WAR-3-01-CO:R:C:E 225078 AJS
District Director of Customs
U.S. Customs Service
1000 Second Avenue, Ste. 2200
Seattle, WA 98104
RE: Withdrawal of merchandise in less than full cartons from a
bonded warehouse; 19 U.S.C. 1562; T.D. 53654; 19 CFR 144.33; T.D.
69-126; 56 FR 41159; CIS HB 2100-01.
Dear Sir:
This is in reply to your letter of November 3, 1993,
concerning Tasco Sales, Inc. (Tasco), and its bonded warehouse
operations.
FACTS:
Tasco operates a bonded warehouse and uses the inventory
control procedure of first-in and first-out (FIFO) based on both
entry and model numbers. Tasco claims to be using Customs Form
(CF) 3499 to manipulate master cartons into a total piece count
and then withdraw goods from its warehouse in less than full
carton quantities. An approved CF 3499 was submitted to this
office as evidence of this fact. This CF 3499 merely indicates
that 5,720 pieces of optical goods will be manipulated. To avoid
possible confusion in the future, Tasco should indicate on each
CF 3499 the total quantity by model number of each optical good
included within the total piece count (e.g., 500 model A
riflescopes, 1000 model B telescopes etc.). Tasco's computer
system segregates the manipulated merchandise by entry and model
numbers, and then keeps track of this merchandise by assigning it
a lot number. In addition, goods remained stored in their master
cartons after manipulation is complete.
Tasco claims that all its inventory software is set up to
account for the FIFO inventory method. It also claims to have
established a record with the Port of Seattle as a well-
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run bonded facility and to have undergone numerous audits. Tasco
asserts that if not permitted to operate in the above manner, two
transactions would be required for each export order. After the
CF 7512 was completed, it claims that any
product remaining in the master carton would have to be withdrawn
for consumption in order to comply with the "no less than full
case quantity" requirement. In each case, Tasco claims the above
paperwork would need to be completed
by hand instead of computer. It claims that this process would
require the hiring of additional employees. In
addition, Tasco claims that changing its current procedure would
cost a great deal for the reprogramming of its computer system.
ISSUE:
Whether the withdrawal of merchandise in less than full
master carton quantity is permissible in this case.
LAW AND ANALYSIS:
19 U.S.C. 1562 provides "[u]nless by special authority of
the Secretary of the Treasury, no merchandise shall be withdrawn
from bonded warehouse in less quantity than an
entire bale, cask, box, or other package . . ." The Secretary of
the Treasury transferred to the Commissioner of Customs all
powers and duties vested in the Secretary by the Tariff Act of
1930 in T.D. 53654. There are exceptions to this transfer, but
the authority listed under section 1562 is not listed as one of
these exceptions. Because of this delegation the Customs
Regulations state that "[u]nless by special authority of the
Commissioner of Customs, merchandise shall not be withdrawn from
bonded warehouse in quantities less than an entire bale, cask,
box, or other package . . ." 19 CFR 144.33.
The Commissioner, by Customs delegation Order No. 1
(Revision 1)(T.D. 69-126) delegated the authority delegated to
him by T.D. 53654 to the Director, Office of Regulations and
Rulings (the Director). Specifically listed is the authority to
decide legal questions concerning bonded warehouses. T.D. 69-
126 A(c)(3). The Director was also given authority to redelegate
and delegate authority to the appropriate Division Director and
Branch Chief. The Director, by Federal Register Notice (56 FR
41159) of August 19, 1991, stated that the Commercial Rulings
Division (CRD) is responsible for legal aspects of the
warehousing system, including the establishment, administration
and operation of Customs bonded warehouses, the entry and
withdrawal of
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merchandise from warehouse, and other warehouse transactions.
The unit quantity of a warehouse withdrawal would be included
within one of these areas. This authority regarding the CRD was
set forth in the Mission and
Organization of the Customs Service, CIS HB 2100-01, Page 406, as
changed, No. 22 of August 1992. Therefore, the
Director of the CRD is the proper officer to make the decision
regarding the unit quantity of a warehouse withdrawal under 19
CFR 144.33.
Tasco requests permission to withdraw goods from its bonded
warehouse in less than full carton quantities. It claims to have
been performing operations at its warehouse in the FIFO method
since the warehouses inception, and that all inventory software
is set up to account for this inventory procedure. It also
claims to have established a
record as a well-run bonded facility and to have undergone
numerous audits. Conversations by this office with Customs
Inspectors appear to support this assertion. Tasco asserts that
if not permitted to operate in the above manner, two transactions
would be required for each export order. In each case, the two
transactions would need to be completed by hand instead of
computer. It claims that this process would require the hiring
of additional employees. In addition, Tasco claims that changing
its current procedures would cost a great deal in computer
reprogramming.
Under the above specific circumstances, the granting of
special authority for Tasco to withdraw merchandise from its
warehouse in less than full carton quantities is appropriate.
Requiring Tasco to withdraw merchandise in full cartons would
appear both burdensome and unnecessary in this case. A with-
drawal in full cartons would be burdensome because it would
require Tasco to reprogram its computer system, process
additional transactions and paperwork, and hire additional
employees. Such a withdrawal would also be unnecessary in-
asmuch as Customs does not appear to have had any previous
problems with Tasco's warehouse operations. In addition, Tasco's
use of the FIFO inventory method and the filing of a CF 3499 for
manipulation of its merchandise should enable Customs to both
protect the revenue as well as not interfere with the efficient
conduct of customs business. We note, however, that the special
authority granted in this case must be sought in each case
involving any other warehouses.
In a letter to the Collector of Customs at Norfolk, VA,
dated July 25, 1941, Customs addressed the issue of withdrawals
from warehouse under 19 U.S.C. 1562. This letter involved an
application on CF 3499 for permission to withdraw
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as samples two bobbins of cigarette paper from each of 17 cases
of such paper. Customs concluded that this type of withdrawal
was not precluded by section 1562, and was permitted under the
Customs regulations provided it could be
accomplished with safety to the revenue and without interference
with the efficient conduct of customs business. Consequently, we
find this decision instructive for determining that the
withdrawal in question is also not precluded by section 1562.
HOLDING:
Special authority is granted pursuant to 19 CFR 144.33 for
the withdrawal of merchandise from the subject bonded warehouse
in less than full carton quantity under the above described
circumstances.
Sincerely,
John Durant, Director
Commercial Rulings Division