WAR-5/TRA-11/ENT-7-07-RR:IT:EC 114180 GG
Stuart M. Pape, Esq.
Patton Boggs, L.L.P.
2550 M Street, N.W.
Washington, D.C. 20037-1350
RE: Duty Free Sales Enterprises; In-Flight Sales; International
Travel Merchandise; Advance Orders; 19 U.S.C. 1553; 19 CFR Part
18 and 122; C.D. 3280-08.
Dear Mr. Pape:
This is in response to your request for a ruling made on
behalf of your client, DFS Group ("DFS"), which was presented in
two submissions dated November 10, 1997, and December 1, 1997.
Our response follows.
FACTS:
DFS is an operator of airport duty-free retail stores. It
holds the concessions at many United States airports. DFS
proposes to commence operation of an in-flight sales program, in
which passengers on international flights may purchase articles,
collectively known as international travel merchandise ("ITM").
ITM may be comprised in whole or in part of duty-free items.
These items will be supplied to the participating airlines by
DFS. One proposed component of this plan is to allow passengers
on inbound flights to place advance orders for ITM, for eventual
delivery to them after their final departure from the United
States. DFS requests approval of the advance sales program.
ISSUE:
Whether ITM may be ordered in advance by inbound passengers
during the flight, and subsequently delivered to them after final
departure from the United States.
LAW AND ANALYSIS:
Authority for the ITM program stems from Customs Directive
("C.D.") 3280-08, dated May 9, 1991, which is based primarily on
Section 1553 of the Tariff Act of 1930, as amended (19 U.S.C.
1553). This statutory provision governs the entry of
merchandise for transportation and exportation. It allows
merchandise destined to a foreign country to be entered for
transportation in bond through the United States by a bonded
carrier, without appraisement or the payment of duty, and then to
be exported under such regulations as the Secretary of the
Treasury may prescribe. Upon arrival at the port of exportation,
the in-transit merchandise may remain on the dock under Customs
supervision for up to one year. 19 CFR 18.24(a).
In the context of the ITM program, "remaining on the dock"
means retention in a Customs Approved Storeroom, or CASR. A CASR
is a facility at an airport where aircraft supplies and equipment
and ITM are retained for export on aircraft. CASR's are operated
by an airline or group of airlines, or by another party, such as
an airport concessionaire or caterer, under an agreement with the
airline(s). Although the actual facility is not required to be
bonded, the merchandise in the CASR must be covered by a bond.
Generally, this has been the international carrier bond of the
participating airline.
CASR's are stocked with ITM, either by the airlines which
import the items directly, or by third parties, such as the
airport concessionaires or caterers who may operate the facility.
The ITM may arrive at the CASR by entry or withdrawal for
immediate exportation, or entry or withdrawal for transportation
and exportation, as evidenced by a CF 7512. ITM is withdrawn
from a CASR and laden on board the departing aircraft under bond,
and is subject to the sealing, listing, and other requirements
imposed on aircraft liquor kits under Subpart M of 19 CFR Part
122.
The central feature of ITM transactions is the sale of
merchandise to passengers by participating airlines while in
international flight. ITM may not be sold to passengers on the
ground. This distinguishes ITM sales from purchases made at
duty-free sales enterprises, which are regulated under the
provisions of 19 U.S.C. 1555(b), and involve sales of duty-free
items to outgoing travelers from retail stores located either at
airports or within 25 miles of the border.
The issue of the advance placement of orders for ITM on
inbound flights has been addressed in HQ 226238, dated August 7,
1997. That ruling authorized Delta Airlines to take advance
orders for ITM from passengers on flights from Tokyo to Los
Angeles, for eventual delivery to the passengers after completion
of the return flight from the United States. The advance orders
in that case were filled by a caterer of ITM, who supplied and
ran the CASR from which Delta Airlines drew its ITM. The caterer
in HQ 226238 stocked the CASR with merchandise stored at a bonded
warehouse in another state. The ITM was shipped from the bonded
warehouse to the CASR in bond.
The ruling allowed the placement of advance sales on
incoming flights for eventual delivery to outbound passengers.
The underlying authority for this decision was derived from an
internal Customs memorandum dated August 1, 1991, which discussed
language in C.D. 3280-08 that appeared to ban the ordering of ITM
on inbound precleared flights. The memorandum clarified the
point that only a complete sales transaction was prohibited on
inbound precleared flights. Handing out order forms and taking
orders in advance would be permissible, provided the delivery of
goods occurred after final departure from the United States.
Although this memorandum specifically addressed the scenario
involving short, precleared flights, HQ 226238 extended its logic
to regular flights from overseas. It concluded that advance
sales of ITM did not violate the spirit and intent of the in-flight program, when the sales took place on the aircraft and
delivery was made only after the purchasers had left the United
States.
Applied here, DFS would be entitled to fill orders for ITM
placed by passengers on arriving international flights, provided
DFS had entered into an agreement with an airline to operate a
CASR, and provided proper procedures were in place to ensure that
the ITM was delivered to the purchasers only after their final
departure from the United States.
HOLDING:
Passengers on inbound flights to the United States may place
advance orders for ITM, provided the actual delivery of the goods
takes place after departure from the United States.
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers
Branch