DRA-2-02/FOR-2-03-CO:R:C:E 224935 JRS
Mr. Thomas W. Hardy
District Director of Customs
Columbia-Snake District
511 NW Broadway, Suite 198
Portland, Oregon 97209
RE: Cable laid in the waters between the islands of Hawaii;exportation; drawback; foreign-trade zone; 19 CFR 101.1(k); 19
U.S.C. 1401(h); C.S.D. 81-167; Headquarters Ruling Letter DRA-2-
02-CO:R:C:E 221414, dated April 11, 1990
Dear Mr. Hardy:
This is in reply to your Internal Advice request of
September 1, 1993, concerning the August 27, 1993, letter from
STC Submarine Systems, Inc., requesting a ruling on the issue of
"exportation" for underwater cable as it pertains to the drawback
and foreign trade zone laws.
FACTS:
According to the facts provided in the August 27, 1993,
letter, STC Submarine Systems is a potential supplier to GTE
Hawaiian Telephone Corporation for about 482 kilometers of fiber
optic cable to be laid between four Hawaiian Islands. STC states
that 28 kilometers of the 482 kilometers will be laid on land,
30 kilometers in Hawaiian territorial waters (within the 3 mile
limit on each end of the 3 undersea components), and the
remaining 424 kilometers will be laid in international waters
between the islands. The company states they may use already
finished cable made from duty-paid components, or make new cable
from duty-free FTZ materials. It is the company's position that
the "cable laid in the international waters between the islands
should be considered "exported" for Customs purposes." This
issue directly impacts the company's proposed pricing structure.
ISSUE:
Whether Customs considers a cable laid in the waters between
the islands of Hawaii to be "exported" for Customs purposes
pertaining to the drawback and foreign trade zone laws.
LAW AND ANALYSIS:
An "exportation" is defined as "a severance of goods from
the mass of things belonging to this country with the intention
of uniting them with a mass of things belonging to some foreign
country." See Swan & Finch Co. v. United States, 190 U.S. 143
(1903) and 19 CFR 101.1(k)(emphasis added).
Customs has ruled that underwater communications cable,
manufactured wholly or partly in the United States with foreign
components, is "exported" for drawback purposes when it is laid
between the international waters of the United States and a
foreign country. See Customs Service Decision (CSD) 81-167 (copy
enclosed).
Customs has re-affirmed this position in Headquarters Ruling
Letter 221414, dated April 11, 1990 (copy enclosed), holding that
drawback is permissible only on the portion of the underwater
cable laid in the international waters from Guam to Japan, but
not on the portion of cable laid between Guam and Hawaii because
shipments to Guam are not considered exportations to a foreign
country citing CSD 79-77.
In this case, likewise, the installation of underwater cable
between the four Hawaiian islands can under no circumstances
constitute an "exportation" of the cable within the meaning of
the above-stated definition since the islands of Hawaii are part
of the State of Hawaii, which is a State of the United States (19
U.S.C. 1401(h)), and therefore, cables are not exported for
drawback purposes when installed to connect one U.S. point to
another U.S. point, despite its traversing international waters.
Foreign merchandise may be brought into a foreign-trade zone
and manufactured and later exported therefrom without the payment
of duty in accordance with the provisions of the Foreign-Trade
Zones Act (19 U.S.C. 81c(a)). However, "exportation" for the
purpose of the foreign-trade zone law is the same as for the
drawback laws as defined above in Swan & Finch, supra, and the
Customs Regulations.
In view of the foregoing, shipment of cable between U.S.
points rather than to a foreign country would not constitute an
"exportation," and consequently, duty would be payable when the
manufactured cable was withdrawn from the foreign-trade zone. We
emphasize, however, that the foreign cable materials while in a
foreign-trade zone are conditionally free merchandise, not "duty-
free" as the company suggests, until the merchandise enters the
customs territory of the United States (19 CFR 101.1(e)) and is
subject to the entry procedures and the payment of any applicable
duty.
HOLDING:
Underwater communications cable installed between the four
islands of Hawaii is not considered to be "exported" for purposes
of either the drawback or foreign-trade zone laws since the cable
connects together the Hawaiian islands and not foreign countries.
You may provide a copy of this decision to the inquirer with
a copy of the enclosures.
Sincerely,
John Durant, Director
Commercial Rulings Division