CON-9-RR:IT:EC 226726 PH
Port Director
U.S. Customs Service
300 South Ferry Street
Terminal Island, California 90731
RE: Internal Advice; Temporary Importation Bond (TIB);
Anticipatory Breach; Heading 9813, HTSUS; 19 CFR 10.31; 19
CFR 10.39(g); Treasury Decision (T.D.) 95-22
Dear Madame or Sir:
In your memorandum of November 6, 1995 (Your File: MAR 1 02
LA:S:TC:6 AS XCON-9-09), you requested internal advice on a
temporary importation bond (TIB) stated to cover the importation
of nine vehicles of which six were exported and three remain in
the United States. You enclosed materials relating to this
matter with your memorandum. Our ruling follows.
FACTS:
The importer imported nine vehicles under TIB subheading
9813.00.30, HTSUS, on May 15, 1993. According to personnel in
your office and a notation in the file, the TIB was extended for
one additional year. Six of the vehicles were exported on July
6, 1994.
By letter of February 23, 1995, the representative of the
importer sought to confirm that the importer's responsibilities
in regard to the TIB entry would be completely satisfied upon
payment of the liquidated damages in regard to the three vehicles
remaining in the United States. Your office responded by letter
of March 7, 1995, stating that you had been advised that the
importer' responsibilities regarding the TIB entry would be
satisfied upon payment of all liquidated damages for the three
automobiles remaining in the United States. You noted that
payment of the liquidated damages does not equate to the valid
entry of the vehicles into the United States. You stated that
the liquidated damages would be double the duty/MPF for the three
vehicles that remaining in the United States ($1,335.14,
according to your letter).
By letter of March 27, 1995, the representative of the importer,
"[p]ursuant to [s]ection 10.39(f) of the Customs Regulations,
[presented] a voluntary tender of $1,335.14 as liquidated damages
due for anticipatory breach of the subject TIB entry." The model
numbers for the three vehicles remaining in the United States
were listed, and the stated value and duties and fees
attributable to them, were stated. According to this letter,
Customs files would reflect the exportation of six of the
vehicles covered by the TIB, as well as evidence of compliance
with Department of Transportation (DOT) and Environmental
Protection Agency (EPA) regulations for the three vehicles
remaining in the United States. Enclosed in the file is a
receipt for the above amount as a "Voluntary Tender For TIB."
In the file there is a July 26, 1995, letter from the
representative of the importer stating that "... we require a
letter to be presented to the State of California in regard to
the registration of these vehicles [the vehicles are listed and
have the same VIN numbers as the vehicles listed in the March 27,
1995, letter (above)]." There is an August 8, 1995, letter from
your office in response to the July 26, 1995, letter, advising
that the "[TIB case, with the same vehicles listed as above] was
closed on April 6, 1995 upon payment of the claim for liquidated
damages." The letter proceeded to state that:
The closure of this case in its administrative process is
not to be construed as Customs release or entry of the above
vehicles. The TIB period has expired and any extension must
be requested from the Chief, Entry Rulings Branch in
Washington, D.C. as noted on the attached TIB Fact Sheet.
Unless such an extension is granted, these vehicles must be
exported or destroyed, under Customs supervision, to satisfy
the Customs regulations.
By letter of August 25, 1995, the representative of the importer
asked that you seek internal advice in this matter "so that a
letter can be issued to the importer which will facilitate lawful
registration of the vehicles covered by the case so that they can
remain in the country permanently." In your November 6, 1995,
memorandum, you sought internal advice on this matter, as
requested. Specifically, you asked whether payment of liquidated
damages precludes the necessity for exporting merchandise
imported on a TIB and, among other issues, you raise the question
of whether two times the duties plus merchandise processing fees
is a sufficient bond for TIB's for non-complying vehicles.
ISSUE:
Must merchandise be exported or destroyed when the merchandise
has been entered under a TIB and liquidated damages have been
assessed and paid, as a result of an anticipatory breach as
provided for in 19 CFR 10.39(g)?
LAW AND ANALYSIS:
Subheading 9813.00.30, HTSUS, provides for the temporary duty-free entry of "[a]rticles intended solely for testing,
experimental or review purposes ...." Pursuant to U.S. Note 1(a)
of Subchapter XIII of Chapter 98, HTSUS, which contains
subheading 9813.00.30:
The articles described in the provisions of this subchapter,
when not imported for sale or for sale on approval, may be
admitted into the United States without the payment of duty,
under bond for their exportation within 1 year from the date
of importation, which period, in the discretion of the
Secretary of the Treasury, may be extended, upon
application, for one or more further periods which, when
added to the initial 1 year, shall not exceed a total of 3
years ....
The Customs Regulations pertaining to TIB's are found in 19 CFR
10.31 through 10.40. Under section 10.31(f), with certain
exceptions not applicable in this case, the bond amount for a TIB
is required to be "... equal to double the duties, including
fees, which it is estimated would accrue (or such larger amount
as the port director shall state in writing or by the electronic
equivalent to the entrant is necessary to protect the revenue)
had all the articles covered by the entry been entered under an
ordinary consumption entry." Section 10.39(a) provides that
charges against bonds for TIB entries may be canceled in the
manner prescribed in 19 CFR 113.55. Section 113.55(a) provides
that a bond to assure exportation may be canceled either upon
exportation (as described in section 113.55(a)(1)) or upon the
payment of liquidated damages. Section 10.39(f) provides that in
instances where there has been partial compliance with the terms
of a TIB and a written petition for relief is filed, total
liability under the TIB may be canceled upon the payment of an
amount equal to double the duty or 110% percent of the duty, as
appropriate, of the articles in respect of which the default
occurred. Under section 10.39(g) (as added by Treasury Decision
(T.D.) 95-22 (published in the Federal Register on March 20, 1995
(60 FR 14630)), after publication of a Notice of Proposed
Rulemaking in the Federal Register (57 FR 44714, September 29,
1992)):
If an importer anticipates that the merchandise entered
under a [TIB] will not be exported or destroyed in
accordance with the terms of the bond, the importer may
indicate to Customs in writing before the bond period has
expired of the anticipated breach. At the time of written
notification of the breach, the importer shall pay to
Customs the full amount of liquidated damages that would be
assessed at the time of breach of the bond, and the entry
will be closed. The importer shall notify the surety in
writing of the breach and payment. By this payment, the
importer waives his right to receive a notice of claim for
liquidated damages as required by 172.1(a) of this
chapter.
Section 10.39(g) was considered in a recent court case involving
TIB's (Titanium Metals Corp. v. United States, 901 F. Supp. 362
(CIT 1995)). In this case, which upheld Customs position that
merchandise subject to antidumping duties or countervailing
duties could be entered under a TIB, the Court described section
10.39(g) as follows:
Under the new amendment, an importer may choose not to
export goods entered under TIB and pay liquidated damages
equal to the amount of the bond at that time, rather than at
the expiration of the statutory time period (generally, one
year). [901 F. Supp. at 366]
The Court in the Titanium Metals case noted Customs position that
for purposes of quota laws, Customs has considered TIB entries to
be entered for consumption and counted such entries against the
applicable quota (901 F. Supp. 366, footnote 11). This Customs
position was published in Treasury Decisions 54802(53) and (54).
The reason for the position taken in these T.D.'s has been
explained in a number of subsequent letters (see quoted material
on page 4 of HQ Ruling 225642, April 3, 1995, copy enclosed; see
also C.S.D. 93-21 ("The rationale for so deeming TIB entries to
be consumption entries for purposes of administering quotas is
that to rule otherwise could allow the circumvention of the quota
laws (i.e., otherwise merchandise subject to quota for which no
visa could be obtained could be entered under a TIB entry and, if
consumed in the United States, subject only to liquidated
damages)" (emphasis added)).
The foregoing makes it clear that when merchandise is entered
under TIB and the bond is canceled upon payment of liquidated
damages, the merchandise is not required to be exported or
destroyed, nor is any entry for consumption required. The Court
in Titanium Metals described the provision in 19 CFR 10.39(g)
(providing for anticipatory breaches of TIB's) in just those
terms (i.e., "... an importer may choose not to export goods
entered under TIB and pay liquidated damages ..." (supra))).
This is consistent with Customs long-standing position regarding
TIB's and quota merchandise, as described above (i.e., otherwise,
if merchandise under TIB could be required to be destroyed or
exported, there would be no danger of the quota being
circumvented). Finally, the Customs Regulations themselves
provide that once liquidated damages are assessed and paid, the
bond for the TIB entry is canceled (19 CFR 10.39(a); 19 CFR
113.55(a)(2), described above).
In regard to your question about whether the bond amount for
TIB's provided for in 19 CFR 10.39 is sufficient when the
imported merchandise may be non-complying vehicles (we assume you
mean vehicles which do not meet Environmental Protection Agency
(EPA) emission requirements and/or Department of Transportation
(DOT) safety requirements), see the applicable Customs
Regulations (19 CFR 12.73 and 12.80). These provisions provide
for exemption from the usual bonding requirements for non-complying vehicles imported for the purpose of test or experiment
(section 12.73(h)(2); section 12.80(b)(1)(vii) and 12.80(c)(3)),
if certain conditions are met. Those conditions are, under
section 12.73, prior approval by the EPA in writing (although a
bond may be provided for timely submission of such written
approval (section 12.73(j))) (section 12.73(h), and, under
section 12.80, a declaration and statement fully describing the
test or experiment, the estimated period of time necessary to use
the vehicle on the public roads, and the disposition to be made
of the vehicle after completion of the test or experiment
(section 12.80(c)(3)). In the case of the latter, Customs is
required to forward the declaration and statement to the National
Highway Traffic Safety Administration (NHTSA) in the DOT.
Thus, these Customs Regulations contain control mechanisms under
which the Federal Agencies primarily involved are informed and/or
involved in the importation of the vehicles for test or
experiment. These Customs Regulations were either approved by
the other Federal Agency (see Treasury Decision (T.D.) 78-478,
signed by the then Administrator of the NHTSA) or coordinated
with the other Federal Agency (according to the file for T.D. 88-40, the regulations in section 12.73 were coordinated with the
EPA). We note that, according to the March 27, 1995, letter from
the representative of the importer in this case, evidence of
compliance with DOT and EPA requirements for the three vehicles
remaining in the United States has allegedly been presented to
your office. In view of the foregoing and the clear language in
the Customs Regulations setting amounts for bonds for TIB
entries, we see no authority for setting such bonds in an amount
greater than "double the duties, including fees" (19 CFR
10.31(f)). The only exception is that given in the parenthetical
statement in section 10.31(f) (i.e., "such larger amount as the
port director shall state in writing or by the electronic
equivalent to the entrant is necessary to protect the revenue").
In view of the above-described regulations in 19 CFR 12.73 and
12.80 (in which the Federal Agencies primarily involved authorize
the admission of non-conforming vehicles for test or experiment
without bond, in certain conditions), protection of the revenue
does not appear to be involved.
HOLDING:
Merchandise which has been entered under a TIB and for which
liquidated damages have been assessed and paid, as a result of an
anticipatory breach as provided for in 19 CFR 10.39(g), is not
required to be exported or destroyed (because the bond for the
TIB entry has been canceled (19 CFR 10.39(a); 19 CFR
113.55(a)(2)).
The Office of Regulations and Rulings will take steps to make
this decision available to Customs personnel via the Customs
Rulings Module in ACS and the public via the Diskette
Subscription Service, Freedom of Information Act and other public
access channels 60 days from the date of this decision.
Sincerely,
Director, International
Trade Compliance Division
Enclosure