FOR-2-03 CO:R:C:E 223828 C
Patricia Goldman, Regional Director
Regulatory Audit Division
U.S. Customs Service
Southeast Region
909 S.E. First Avenue
Miami, FL 33131-2595
RE: Internal advice request concerning exportations from a
foreign trade zone to the Island of Guam; 19 U.S.C. 81c(a)
Dear Ms. Goldman:
This responds to the internal advice request submitted to
our office by the Branch Manager, Regulatory Audit Division,
Atlanta Branch, concerning the referenced subject (FOR-2-O:R:DLB;
431-92-FT1-001; dated March 9, 1992). We have reviewed the file
and our response follows.
FACTS:
The facts as we understand them are as follows: Yamaha
Motor Manufacturing Corporation of America (YMMCA) imports
merchandise into the United States for admission into a foreign
trade zone (FTZ) where such merchandise is used in the
manufacture of golf carts. The golf carts are then shipped to
the Island of Guam after withdrawal from the FTZ under
transportation and exportation entries. Customs has determined
that appropriate duties should be assessed against the golf carts
since the merchandise is not "exported" as required under the
foreign trade zones law, 19 U.S.C. 81c(a). YMMCA asserts that
duties can be applied only upon admission of the golf carts into
the Customs territory; since Guam is not part of the Customs
territory, the Customs laws do not apply to the golf carts.
ISSUE:
Are duties properly applicable to merchandise manufactured
in a foreign trade zone when that merchandise is withdrawn from
the zone under transportation and exportation entries for
shipment to the Island of Guam?
LAW AND ANALYSIS:
The law pertaining to foreign trade zones, 19 U.S.C. 81c-u,
provides for the duty-free admission into a FTZ of merchandise of
every description for the various purposes set forth in section
81c(a), including storage, manufacturing, and manipulation. This
merchandise, according to section 81c(a), must then be exported,
destroyed, or sent into the Customs territory. Upon destruction
or exportation to a foreign country, duties need not be paid.
Upon entry into the Customs territory, duties must be paid.
It is well established that the Island of Guam is an insular
possession of the United States and not a foreign country. For
purposes of the drawback law and the tariff provision pertaining
to temporary importation under bond, shipments from the United
States to Guam are not exportations to a foreign country. (See
Customs Service Decision (C.S.D.)79-77, 13 Cust. Bull. 1114.)
(See also Rothschild & Co. v. United States, 16 Ct. Cust. App.
442 (1929) and Mitsubishi International Corp. v. United States,
55 Cust. Ct. 319, C.D. 2597 (1965); yet, see C.S.D. 82-48 for
applicability of drawback to merchandise imported into the United
States, duty paid, from an insular possession and then exported
back to that insular possession under drawback conditions. 16
Cust. Bull. 762.) Because shipments to Guam from the United
States are not considered exportations to a foreign country, we
conclude that the shipment of golf carts from a FTZ to Guam is
not an exportation to a foreign country sufficient to meet the
exportation requirement of the statute, 19 U.S.C. 81c(a).
YMMCA asserts that since the merchandise is not entered into
the customs territory, it is not subject to the Customs laws,
including those pertaining to the application of duty. However,
the Rothschild case is illuminating on this point. There, an
importer made the same claim with respect to the exportation of
merchandise from a customs bonded warehouse. Under 19 U.S.C.
1557, as then constituted (1929), merchandise admitted into a
bonded warehouse could be exported to a foreign country without
the payment of duty. Merchandise was withdrawn from the
warehouse for shipment to Guam and Customs assessed duties
against it on the grounds that shipments to Guam are not
exportations to a foreign country. Since the exportation
requirement of the statute had not been met, duties were
applicable. The United States Court of Customs Appeals agreed
with Customs position and the assessment of duty was upheld.
Subsequently, 19 U.S.C. 1557 was amended by Congress to
explicitly permit fulfillment of the exportation requirement upon
exportations to Guam.
The foreign trade zones law does not provide for fulfillment
of the exportation requirement upon exportations to Guam or any
other insular possession or territory of the United States. Any
such provision will have to be provided upon amendment of the
statute, as was done with 19 U.S.C. 1557. In the absence of such
an amendment, Customs position is that the exportation
requirement of 19 U.S.C. 81c(a) can be met only upon exportation
to a foreign country. This comports with the definition of
"exportation" in the Customs regulations (19 C.F.R. 101.1(k).)
Since Guam is not a foreign country, shipments to Guam from a FTZ
are not exportations within the contemplation of 19 U.S.C.
81c(a). Thus, such exportations do not fulfill the requirement
of the statute. Consequently, as in the Rothschild case, duty
assessment by Customs is proper.
Further, liability for duty arises upon importation (19
C.F.R. 141.1). An importation is the arrival of goods at a
United States port from a foreign port or place with the intent
then and there to unlade them. United States v. Estate of
Boshell, 14 Ct. Cust. App. 273, T.D. 41884 (1922); Porto Rico
Brokerage Co. v. United States, 76 F. 2d 605, 23 CCPA 16 (1935);
East Asiatic Co., Inc. v. United States, 27 CCPA 364 (1940);
Sherwin-Williams Co. v. United States, 38 CCPA 13 (1950); United
States v. John V. Carr & Sons, 266 F. Supp. 175, aff'd 396 F. 2d
1017, 55 CCPA 111 (1967). Merchandise admitted into a foreign
trade zone has been imported. The contention that duty cannot be
imposed on goods admitted into a FTZ because a FTZ is considered
to be outside the customs territory was rejected as an overbroad
reading of the foreign trade zones statute. Nissan Motor
Manufacturing Corp. U.S.A. v. United States, 7 Fed. Cir. (T) 143,
146 (1989). The Nissan court characterized the merchandise there
involved as imported merchandise. Id. at 143, 146-47. There is
no dispute that duty on imported goods entered into a FTZ can be
avoided upon compliance with the statute. However, YMMCA's
argument is that once admitted into a zone, merchandise can be
removed without regard to the express provisions of the statute
and still not be dutiable. The Nissan court's reasoning (at
pages 146-47) with respect to compliance with the express
language of the statute concerning the admission of goods into a
zone is equally applicable to zone withdrawals. That is, the
duty exemption does not apply unless there is strict compliance.
Since the statute requires destruction or exportation for duty-
free treatment, a shipment to Guam that is not an "exportation"
does not fulfill the requirement.
HOLDING:
Merchandise admitted duty-free into a FTZ and there
manufactured into other articles is dutiable upon withdrawal from
the zone when such articles are shipped to Guam or other insular
possessions. Shipments to Guam from a foreign trade zone do not
meet the exportation requirement of 19 U.S.C. 81c(a). Guam is
not a foreign country for purposes of exportation under the
statute.
If you have any further questions, please contact this
office.
Sincerely,
John Durant, Director
Commercial Rulings Division