OT:RR:CTF:EPDR H295516 RD
Eric R. Rock, Esq.
Rock Trade Law LLC
77 W. Washington St., Suite 400
Chicago, IL 60602
Re: Request for Ruling under 19 C.F.R. Part 177 regarding Temporary Importation of Automobiles by Nonresidents
Dear Mr. Rock:
This decision is in response to your ruling request on behalf of Insurance Auto Auctions, Inc. Our decision, based on your submission, follows.
FACTS:
The ruling request concerns situations wherein a nonresident of the United States enters a personal automobile duty free under subheading 9804.00.35, Harmonized Tariff Schedule of the United States ("HTSUS"). While in the United States, the automobile is damaged. The insurance company determines that the automobile is a "total loss," or "totaled," meaning it costs more to repair the automobile than it is worth repaired. The insurance company pays the insured and takes ownership of the damaged automobile and its associated title. The insurance company grants physical possession of the automobile to Insurance Auto Auctions, Inc. ("IAAI"), who arranges the sale of the automobile through auction. IAAI will only sell for export. If sold, the automobile's title passes from the insurance company to the foreign buyer and the automobile is subsequently exported. If the automobile is not sold at auction, it is destroyed in the United States. IAAI arranges for destruction of the automobile by crushing where no value is obtained from the scrap.
IAAI requests that the automobiles may be sold to a nonresident without requiring the payment of duties. They also request that the importation of the automobile, once totaled, be treated as a transportation and exportation entry with the filing of a Transportation Entry and Manifest of Goods Subject to CBP Inspection and Permit Form ("CBP Form 7512"). They also request that for automobiles destroyed in the United States, U.S. Customs and Border Protection ("CBP") only needs to be notified of the destruction and offered the opportunity to supervise or witness the destruction.
ISSUE:
Whether an automobile temporarily imported duty free under subheading 9804.00.35, HTSUS, that undergoes a sale prior to being auctioned for export is subject to forfeiture.
LAW AND ANALYSIS:
Nonresidents may import an automobile without the payment of duties if the automobile is imported in conjunction with the nonresident owner's arrival and is "to be used in the United States only for the transportation of the nonresident, his family and guests . . . ." 19 C.F.R. 148.45; 9804.00.35, HTSUS. If any such imported automobile that was exempted from duties under 9804.00.35, HTSUS, is sold within one year after the date of importation, "such article, or its value (to be recovered from the importer), shall be subject to forfeiture." U.S. Note 1(b) to Subchapter IV of Chapter 98, HTSUS; see also 19 C.F.R. 148.46(a)(2). An exception to this provision is regarding articles sold pursuant to a judicial order or in liquidation of the estate of a decedent. 19 C.F.R. 148.46(c). Forfeiture is not required, and a sale is permitted, however, "if, prior to the time of sale, payment is made to a port director of the duty which would have been payable at the time of entry if the article had been entered without the benefit of the applicable exemption." 19 C.F.R. 148.46(b). Additionally, automobiles imported by nonresidents that do not conform to U.S. emissions and safety standards must be exported or destroyed within one year and may not be sold in the United States. 19 C.F.R. 12.73(g); 19 C.F.R. 12.80(b)(1)(v).
At issue in this ruling request is whether there is a sale resulting in forfeiture under the circumstances described where the car is considered "totaled" by the insurance company and auctioned prior to exportation. The relevant statutory and regulatory provisions governing personal declarations and exemptions for nonresidents do not define the term "sale." Merriam-Webster, however, defines a sale as "the transfer of ownership of and title to property from one person to another for a price." Sale, Merriam-Webster, https://www.merriam-webster.com/dictionary/sale (last visited Aug. 8, 2024). Whether there is a "sale" will necessarily be a case-by-case determination.
Under the circumstances described in this ruling request, a sale occurs prior to the auctioning of the automobile. The insurance company pays the insured and takes ownership of the damaged automobile and its associated title. Thus, consideration is given to the nonresident importer in exchange for the title and possession rights of the imported automobile. The risk is assumed by the insurance company, and the insurance company has the right to resell the automobile. Accordingly, under these facts, there is a "sale" of the automobile to the insurance company prior to it being sold by IAAI at auction. In these instances, there are no judicial orders or liquidations of an estate of a decedent. Therefore, pursuant to 19 C.F.R. 148.46(b), the automobile may be sold "if, prior to the time of sale, payment is made to a port director of the duty which would have been payable at the time of entry if the [automobile] had been entered without the benefit of the applicable exemption." Otherwise, the automobile or its value is subject to forfeiture. 19 C.F.R. 148.46(a)(2).
The requester argues that the payment of duty prior to a sale is only required when the sale is made to a U.S. resident, and since the automobile is sold to a nonresident it is not subject to forfeiture. To support this argument, they cite to U.S. Note 1(b) to Subchapter IV of Chapter 98, HTSUS, HQ H249818 (Apr. 4, 2014), HQ 112041 (Jan. 22, 1992), and HQ 110136 (1989). These referenced sources do not support the requester's argument. U.S. Note 1(b) to Subchapter IV of Chapter 98, HTSUS makes no distinction between sales to nonresidents and residents-it states that any article "which has been exempted from duty under subheading 9804.00.35 is sold within 1 year after the date of importation" is subject to forfeiture. Furthermore, the headquarters rulings cited are specific to imported vessels, wherein the rulings addressed whether the vessel was imported for sale or for charter to a resident of the United States. Our rulings have distinguished importation of vessels for sale or for charter to a resident from a nonresident for historical reasons that pertain only to vessels, such as 696.05, Tariff Schedule of the United States ("TSUS," predecessor to the HTSUS), which provided for the tariff rate of vessels imported "for sale or charter to a resident" of the United States. This historical distinction does not apply to importations of automobiles. Therefore, an automobile imported duty free under 9804.00.35, HTSUS, is subject to the provisions of 19 C.F.R. 148.46, whether it is sold to a nonresident or resident.
The requester also asks about the required documentation that would need to be filed with CBP during this process. They propose that the temporary importation of the automobile "effectively manifests" itself as a transportation and exportation entry, which is filed on a Transportation Entry and Manifest of Goods Subject to CBP Inspection and Permit Form ("CBP Form 7512"), and therefore a CBP Form 7512 can be provided here. We do not agree that the process described by the requestor would qualify for a transportation and exportation entry. A transportation and exportation entry is a form of in-bond transportation that, among other things absent in this situation, requires a bond. Further, the transportation and exportation bond application must be made prior to the merchandise departing the origination port. 19 C.F.R. 18.1(d)(3). Under the circumstances of this ruling request, the totaled vehicle has already departed the origination port and, therefore, CBP Form 7512 cannot be later filed to create a transportation and exportation entry at that time.
Regarding the requester's general question about documentation in the event of destruction, we note that event in the event of destruction payment of duties must be made to the port director because, as discussed above, there is a sale. After such payment of the appropriate duties to CBP, no documentation is required to substantiate destruction.
HOLDING:
We find that an automobile temporarily imported duty free under subheading 9804.00.35, HTSUS, that undergoes a sale prior to being auctioned for export is subject to forfeiture. Forfeiture is not required, however, if, prior to the time of sale, payment is made to a port director of the duty which would have been payable at the time of entry if the article had been entered without the benefit of the applicable exemption.
Please note that 19 C.F.R. 177.9(b)(1) provides that "[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruing letter, either directly, by reference, or by implication, is accurate and complete in every material respect." If any fact in the transaction varies from the facts stipulated to herein, this decision shall not be binding on CBP, as provided for in 19 C.F.R. 177.9(b).
Sincerely,
Alexandra B. Hess, Chief
Entry Process and Duty Refunds Branch