CON-13-02/WAR-2-01:RR:IT:EC 226319 PH
Peggy Chaplin, Esq.
Ober, Kaler, Grimes & Shriver
120 East Baltimore Street
Baltimore, Maryland 21202-1643
RE: Supplies and Equipment for Vessels or Aircraft; Customs
Bonded Warehouse; Blanket Withdrawals; FIFO Accounting
Procedures; 19 U.S.C. 1309; 19 U.S.C. 1555; 19 U.S.C. 1557;
19 CFR 10.62a; 19 CFR 19.6(d); 19 CFR 144.38; 19 CFR 144.39;
C.S.D. 83-63
Dear Ms. Chaplin:
In your letter of July 27, 1995, on behalf of British Airways
Plc., you request a ruling on the use of Customs Bonded Warehouse
procedures and the provisions of 19 U.S.C. 1309 to spare parts
and other supplies for the repair and maintenance of your
client's aircraft. Our ruling follows.
FACTS:
You state that your client in this matter operates foreign
aircraft between the United Kingdom and the United States. Your
client maintains a collection of spare parts and other supplies
for the repair and maintenance of its aircraft. You characterize
the spare parts as being either rotable parts (subject to repair
and reuse) and expendable parts (subject to a single use). You
state that the spare parts and supplies are goods which are used
in the normal operation of an aircraft and, with the proper
certification required by 19 U.S.C. 1309, "... clearly fit under
the duty-free treatment of [section 1309]."
You state that the aircraft spare parts which your client imports
consist primarily of American-made parts, with a minority being
foreign-made. It is possible that certain of the American-made
parts which are rotable will be repaired outside the United
States and returned, or repaired in the United States, as the
occasion warrants. You state that your client is considering the
use of bonded warehouses for its repair and maintenance
operations in the United States.
You state that the above-described rotables are frequently loaned
by one carrier to another in emergency situations. As an example
of this, you state that your client may be storing a computer at
a bonded warehouse facility when the computer on the aircraft of
another air carrier becomes unserviceable during its flight to
the airport where the bonded warehouse facility is located. The
computer your client has would be loaned to the other air carrier
and "ultimately returned". You cite the provisions of the
Customs Regulations requiring the issuance of a permit by Customs
before withdrawal and state that, because the need for these
rotables may be immediate, waiting for the issuance of such a
permit may be "commercially disastrous ..." You suggest
implementation of a test program, under 19 CFR 101.9 (promulgated
by T.D. 95-21), and state that your client would volunteer to be
an entrant in such a test program.
You state that your client proposes to use first-in, first-out
(FIFO) accounting procedures to account for fungible parts which
are not identified with a serial number. You provide copies of
the records which will be used for this purpose. These records
are invoices for the part involved (with a part number on the
invoice (the copy we have does not have a clear date, but we
assume, for purposes of this ruling, that such invoices would
have clear dates)); and a "station stock card" which shows the
quantity of the same part (identified by the same part number)
brought forward, additions to the inventory (an "in" column),
removals from the inventory (an "out" column), with a "date"
column for all changes, and a "consignee/consignor" column, in
which there appear initials. You ask for Customs approval for
this method of accounting for fungible merchandise.
You request that Customs permit your client to store its parts
and equipment in a bonded warehouse without requiring the tariff
classification upon entry of the parts into the warehouse. You
request approval of such a procedure on the basis of reciprocity,
in that you state that United Kingdom Customs and Excise permits
American air carriers to store their parts and supplies without
any tariff number. If Customs deems it necessary for your client
to state a classification number at the time of entry into the
warehouse, you ask that your client be permitted to use "... a
single tariff number, namely HTS 8803.90.9050, Parts of goods of
heading 8801 or 8802:... Other:... Other:... Other:'". You state
that if any parts are withdrawn for consumption by an American
air carrier, the correct tariff number will be assigned and the
correct duty paid at the time of such withdrawal.
You state that your client intends to segregate non-bonded
merchandise, label it as such, and store it in the bonded
warehouse facility. You request confirmation that under 19 CFR
19.6(b)(2), your client may store such non-bonded merchandise,
"... so long as non-bonded merchandise is segregated and
physically marked to maintain its identity as non-bonded
merchandise." If such storage of non-bonded merchandise is not
allowed, you request Customs approval of the elimination as
bonded space of sufficient storage area in each of your client's
bonded warehouses to provide a non-bonded area within the
facility in which your client may store non-bonded merchandise.
You state that Customs procedures regarding bonded warehouse are
different in different districts (now ports). You ask that each
of your client's bonded warehouses be subject to the same rules
and procedures in order that a "nationwide guideline and
procedure may be written and enforced by the company for its
internal purposes."
You request a ruling on the issues listed in the ISSUES portion
of this ruling.
ISSUES:
(1) May the filing with Customs of documentation for warehouse
withdrawal follow withdrawal from warehouse for certain rotables
loaned to other air carriers, including United States air
carriers?
(2) May first-in, first-out (FIFO) accounting methods be used to
account for fungible merchandise in your client's bonded
warehouses?
(3) May the merchandise under consideration be entered into the
your client's bonded warehouses without stating the tariff
classification or, if not, may all of the merchandise be
classified under subheading 8803.90.9050, HTSUS, at the time of
entry into the warehouse?
(4) May non-bonded merchandise be stored in your client's bonded
warehouses, so long as the non-bonded merchandise is segregated
from bonded merchandise?
(5) Will Customs assure your client that its private bonded
warehouses will be regulated uniformly throughout the United
States?
LAW AND ANALYSIS:
Under 19 U.S.C. 1555, in part:
Buildings or parts of buildings and other inclosures may be
designated by the Secretary of the Treasury as bonded
warehouses for the storage of imported merchandise entered
for warehousing .... Such warehouses may be bonded for the
storing of such merchandise only as shall belong or be
consigned to the owners or proprietors thereof and be known
as private bonded warehouses. ... Except as otherwise
provided in this chapter, bonded warehouses shall be used
solely for the storage of imported merchandise and shall be
placed in charge of a proper officer of the customs, who,
together with the proprietor thereof, shall have joint
custody of all merchandise stored in the warehouse ....
Under 19 U.S.C. 1557, in part:
(a) Any merchandise subject to duty ... may be entered for
warehousing and be deposited in a bonded warehouse at the
expense and risk of the owner, importer, or consignee. Such
merchandise may be withdrawn, at any time within 5 years
from the date of importation, for consumption upon payment
of the duties and charges accruing thereon at the rate of
duty imposed by law upon such merchandise at the date of
withdrawal; or may be withdrawn for exportation or for
transportation and exportation to a foreign country ...
without the payment of duties thereon ... Provided, That the
total period of time for which such merchandise may remain
in bonded warehouse shall not exceed 5 years from the date
of importation.
Under 19 U.S.C. 1309, in part:
(a) Articles of foreign or domestic origin may be withdrawn,
under such regulations as the Secretary of the Treasury may
prescribe, from any customs bonded warehouse, from
continuous customs custody elsewhere than in a bonded
warehouse, or from a foreign-trade zone free of duty and
internal-revenue tax ... --
(1) for supplies (not including equipment) of ... (C)
aircraft registered in the United States and actually
engaged in foreign trade or trade between the United
States and any of its possessions, or between Hawaii and
any other part of the United States or between Alaska and
any other part of the United Stats; or
...; or
(3) for supplies (including equipment), ground equipment,
maintenance, or repair of aircraft registered in any
foreign country and actually engaged in [the same trades
as described in section 1309(a)(1) above], where trade by
foreign aircraft is permitted. With respect to articles
for ground equipment, the exemption hereunder shall apply
only to duties and to taxes imposed upon or by reason of
importation.
...
(c) Any article exempted from duty or tax, or in respect of
which drawback has ben allowed, under this section or [19
U.S.C. 1317] and thereafter removed in the United States
from any vessel or aircraft, or otherwise returned to the
United States, shall be treated as an importation from a
foreign country.
(d) the privileges granted by this section and [19 U.S.C.
1317] in respect of aircraft registered in a foreign country
shall be allowed only if the Secretary of the Treasury shall
have been advised by the Secretary of Commerce that he has
found that such foreign country allows, or will allow,
substantially reciprocal privileges in respect of aircraft
registered in the United States. ...
The Customs Regulations issued under the above statutes are found
in 19 CFR Parts 19 and 144 (warehouses) and 19 CFR 10.59 through
10.65 (withdrawal of supplies and equipment for vessels and
aircraft).
Under 19 CFR 144.35, supplies and equipment for vessels and
aircraft may be withdrawn from warehouse under the procedures set
forth in subpart D of part 144 of the Customs Regulations and 19
CFR 10.59 through 10.65. Under 19 CFR 10.60 (as amended by T.D.
95-81), withdrawals from warehouse under 19 U.S.C. 1309 shall be
made on Customs Form 7501, and under 19 CFR 144.38, a withdrawal
for consumption is required to be filed on Customs Form 7501.
Under 19 CFR 10.61, upon the filing of the withdrawal (under 19
CFR 10.59), and the execution of the bond, when required, the
port director shall issue a permit on Customs Form 7501. Under
19 CFR 144.38(e), when the duties and other charges have been
paid, and all other requirements of law and regulations have been
met, a permit shall be issued by Customs and delivered to the
person making the warehouse withdrawal (for consumption) and
under 19 CFR 144.39, the applicant for withdrawal shall present
the approved permit to the warehouse proprietor as evidence of
Customs authorization of the withdrawal.
Thus, as you suggest, the above provisions require the issuance
of a permit by Customs before withdrawal of the merchandise from
warehouse. However, there are provisions in the Customs
Regulations under which a permit is not required before each
withdrawal from warehouse. Under 19 CFR 10.62a, a "blanket
withdrawal" on Customs Form 7501 may be filed for all or part of
any merchandise withdrawn from warehouse except fuel oil, for use
on qualified vessels (i.e., qualified under 19 U.S.C. 1309). The
Treasury Decision by which section 10.62a was promulgated (T.D.
69-177) makes it clear that these blanket withdrawal procedures
are applicable to both supplies and equipment intended for use on
qualified vessels (or aircraft; under 19 CFR 10.59(d) the
procedures in 19 CFR 10.59 through 10.65 are made applicable to
aircraft) (i.e., the first sentence of the first paragraph of the
text of T.D. 69-77 reads, "[t]o facilitate withdrawals of
articles under section 309 or 317 of the Tariff Act of 1930, as
amended, for use as supplies or equipment on qualified vessels,
the Bureau has decided to permit the optional filing of a blanket
withdrawal ... for all or part of merchandise entered for
warehouse which is intended for use on vessels", and the sentence
immediately following the text of the amendment reads, "[a]s
above indicated, the procedure authorized is optional and is
intended to make it easier to effect duty-free withdrawals of
supplies and equipment for vessels" (emphasis added)). (For the
procedures regarding fuel oil, see T.D. 96-18.)
The procedures for the above-described blanket withdrawals are
provided in 19 CFR 10.62a(b) and 19 CFR 19.6(d). Merchandise
withdrawn under blanket withdrawals must be loaded or used on
vessels or aircraft at the port where the warehouse is located
(19 CFR 10.62a; 19 CFR 19.6(d)(1)). A withdrawer who desires a
blanket permit to withdraw states in capital letters on the
warehouse entry or warehouse entry/entry summary that "Some or
all of the merchandise will be withdrawn under blanket permit per
section 19.6(d), C.R." Customs acceptance of the entry
constitutes approval of the blanket permit. A copy of the entry
is delivered to the warehouse proprietor, after which merchandise
may be withdrawn under the terms of the blanket permit.
Withdrawals under the blanket withdrawal procedure may be made
without further Customs approval after Customs acceptance of the
entry upon which the above statement is made. Each withdrawal is
filed on Customs Form 7501, consecutively numbered and prefixed
with the letter "B". Each withdrawal must state the quantity and
value of each type of merchandise to be withdrawn, and must
include a summary statement of the quantity in the warehouse
account before withdrawal, the quantity withdrawn, and the
quantity remaining, as provided in 19 CFR 144.32(a). Removal
from the warehouse of merchandise covered by an entry for which a
blanket permit was issued prior to the preparation of the
withdrawal subjects the warehouse proprietor to liquidated
damages as if the merchandise were removed without Custom permit.
A copy of the withdrawal is retained in the records of the
warehouse proprietor (in the permit file folder, as provided for
in 19 CFR 19.12(a)(2)). The original of the withdrawal
accompanies the merchandise withdrawn for certification by the
Customs officer supervising loading or use of the merchandise, or
the pilot of the aircraft (or authorized airline representative,
see U.S. Customs Service Bonded Warehouse Manual, section
7.9(e)(3)) if a Customs officer does not physically supervise
such loading or use.
When all merchandise covered by an entry on which a blanket
permit to withdraw was issued has been withdrawn, including
withdrawals for other purposes, the proprietor is required to
prepare a report on a copy of Customs Form 7501 or a form on the
letterhead of the proprietor, which provides an account of the
disposition of the merchandise covered by the blanket permit (19
CFR 19.6(d)(4)). On this form, the proprietor certifies that the
merchandise listed thereunder was withdrawn in compliance with
section 19.6(d) and accounts for all of the merchandise withdrawn
under blanket permit by HTSUS number, HTSUS quantity (where
applicable), and value, with a separate listing and
identification of merchandise withdrawn for the different
purposes for which blanket withdrawals are authorized. The form
is placed in the permit file folder and is treated as provided
for in 19 CFR 19.12(a) (under section 19.12(a)(4) the warehouse
proprietor is required to review the permit file folder to ensure
that all necessary documentation is in the file folder accounting
for the merchandise covered by the entry, notify Customs of any
merchandise covered by the warehouse entry which has not been
withdrawn or removed, and file the permit file folder with
Customs within 30 business days after final withdrawal).
The above-described blanket withdrawal procedures may address the
problem you describe (i.e., the delay which may occur while
awaiting issuance by Customs of a permit for withdrawal of
supplies or equipment from a warehouse), at least in part.
Alternatively, this problem could be ameliorated by another
provision of the Customs Regulations which you cite, 19 CFR
19.6(b)(2). Under section 19.6(b)(2), merchandise for which a
permit for withdrawal has been issued, whether duty-paid or not,
need not be physically removed from the warehouse, although it
must be segregated or physically marked to maintain its identity
as merchandise for which a withdrawal permit has been issued.
Duty-paid or unconditionally duty-free merchandise which has been
withdrawn, but not removed, from a warehouse is no longer deemed
to be in Customs custody. All other goods which have been
withdrawn, but not removed, remain in Customs custody until the
end of the 5-year warehouse entry period.
Thus, the problem you describe could be addressed, insofar as
withdrawal of supplies or equipment for aircraft qualifying for
the treatment authorized by 19 U.S.C. 1309 are concerned, by use
of blanket withdrawal procedures (in which case issuance by
Customs of an individual permit prior to each withdrawal of
merchandise from a warehouse is not required) or by use of the
procedures in section 19.6(b)(2), under which your client could
file a withdrawal under 19 CR 144.37 (for exportation) or 144.38
(for consumption) and, after the permit to withdraw is issued by
Customs (19 CFR 144.38(e) and 144.39), the merchandise could be
retained in the warehouse until the end of the 5-year warehouse
entry bond period. However, the blanket withdrawal procedures
may not be used for withdrawals of supplies or equipment for
aircraft which do not qualify for treatment under 19 U.S.C. 1309.
That is, under 19 CFR 19.6(d)(1), merchandise covered by an entry
for which a blanket permit was issued may be withdrawn for
purposes other than those for which blanket withdrawals are
permitted (listed in section 19.6(d)(1)(i) through (iii)) if a
withdrawal is properly filed as required in subpart D, part 144
of the Customs Regulations. As stated above, the provisions in
subpart D, part 144, for withdrawals for consumption require the
filing of a withdrawal and the issuance of a permit to withdraw
prior to withdrawal (19 CFR 144.38 and 144.39; see above).
In regard to this issue, it should be noted that if supplies or
equipment are withdrawn from a bonded warehouse for use on an
aircraft not qualifying under 19 U.S.C. 1309 (e.g., if a computer
were withdrawn from your client's warehouse for use on a domestic
flight), such supplies or equipment would be subject to duty and
would not be "deemed" exported under section 1309. This would be
so regardless of whether the supplies or equipment were
subsequently returned to your client.
In Customs Service Decision (C.S.D.) 83-63, Customs ruled on the
issue of whether "[i]f fungible merchandise is commingled in
storage in a Customs bonded warehouse, may FIFO accounting be
applied to identify the merchandise in place of physical
examination?" We ruled, citing rulings approving FIFO accounting
for foreign trade zones (C.S.D. 81-62) and drawback (C.S.D. 82-35), that FIFO accounting could be so used for accounting for
fungible merchandise commingled in storage in a warehouse.
Ruling HQ 224237, January 26, 1993, copy enclosed, also concerned
this issue. Under ruling HQ 224237, when FIFO procedures are
used for this purpose, each inventory category shall be assigned
a unique number or other identifier to distinguish it from all
other inventory categories. All merchandise in a given inventory
category shall be physically placed so as to be segregated from
merchandise under other inventory categories or merchandise
accounted for under other methods. The merchandise, its
location, or the location where it is stored shall be marked with
the unique identifier so as to clearly show the inventory
category of each article.
Subject to the above requirements, and assuming that the records
involved clearly identify the supplies and equipment (by unique
number or other identifier), activity, and dates and that your
client's records will establish the particulars of the use of the
supplies or equipment so that qualification for 19 U.S.C. 1309 is
established (e.g., the identity of the aircraft on which they
were used, when they were used, the trade in which the aircraft
engaged thereafter), FIFO accounting procedures may be used to
account for fungible supplies and equipment commingled in storage
in a bonded warehouse. (For general requirements and examples
relating to FIFO and other accounting procedures, see 19 CFR Part
181, Appendix, Schedule X; see also T.D. 95-61.)
Under 19 CFR 144.11(a), the documentation (entry form, evidence
of right to make entry, commercial invoice, packing list (if
appropriate), other documentation, and identification of the
United States buyer, if the merchandise is imported having been
sold) required by 19 CFR 142.3 shall be filed at the time of
entry of merchandise into a warehouse. Section 144.11(a)
provides, as does section 142.3, that if the entry summary is
filed at the time of entry for merchandise to be entered for
warehouse, the entry summary shall serve as both the entry and
entry summary and the entry form is not required. Section
144.11(a) provides that if the entry summary is not filed at the
time of entry, it shall be filed within the time limit prescribed
by 19 CFR 142.12 (10 working days after the time of entry).
Under 19 CFR 144.12, the entry summary filed for merchandise
entered for warehouse is required to "show the value,
classification, and rate of duty as approved by the port director
at the time the entry summary is filed [although] no deposit of
estimated duties shall be required until the merchandise is
withdrawn for consumption."
Thus, your proposal to store supplies and equipment in a bonded
warehouse without stating the tariff classification upon entry of
the supplies and equipment into the warehouse may not be
approved. Insofar as your request that such a procedure be
approved on the basis of reciprocity, we note that the reference
to reciprocity in 19 U.S.C. 1309(d) provides only that the
privileges granted in section 1309 shall be allowed only to
aircraft of a foreign country which allows substantially
reciprocal privileges in respect of United States-registered
aircraft. In other words, reciprocity is only of the privileges
provided for in section 1309 (and the proposed procedure is not
provided for in section 1309).
Insofar as your request that your client be permitted to use
subheading 8803.90.9050, HTSUS, for all of the supplies or
equipment entered into the bonded warehouse, we have no authority
to permit such a procedure (unless, of course, that is the
correct classification for the merchandise). Indeed, in view of
the concept of "shared responsibility" (between Customs and the
trade community) provided for in the Customs Modernization Act
(Public Law 103-182, 107 Stat. 2057, Title VI; House Report 103-361, 103d Cong., 1st Sess., 120, 136 (1993)), we believe that
such a procedure would be inconsistent with the intent of changes
made by that Act (in this regard, see also in the above-referenced legislative history the requirement that an importer
use "reasonable care" in discharging the activities for which the
importer has responsibility).
The provisions for establishment of a Customs bonded warehouse
are found in 19 CFR 19.2. Under section 19.2(a), the owner or
lessee desiring to establish a bonded warehouse facility is
required to make a written application to the port director where
the warehouse is to be located, describing the premises, giving
the location, and stating the class of warehouse desired. Under
section 19.2(b), when a part or parts of a building are to be
used as the warehouse, a detailed description of the materials
and construction of all partitions is required. Under 19 CFR
19.1(c), specific requirements are stated for the effective
separation of bonded and nonbonded portions of a building, when
only part of the building is to be used as a Customs bonded
warehouse (as noted below, Customs has given notice that it is
proposing the deletion of section 19.1(c)).
Under 19 CFR 144.1(a), "[a]ny merchandise subject to duty may be
entered for warehousing [with exceptions not applicable in this
case]." This provision was promulgated by Treasury Decision
(T.D.) 84-149. Prior to T.D. 84-149, the corresponding provision
was that "[a]ny merchandise may be entered for warehousing except
[the same exceptions as currently] and unconditionally free
merchandise." This change is explained in the background of T.D.
84-149 as follows:
Customs has determined that section 144.1(a) must be amended
to: (1) eliminate the exception made for unconditionally
free merchandise so as to allow unconditionally duty-free
merchandise to be entered for warehouse; and (2) restrict
the coverage of the regulation to "any merchandise subject
to duty" so as to avoid an implication that domestic or
duty-paid merchandise may be entered into or placed in a
bonded warehouse.
Thus, it is clear that only merchandise subject to duty may be
entered for warehousing (and domestic or duty-paid merchandise
may not be entered for warehousing. The provision you cite in
this regard, 19 CFR 19.6(b)(2), does not provide for the entry
for warehousing of domestic or duty-paid merchandise (if that is
what you mean by non-bonded merchandise); rather it provides for
the retention in a bonded warehouse of merchandise properly in a
warehouse after a permit for withdrawal has been issued (see
discussion of section 19.6(b)(2) above).
If your proposal in this regard is for segregation of part of the
building in which the bonded warehouse facility is located, so
that there are bonded and non-bonded portions in the building,
both the statute and the Customs Regulations clearly authorize
this. That is, 19 U.S.C. 1555 authorizes the designation as
bonded warehouses of "[b]uildings or parts of buildings"
(emphasis added) and 19 CFR 19.2(b) specifically provides for
approval of a part or parts of a building as a bonded warehouse,
with 19 CFR 19.1(c) providing specific requirements for the
effective separation of bonded and non-bonded portions of a
building. If you are concerned with whether alternate (i.e.,
alternative to those described in the Customs Regulations) means
of separating the bonded and non-bonded portions of a building
are available, see ruling HQ 224820, October 26, 1993, copy
enclosed, in which we noted that the waiver of specific
references to the building materials described in section 19.1(c)
has been authorized (see also, Notice of Proposed Rulemaking
(NPRM) published in the Federal Register on June 6, 1996 (61 FR
28808), in which notice is given that Customs is proposing to
delete section 19.1(c)).
Insofar as your request that Customs assure your client that its
private bonded warehouses will be regulated uniformly throughout
the United States is concerned, this ruling should serve that
purpose. Unless there is some special reason for the port
director, in his or her discretion, to treat a bonded warehouse
in the port differently than indicated by this ruling (e.g.,
under 19 CFR 19.6(d)(1), a blanket withdrawal permit may be
revoked by the port director in favor of individual applications
and permits if the permit is found to be used for other purposes,
of if necessary to protect the revenue or properly enforce any
law or regulation), the procedures described herein should be
applied uniformly to your client's bonded warehouses throughout
the United States.
As an alternative to the bonded warehouse procedures, your client
may wish to consider the use of other procedures. Enclosed is a
copy of ruling HQ 224266, March 3, 1993, describing alternative
procedures (Civil Aircraft Agreement, General Note 6, HTSUS; 19
CFR 10.183; and Temporary Importation under Bond (TIB), under
heading 9813, HTSUS) which may be applicable to your client's
operations.
In regard to the first issue discussed in this portion of the
ruling (i.e., removal from warehouse of supplies or equipment
without prior filing of a withdrawal and issuance of a permit by
Customs under 19 CFR 144.38 and 144.39 (see above)), you ask that
Customs initiate a test program, under 19 CFR 101.9, "... to
determine the value to Customs and [your client], and ultimately
the air carrier industry of amending the Customs Regulations
concerning warehouse entries and withdrawals of aircraft parts
and equipment and the best way to make and implement such
amendments." As stated above, in the discussion of this issue,
we believe that the problem you raise can be addressed by current
regulatory provisions, insofar as the withdrawal of supplies or
equipment for qualifying (under 19 U.S.C. 1309) aircraft is
concerned. For withdrawals of supplies or equipment for non-qualifying aircraft, prior filing of a withdrawal and issuance of
a permit is required. The change you propose (for withdrawals
for non-qualifying aircraft) would constitute a major change to
Customs warehouse procedures.
In regard to your request for the suspension, under a test
program pursuant to 19 CFR 101.9, of the requirement for physical
separation (between bonded and non-bonded portions of a building
in which there is a bonded warehouse) in 19 CFR 19.1(c), we have
advised the appropriate operational office of your interest in
such a test program. As noted elsewhere in this ruling, Customs
has recently issued an NPRM (primarily pertaining to duty-free
stores under 19 U.S.C. 1555) under which section 19.1(c) would be
deleted (published in the Federal Register on June 6, 1996 (61 FR
28808)). According to the background of the NPRM, "[w]hile
language concerning warehouse security would be added to
[section] 19.4(b)(6), warehouse construction requirements will
not be set forth in the regulations. The warehouse construction
is a factor that will be considered by the port director in
deciding whether to approve the application." Note that the
provision referenced in the above-quoted language (section
19.4(b)(6)) is proposed to be amended to specifically provide for
"effective separation of the bonded and non-bonded merchandise"
in a facility in which a portion is to be used for the storage of
non-bonded merchandise by "painted line", among other
alternatives.
Because of the above-described proposed deletion of 19 CFR
19.1(c), the operational office involved (to which we referred
your proposal (see above)) has advised that it believes no test
under 19 CFR 101.9 is necessary. Your client may wish to comment
on the above-referenced NPRM. Instructions for making comments,
and the identity of a Customs officer who will be able to provide
further information about the proposal, are provided in the NPRM.
HOLDINGS:
(1) The usual procedures for withdrawal from a bonded warehouse
of merchandise require filing of a withdrawal with Customs and
issuance by Customs of a permit to withdraw prior to withdrawal
(19 CFR 10.61, 144.38, 144.39). However, under the "blanket"
withdrawal permit procedures in 19 CFR 10.62a and 19.6(d), if a
withdrawer obtains approval for use of these procedures,
withdrawals of equipment or supplies for a qualifying aircraft
under 19 U.S.C. 1309 may be without further Customs approval by
filing with the warehouse proprietor a withdrawal for the
merchandise withdrawn on Customs Form 7501, as described in the
LAW AND ANALYSIS portion of this ruling. Alternatively, under 19
CFR 19.6(b)(2), merchandise for which a permit for withdrawal has
been issued may be retained in a bonded warehouse, if segregated
or physically marked to maintain its identity as merchandise for
which a withdrawal permit has been issued, until the end of the
5-year warehouse entry period. Blanket withdrawal procedures may
not be used for withdrawals of supplies or equipment for aircraft
which do not qualify for treatment under 19 U.S.C. 1309, in which
case the usual requirements for filing of a withdrawal and
issuance of a permit by Customs prior to withdrawal apply (19 CFR
19.6(d)(1), 144.38, and 144.39).
(2) First-in, first-out (FIFO) accounting methods may be used to
account for fungible merchandise in your client's bonded
warehouses, provided that each inventory category is assigned a
unique number, each inventory category is physically segregated
from merchandise in other inventory categories or merchandise
accounted for under other methods, and that the requirements
described in the LAW AND ANALYSIS portion of this ruling
(referring to C.S.D. 83-63 and ruling HQ 224237, as well as, for
general requirements and examples relating to FIFO and other
accounting procedures, 19 CFR Part 181, Appendix, Schedule X, and
T.D. 95-61) are complied with.
(3) The merchandise under consideration may not be entered into
your client's bonded warehouses without stating the tariff
classification (see 19 CFR 144.12), nor may all of the
merchandise be classified under subheading 8803.90.9050, HTSUS,
at the time of entry into the warehouses (unless that is the
correct classification of the merchandise) (see authorities cited
in this regard in the LAW AND ANALYSIS portion of the ruling).
(4) Domestic or duty-paid merchandise may not be entered for
warehouse (19 CFR 144.1(a), as promulgated by T.D. 84-149).
Merchandise for which a permit for withdrawal has been issued may
be retained in the warehouse under 19 CFR 19.6(b)(2) (see above).
A bonded warehouse facility may be in a building in which there
are bonded and non-bonded portions of the building, provided that
the bonded and non-bonded portions are effectively separated (see
19.CFR 19.2(b) and 19.1(c); see also discussion of the NPRM to
delete the latter section).
(5) The procedures described in this ruling should be applied
uniformly to your client's bonded warehouses throughout the
United States unless there is some special reason for the port
director, in his or her discretion, to treat a bonded warehouse
in the port differently (see, e.g., 19 CFR 19.6(d)(1), regarding
blanket withdrawal permits).
Sincerely,
Director, International
Trade Compliance Division
Enclosures