
Canada at Detroit/Windsor, thereafter delivery to
Richmond.
The above-described Mexico-U.S. shipments, and subsequent
U.S.-Canada shipments essentially retrace the southbound Canada-Mexico routes. Other northbound international shipments include
the following:
(6) Shipments consigned from Mexico City, Puebla,
Tlaquepaque and
Guadalajara to metropolitan New York City (Bayshore,
Brooklyn, Bronx,
and Port Washington). All these consignments from
Mexico to metropolitan
New York City would depart on Monday, Tuesday and
Wednesday along the
following route: N I-35 in TX, E I-30 TX/AR, E I-40
AR/TN, N I-81 TN/
VA/WV/MD/PA, E I-78 PA/NJ, E I-278 NJ/NY. Upon
delivery of these
international shipments, the drivers would be assigned
an international ship-
ment consigned from Brooklyn, New York to Scarborough,
Ontario, said
international shipment using the following route: W I-78 NY/NJ, W I-80 NJ/
PA and I-81 PA/NY, W NY-17 in NY, N I-390 in NY, W I-90
to entry to
Ontario at Buffalo/Port Erie or Niagara/Niagara for
delivery at Scarborough,
Ontario.
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(7) Shipments consigned from Mexico City, Puebla,
Tlaquepaque and
Guadalajara to metropolitan New York City (Bayshore,
Brooklyn, Bronx,
and Port Washington). All these consignments from
Mexico to metropolitan
New York City would depart on Monday, Tuesday and
Wednesday along the
following route: N I-35 in TX, E I-30 TX/AR, E I-40
AR/TN, N I-81 TN/
VA/WV/MD/PA, E I-78 PA/NJ, E I-278 NJ/NY. Upon
delivery of these
international shipments, the drivers would be assigned
an international ship-
ment consigned from Brooklyn, New York, to Whitby,
Ontario, said inter-
national shipment using the following route: N I-78
NY/NJ, W I-80/NJ/PA,
N I-81 PA/NY and entry into Ontario at Alexandria
Bay/Ivy Lea for delivery
in Whitby, Ontario.
(8) Shipments from Zapopan, Mexico, to Tulsa, OK, with
entry at Nuevo
Laredo/Laredo, N I-35 TX, N US-75 TX/OK, N US-69/Turnpike/US-75
to delivery in Tulsa. Thereafter the driver would be
dispatched E I-44/OK-
66 in OK to pick up an international shipment consigned
from Claremore,
OK, to Cambridge, Ontario. The route of this shipment
would be E I-44
OK/MO, N I-255/I-55 MO/IL, E I-80 IL/IN, E I-94 IN/MI
and entry into
Ontario at Detroit/Windsor and for delivery in
Cambridge, Ontario.
C.
Gerth also has international shipments that originate in
Mexico for delivery in the southeastern United States. These
shipments, which depart on Monday, Tuesday and Wednesday, mesh
with international shipments consigned from the same area to
Ontario, Canada. The routes used by these shipments would be as
follows:
(9) Entry at Nuevo Laredo/Laredo, N I-35 TX, E I-10
TX/LA/MS/AL,
N I-65 AL, N I-85 AL/GA and I-285 to McDonough. After
delivery of
the international shipment, the drivers would be
assigned the following
international shipment consigned from McDonough, GA to
Toronto,
Ontario. The route for this international shipment
would be N I-75
through GA/TN/KY/OH/MI and entry to Canada at
Detroit/Windsor
and on to Toronto, Ontario.
(10) Entry at Nuevo Laredo/Laredo, N I-35 TX, E I-10
TX/LA/MS/AL,
N I-65 AL, N I-85 AL/GA and I-285 to Atlanta. After
delivery of the
international shipment the drivers would be assigned
the following
international shipment consigned from Lithia Springs,
GA (in the western
metropolitan Atlanta area) to Waterloo, Ontario. The
route for this ship-
ment would be N I-75 through GA/TN/KY/OH/MI and entry
to Canada
at Detroit/Windsor and on to Waterloo, Ontario.
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Gerth also has international shipments consigned from Mexico
City to Miami, Florida. The routes for these shipments are as
follows:
(11) Entry at Nuevo Laredo/Laredo, N I-35 TX, E I-10
TX/LA/MS/FL,
S I-75 FL Turnpike/I-95 to Miami, then delivery of the
international
shipment from Mexico City. A direct northbound route
would be driven
without a load as follows: N I-95 FL, N FL Turnpike, N
I-75 FL/GA to
Lithia Springs. The driver would then pick up an
international shipment
consigned from Lithia Springs, GA to Waterloo, Ontario.
The route
would be as follows: Pick up of international shipment
in Lithia Springs,
GA, N I-75 GA/TN/KY/OH/MI and entry to Ontario at
Detroit/Windsor
and on to Waterloo for delivery.
(12) Entry at Nuevo Laredo/Laredo, N I-35 TX, E I-10
TX/LA/MS/FL,
S I-75 FL Turnpike/I-95 to Miami, then delivery of the
international
shipment from Mexico City. A direct northbound route
would be driven
without a load as follows: N I-95 FL, N FL Turnpike, W
FL-60/US-98
to Lakeland, FL. The driver would then pick up an
international shipment
consigned from Lakeland, FL to Kitchener, Ontario. The
route would be
as follows: Pick up of international shipment in
Lakeland, FL, E I-4 FL,
N I-95 FL/GA/SC, W I-26 SC, N I-77 SC/MC/BA/WB, N US-19
WB,
N I-79 WB/PA, E I-90 PA/NY and entry to Canada at
Buffalo/Port Erie
with delivery to Kitchener, Ontario.
(13) Entry at Nuevo Laredo/Laredo, N I-35 TX, E I-10
TX/LA/MS/FL,
S I-75 FL Turnpike/I-95 to Miami, then delivery of the
international
shipment from Mexico City. A direct northbound route
would be driven
without a load as follows: N I-95 FL/GA to Brunswick,
GA. The driver
would then pick up an international shipment consigned
from Brunswick,
GA to Toronto, Ontario. The route would be as follows:
Pick up of
international shipment in Brunswick, GA, W I-26 SC, N
I-77 SC/MC/
BA/WB, N US-19 WB, N I-79 WB/PA, E I-90 PA/NY and entry
to
Canada at Buffalo/Port Erie with delivery to Toronto,
Ontario.
In regard to the above-described shipments, all involve
either the import or export of merchandise from one country to
another (Canada, Mexico or the United States), in sealed
trailers, with through bills of lading and other title and/or
customs documentation demonstrating that the goods are traveling
from one country to another without any additions, deletions,
transshipments, loading or unloading of the merchandise. With
respect to those itineraries involving Nuevo Laredo/ Laredo, many
of the local customs brokers/forwarders physically shepard
trailers across the border resulting in delivery of the trailers
to the customs brokers/ forwarders in one of Laredo's four
foreign trade zones (FTZ). The Gerth driver will subsequently
pick up these trailers within the FTZ for delivery.
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ISSUE:
Whether the use of Canadian-based trucks as described in the
above scenarios is violative of 19 CFR 123.14(c).
LAW AND ANALYSIS:
Section 141.4, Customs Regulations (19 CFR 141.4),
provides that entry as required by title 19, United States Code,
1484(a) (19 U.S.C. 1484(a)), shall be made of every
importation whether free or dutiable and regardless of value,
except for intangibles and articles specifically exempted by law
or regulations from the requirements for entry. Since the
foreign-based equipment in question is not within the definition
of intangibles as shown in General Note 4, Harmonized Tariff
Schedule of the United States (HTSUS; 19 U.S.C. 1202, as
amended), they are subject to entry and payment of any applicable
duty if not specifically exempted by law and regulations.
Instruments of international traffic may be entered without
entry and payment of duty under the provisions of 19 U.S.C.
1322. To qualify as instruments of international traffic, trucks
having their principal base of operations in a foreign country
must be arriving in the United States with merchandise destined
for points in the United States, or arriving empty or loaded for
the purpose of taking merchandise out of the United States (see
19 CFR 123.14(a)). Further-more, certain foreign-based
vehicles engaged, in whole or in part, in the domestic carriage
of merchandise that either originates from a location outside the
United States or will be sub-
sequently moved to a destination outside the United States, or
such vehicles moving without a payload between two points in the
same country, shall be considered as engaged in international
traffic. (See Customs Bulletin of October 1, 1997, Vol. 31, No.
40, at pp. 7-13.)
A foreign truck tractor which arrives in the United States
in international traffic towing a foreign trailer, either empty
or loaded, constitutes a foreign "truck" as that term is used in
123.14(a), (b), and (c)(1), Customs Regulations (19 CFR
123.14(a), (b), and (c)(1)).
Section 123.14(c), Customs Regulations, states that with one
exception, a foreign-based truck, admitted as an instrument of
international traffic under 123.14, shall not engage in local
traffic in the United States. The exception, set out in
123.14(c)(1), states that such a vehicle, while in use on a
regularly scheduled trip, may be used in local traffic that is
directly incidental to the international schedule.
A carrier may be considered as engaged in regularly
scheduled service whether trips are scheduled hourly, daily,
weekly, etc., provided the trips are regular, not varied, and are
over an established route. Trips made if and when a load is
available do not qualify.
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Section 123.14(c)(2), Customs Regulations (19 CFR
123.14(c)(2)), provides that a foreign-based truck trailer
admitted as an instrument of international traffic may carry
merchandise between points in the United States on the return
trip as provided by 123.12(a)(2) which allows use for such
transportation as is directly incidental to its economical and
prompt departure for a foreign country. Section 123.14(c)(2)
applies only to trailers and not to tractor-trailer units which,
as was stated earlier, are considered trucks as that term is used
in the Customs Regulations.
Section 10.41(d), Customs Regulations provides, in part,
that any foreign-owned vehicle brought into the United States for
the purpose of carrying merchandise between points in the United
States for hire or as an element of a commercial transaction,
except as provided for in
123.14(c), is subject to treatment as an importation of
merchandise from a foreign country and a regular Customs entry
therefore shall be made. Section 123.14(d), Customs Regulations
provides that any vehicle used in violation of 123.14, is
subject to forfeiture under 592, Tariff Act of 1930, as amended
(19 U.S.C. 1592).
Whether the use of an instrument of international traffic
constitutes a diversion from international traffic is based on
the facts in each case. The transportation of merchandise in
international traffic is the key. In those instances where
merchandise has either not originated from outside the United
States or will not be moved to a destination outside the United
States, or where there is no movement without a payload between
two points in the United States, the domestic movement of
merchandise must be secondary to the international movement and
meet other criteria. There must be a regular international
schedule and the domestic movement must follow the same basic
route as the merchandise moving in international traffic.
With respect to your inquiry, upon reviewing the use of
Gerth's Canadian-based vehicles as described in the scenarios you
pose, we note that all of these vehicles would be engaged, in
whole or in part, in the carriage of merchandise originating in
one country and terminating in another. As such, these vehicles
are considered to be engaged in international traffic. (See
Customs Bulletin of October 1, 1997, Vol. 31, No. 40, at pp. 7-13). Furthermore, the proposed use of the subject vehicles in
the United States does not constitute "local traffic" within the
meaning of 123.14(c) since none of the vehicles would be
involved in the transportation of merchandise between any two
points in the United States when such merchandise has not had a
prior movement from an origin (i.e., point of loading) outside
the United States or will not be subsequently moved to a
destination (i.e., point of delivery) outside the United States.
Id. at
p. 11.
Accordingly, the use of Gerth's vehicles as proposed would
not be prohibited by Customs administration of 19 CFR 123.14.
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HOLDING:
The use of Canadian-based trucks as described in the above
scenarios is not violative of 19 CFR 123.14(c).
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers
Branch