HQ 112164

April 6, 1992

BOR-7-03/04-CO:R:IT:C 112164 GEV

CATEGORY: Carriers

Forest Ayer

Maine Packers Inc.

RFD 3 Box 50

Caribou, Maine 04736

RE: Instruments of International Traffic; Trucks; Rail;

Intermodal Transportation; 19 U.S.C. 1322

Dear Mr. Ayer:

This is in response to your letter dated March 27, 1992,

requesting a ruling on a proposed intermodal (truck/rail)

transportation of merchandise between two United States points

via Canada. Our ruling on this matter is set forth below.

FACTS:

Maine Packers Inc. proposes to load potatoes in North Dakota

on Canadian trailers. These trailers will be delivered to

Winnipeg, Manitoba, Canada, by either U.S. or Canadian tractors.

These trailers will then be loaded onto Canadian rail cars (i.e.,

the \"piggyback\" procedure) for transportation to Montreal,

Quebec, Canada.

Upon arrival in Montreal, the trailers will be off-loaded

from the rail cars and then be hauled by different Canadian or

U.S. tractors to various points in Maine.

ISSUES:

Whether the intermodal (i.e., truck/rail) transportation

scenarios described above constitute movements in local traffic

in violation of 19 CFR 123.12 and/or 123.14.

LAW AND ANALYSIS:

Section 141.4, Customs Regulations (19 CFR 141.4), provides

that entry as required by title 19, United States Code, section

1484(a) (19 U.S.C. 1484(a)), shall be made of every importation

whether free or dutiable and regardless of value, except for

intangibles and articles specifically exempted by law or

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regulations from the requirements for entry. Since the foreign-

based equipment in question is not within the definition of

intangibles as shown in General Note 4, Harmonized Tariff

Schedule of the United States (HTSUS; 19 U.S.C. 1202, as

amended), it is subject to entry and payment of any applicable

duty if not specifically exempted by law and regulations.

Instruments of international traffic may be entered without

entry and payment of duty under the provisions of 19 U.S.C. 1322.

To qualify as instruments of international traffic, trucks having

their principal base of operations in a foreign country must be

arriving in the United States with merchandise destined for

points in the United States, or arriving empty or loaded for the

purpose of taking merchandise out of the United States (see 19

CFR 123.14(a)). To receive the same consideration, foreign

railroad equipment other than locomotives may proceed on the

inward trip to the place of complete unloading for any

merchandise imported therein (see 123.12(a)(1), Customs

Regulations).

In addition, 123.12(a)(2), Customs Regulations, states that

foreign railroad equipment other than locomotives may be used on

the outward trip in through trains crossing the boundary or for

such local traffic as is reasonably incidental to its economical

and prompt departure for a foreign country (i.e., in the general

direction of the country of origin, or to the home route junction

point, over a route which the equipment would ordinarily

otherwise travel empty).

Generally speaking, a foreign truck tractor which arrives in

the United States in international traffic towing a foreign

trailer, either empty or loaded, constitutes a foreign \"truck\" as

that term is used in 123.14(a), (b), and (c)(1), Customs

Regulations (19 CFR 123.14(a), (b), and (c)(1)).

Section 123.14(c), Customs Regulations, states that with one

exception, a foreign-based truck, admitted as an instrument of

international traffic under section 123.14, shall not engage in

local traffic in the United States. The exception, set out in

123.14(c)(1), states that such a vehicle, while in use on a

regularly scheduled trip, may be used in local traffic that is

directly incidental to the international schedule.

A carrier may be considered as engaged in regularly

scheduled service whether trips are scheduled hourly, daily,

weekly, etc., provided the trips are regular, not varied, and are

over an established route. Trips made if and when a load is

available do not qualify.

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Section 123.14(c)(2), Customs Regulations, provides that a

foreign-based truck trailer admitted as an instrument of

international traffic may carry merchandise between points in the

United States on the return trip as provided by 123.12(a)(2)

which allows use for such transportation as is directly

incidental to its economical and prompt return to the country

from which it entered the United States. Section 123.14(c)(2)

applies only to trailers and not to tractor-trailer units which,

as was stated earlier, are considered trucks as that term is used

in the Customs Regulations.

Section 10.41(d), Customs Regulations, provides, in part,

that any foreign-owned vehicle brought into the United States for

the purpose of carrying merchandise between points in the United

States for hire or as an element of a commercial transaction,

except as provided for in 123.14(c), is subject to treatment as

an importation of merchandise from a foreign country and a

regular Customs entry therefore shall be made. Section

123.14(d), Customs Regulations, provides that any vehicle used in

violation of 123.14, is subject to forfeiture under 592,

Tariff Act of 1930, as amended (19 U.S.C. 1592).

Whether the use of an instrument of international traffic

constitutes a diversion from international traffic is based on

the facts in each case. The transportation of merchandise in

international traffic is the key; the domestic movement of

merchandise must be secondary to the international movement and

meet other criteria. There must be a regular international

schedule and the domestic movement must follow the same basic

route as the merchandise moving in international traffic.

It should be noted that 123.14 is applicable only to those

vehicles which have their \"principal base of operations in a

foreign country.\" Customs has no specific requirements for

determining a vehicle\'s base of operations. As long as an

operator has the intention to establish his base of operations in

a certain place and operate out of that location, and presents

sufficient evidence to support this intention, Customs will

consider that as his base of operations. In the event a vehicle

is not found to be foreign-based thereby rendering 123.14

inapplicable, it may nevertheless be in violation 10.41(d),

Customs Regulations, if it is foreign-owned and carrying

merchandise between points in the United States for hire or as an

element of a commercial transaction without having made a formal

Customs entry. Failure to make entry in this situation, just as

in the case of failure to enter a foreign-based vehicle before

use in local traffic, is subject to penalty under 19 U.S.C. 1592.

Assuming, arguendo, that the Canadian vehicles in the

scenarios under consideration are Canadian-based, our findings

are as follows.

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At the outset it should be noted that the Canadian railroad

equipment involved is used only in the movement of the trailers

between Canadian points (Winnipeg - Montreal). Accordingly, this

leg of the transportation does not constitute a violation of 19

CFR 123.12.

Focusing on the proposed use of Canadian trailers we note

that the mere fact that a truck trailer is transported on a rail

car (i.e., the \"piggyback\" procedure) does not render the trailer

railroad equipment, nor does it exempt it from the applicable

entry requirements accorded those vehicles not designated as

instruments of international traffic. (C.I.E. 77/56, and ruling

letter DB 514.112 1, dated June 18, 1964) Accordingly, there is

a movement in local traffic in violation of 123.14(c)(2)

regarding the Canadian trailer which, after being loaded in the

U.S. is hauled to Canada, placed aboard a Canadian rail car,

transported to a second Canadian point, then hauled by a tractor

to its final U.S. destination. Pursuant to 123.14(c)(2),

Customs Regulations, a foreign-based truck trailer may carry

merchandise between points in the United States only on its

departure for a foreign country and only if such local traffic is

reasonably incidental to its economical and prompt departure for

a foreign country. The route of the Canadian-based trailers in

question (i.e., U.S.-Canada-U.S.) does not meet these criteria.

In regard to the use of different Canadian or U.S. tractors

on either end of the transportation in question, we note the

following.

The use of U.S. tractors on either or both end legs of the

the transportation would incur no violation of 19 CFR 123.14 as

to the tractors. However, the same cannot be said with respect

to the use of Canadian tractors. Customs has long-held that the

termination of transportation in Canada by a foreign truck which

hauled merchandise to Canada with the present existing intention

by the shipper that the merchandise would ultimately be

transported to the U.S. and the subsequent use of a different

foreign truck in hauling the merchandise from Canada to the U.S.,

whether by the same or a different trucking firm, would not

constitute a break in the continuity of the transportation

between points in the U.S. to the extent that each truck would be

considered as operating in international traffic rather than

solely in local traffic. (Ruling 100323) Accordingly, the

movement of Canadian tractors on both ends of the transportation

constitutes an engagement in local traffic not within the

permitted exceptions of section 123.14(c)(1), Customs

Regulations.

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Furthermore, the use of a Canadian tractor only on the first

leg of the transportation (North Dakota - Winnipeg) would be in

violation of 123.14(c)(1), Customs Regulations. This Canadian

truck (i.e., tractor-trailer unit) would not be considered an

instrument of international traffic within the meaning of

123.14(a), Customs Regulations. That section considers a

foreign truck \"arriving empty or loaded for the purpose of taking

out merchandise or passengers\" as engaged in international

traffic. \"Taking out\" means destined to a foreign country and

does not cover merchandise or passengers whose intended

destination is a second point in the United States.

Accordingly, the Canadian truck involved in the first leg of the

transportation is considered to have been engaged in \"local

traffic\" within the meaning of 123.14(c), Customs Regulations,

and not within any of the exceptions noted thereunder regardless

of the fact that the tractor did not take the load to its final

destination in the United States. The fact that the tractor

separated from the trailer in Winnipeg does not exculpate it

from the prohibitions of 123.14(c)(1), Customs Regulations.

In addition, the use of a Canadian tractor on the final leg

of the transportation (Montreal - Maine) would constitute a

violation of 19 CFR 123.14(a) inasmuch as it is transporting

merchandise that is not in international traffic. Furthermore,

it is the intent of both 19 CFR 123.14 and 19 U.S.C. 1322 to

prevent the movement of merchandise between two U.S. points by

either a single foreign-based carrier or a combination thereof.

In your telephone conversation of March 31, 1992, with Mr.

Glen E. Vereb of my staff you alternatively proposed using only

U.S.-based tractors and trailers owned by your company in the

transportation under consideration. The use of U.S.-based

equipment in the manner you propose would not constitute a

violation of 19 CFR 123.14. Furthermore, you should know that

Customs has ruled that when a U.S. tractor-trailer unit

originating from a U.S. point proceeds to Canada where the

trailer is transferred to a Canadian-based tractor which

subsequently hauls the trailer to its U.S. destination, the

Canadian-based tractor hauling solely from a point in Canada to a

point in the U.S. is in international traffic and cannot be

considered imported merchandise subject to Customs entry solely

because it is transporting merchandise on an international leg of

a movement of the merchandise between U.S. points. (see Customs

Rulings DB 542.112 40283, dated December 19, 1958; 101235 dated

February 27, 1975; and 111285, dated October 21, 1990; copies

attached)

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HOLDING:

The intermodal (i.e., truck/rail) transportation scenarios

under consideration constitute movements in local traffic in

violation of 19 CFR 123.14 with the exception of those scenarios

noted above.

Sincerely,

B. James Fritz

Chief

Carrier Rulings Branch

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