[Federal Register Volume 62, Number 151 (Wednesday, August 6, 1997)]
[Rules and Regulations]
[Pages 42209-42212]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20648]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 10

[T.D. 97-69]
RIN 1515-AB79


Use of Containers Designated as Instruments of International 
Traffic in Point-to-Point Local Traffic

AGENCY: Customs Service, Department of the Treasury.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This document amends the Customs Regulations to provide that 
certain containers that are designated as instruments of international 
traffic are deemed to remain in international traffic provided they 
exit the United States within 365 days of the date on which they are 
admitted to the U.S. For the importing community as well as Customs, 
this amendment greatly simplifies the treatment of containers for 
Customs purposes regardless of their use in domestic commerce.

DATES: Effective: December 4, 1997.
    Compliance date: For containers subject to this rule that have 
already been admitted to the U.S. the 365-day period will begin on 
December 4, 1997, without regard to the time the containers were 
already in this country.

FOR FURTHER INFORMATION CONTACT:

    Legal aspects: Glen E. Vereb, Entry and Carrier Rulings Branch, 
(202-482-6940).
    Operational aspects: Eileen A. Kastava, Cargo Control, (202-927-
0983).

[[Page 42210]]

SUPPLEMENTARY INFORMATION:

Background

    Under 19 U.S.C. 1322, vehicles and other instruments of 
international traffic are excepted from the application of the Customs 
laws to such extent and subject to such terms and conditions as may be 
prescribed in regulations or instructions of the Secretary of the 
Treasury. The Customs Regulations issued under the authority of 19 
U.S.C. 1322 are contained in Sec. 10.41a.
    Instruments of international traffic so designated pursuant to 
Sec. 10.41a may, as provided therein, be released without a Customs 
entry which would otherwise be required. Such instruments are also 
stated to be duty-free in subheading 9803.00.50, Harmonized Tariff 
Schedule of the United States.
    Section 10.41a(d) provides that if an instrument of foreign origin, 
or of U.S.-origin that has been increased in value or improved in 
condition by a process of manufacture or other means while abroad, is 
released under Sec. 10.41a and is subsequently diverted to point-to-
point local traffic within the United States, or is otherwise withdrawn 
from its use as an instrument of international traffic, it becomes 
subject to entry and the payment of any applicable duty.
    However, Sec. 10.41a(f) sets forth certain uses to which an 
instrument of international traffic may properly be put in the United 
States that would not constitute a diversion to unpermitted point-to-
point local traffic within the U.S. or a withdrawal from its use in 
international traffic.
    Specifically, Sec. 10.41a(f) provides that, except for the 
application of the coastwise trade laws (see Sec. 4.93, Customs 
Regulations (19 CFR 4.93)), no part of Sec. 10.41a precludes (1) the 
use of an instrument in picking up and delivering loads at intervening 
points in the United States while en route between the port of arrival 
and the point of destination of its imported cargo, (2) the use of an 
instrument while en route from such point of destination of imported 
cargo to a point where export cargo is to be loaded or to an exterior 
port of departure by a reasonably direct route to, or nearer to, the 
place of such loading or departure, or (3) the use of a ``container'' 
as defined in the Customs Convention on Containers (together with its 
normal accessories and equipment if imported therewith), when such 
container arrives empty while en route between the port of arrival and 
a point where export cargo is to be loaded or from that point to an 
exterior port of departure by a reasonably direct route to, or nearer 
to, the place of such loading or departure, provided that such point-
to-point traffic is incidental to the efficient and economical 
utilization of the instrument in the course of its use in international 
traffic.
    By a document published in the Federal Register on October 4, 1996 
(61 FR 51849), Customs proposed to amend Sec. 10.41a(f) so as to apply 
only to instruments of international traffic other than containers as 
defined in Article 1 of the Customs Convention on Containers, and to 
add a new paragraph (g) to Sec. 10.41a, that would provide that such 
containers would be deemed to remain in international traffic as long 
as they exited the U.S. within 365 days of the date of their admission 
to the U.S. This would be so regardless of the fact that the containers 
engaged in point-to-point local traffic while in the United States 
during this period.
    This proposal was intended to simplify Customs treatment of 
containers for both the public as well as Customs itself in that the 
more difficult-to-apply requirements set forth in Sec. 10.41a(f) would 
no longer apply to containers, these requirements constituting a 
restrictive and cumbersome impediment to the efficient and economical 
utilization of such containers while in the U.S.
    Inasmuch as containers specially designed and equipped for carriage 
by one or more modes of transport were duty-free under subheading 
8609.00.00, Harmonized Tariff Schedule of the United States, Customs 
expected little or no loss of revenue to the Government under the 
proposal.
    Eight comments were submitted in response to the notice of proposed 
rulemaking, five of which fully supported the proposal. A discussion, 
together with Customs analysis, of the questions raised about the 
proposed rule appears below.

Discussion of Comments

Comment

    One commenter believed that the proposal would permit a more 
flexible use of railcars.

Customs Response

    While Sec. 10.41a(g) will facilitate intermodal transportation 
insofar as the domestic movement of the subject containers is 
concerned, it must be emphasized that foreign railcars, which may 
sometimes be used to transport such containers, are still governed by 
the provisions of Sec. 123.12, Customs Regulations (19 CFR 123.12), as 
to the permissible domestic traffic in which they may engage. Pursuant 
to Article 1, section (b)(v), of the Customs Convention on Containers, 
the term ``container'' expressly excludes vehicles. Thus, railcars are 
not containers within the scope of, and are not covered by, 
Sec. 10.41a(g).

Comment

    One commenter suggested that Secs. 123.14 and 123.16, Customs 
Regulations (19 CFR 123.14, 123.16), be amended to permit Canadian 
tractors and trailers to engage in point-to-point local traffic within 
the United States, similar to that permitted for containers in proposed 
Sec. 10.41a(g).

Customs Response

    Customs has this suggestion under consideration. Such a proposal 
would be the subject of a separate publication in the Federal Register, 
should Customs decide to proceed therewith.

Comment

    One commenter requested that certain wooden containers, which were 
capable of being enlarged by the use of removable sections, and were 
used to import bearings, be included in proposed Sec. 10.41a(g).

Customs Response

    Customs is satisfied that the wooden containers, which were 
described in literature furnished by the commenter, fall within the 
purview of Sec. 10.41a(g).

Comment:

    Two commenters, on behalf of various container lessors, owners and 
operators, raised a number of objections to proposed Sec. 10.41a(g).
    Specifically, these commenters stated that requiring entry for 
containers remaining in the U.S. in excess of the 365-day limit would 
impose an onerous financial and paperwork burden on the container 
owner, in terms of the administrative costs of tracking and monitoring 
the subject containers, and making arrangements, if necessary, for 
their entry.
    Moreover, in the case of a leasing company, the 365-day limit would 
be very difficult, or impossible, to comply with, because if a 
container were on lease to a shipping line, the section leasing company 
would not know when it entered the United States; and should the 
container be returned to the leasing company by the shipping line, the 
lessor would not know how much of the 365-day period had expired.
    In addition, entry would be required for containers left in the 
U.S. in excess of the 365-day period, even though they might have 
remained unused at a depot during this time and thus posed no 
competitive threat to any domestic or other transport.

[[Page 42211]]

    To this latter end, it was declared that, from time to time, a 
container could remain in the U.S. in excess of the 365-day limit, for 
example, because of a reduced demand therefor, as in a recession, or 
because the container had been stored/stacked in a manner which 
precluded its ready accessibility (although one commenter remarked that 
the time a container remained unused in this manner averaged only a few 
days or weeks). In a recession, a leasing company's containers, rather 
than those owned by a shipping company, were asserted to be more likely 
to remain unused at a depot, since the shipper would rely on its own 
containers during an economic slowdown, returning any leased containers 
to the lessor.
    Yet, notwithstanding these objections, the commenters stated that 
they would nevertheless support proposed Sec. 10.41a(g) as long as they 
had the option of continuing to operate under existing Sec. 10.41a(f).

Customs Response

    Customs believes that Sec. 10.41a(g) significantly alleviates the 
burden of tracking and monitoring containers otherwise imposed by 
Sec. 10.41a(f), inasmuch as Sec. 10.41a(g) focuses solely on the dates 
of a container's admission to, and subsequent exit from, the U.S. As 
such, Sec. 10.41a(g) will simplify Customs administration of the 
applicable statutory and regulatory authority, and, moreover, it will 
better facilitate the domestic use of containers for the parties 
concerned, by basically permitting their unrestricted, and hence more 
efficient and economical, use within the U.S. In addition, the records 
necessary to track and monitor the movements of containers under 
Sec. 10.41a(g) are those that are otherwise generated and retained in 
the ordinary course of business. A reference to this latter effect is 
included in Sec. 10.41a(g)(2).
    By contrast, as pointed out by the commenters who unreservedly 
supported the amendment, Sec. 10.41a(f) has consumed unduly burdensome 
amounts of time and effort expended in container tracking and 
recordkeeping; has created much confusion and misunderstanding as to 
which domestic uses of containers are or are not permitted thereunder; 
and has caused an inefficient and uneconomical deployment of containers 
and related facilities, resulting in higher costs for carriers and 
shippers.
    Consequently, Customs has concluded that containers as defined in 
Article 1 of the Customs Convention on Containers will, as initially 
proposed, be governed solely by Sec. 10.41a(g), in place of current 
Sec. 10.41a(f) with its cumbersome restrictions in this regard.
    Entry pursuant to Sec. 10.41a(g) would be required only when the 
container remained in the U.S. in excess of the 365-day period, an 
occurrence that should be relatively rare especially in the case of a 
container remaining unused at a depot, given the fact that the time a 
container so remains in the U.S. ordinarily averages at most only a few 
weeks, as stated by one of the commenters. Thus, it fairly appears that 
the container industry is already generally operating well within the 
365-day limit.
    Nevertheless, in light of the concerns expressed by the commenters 
with respect to any possible revisions in their business practices that 
may be incurred as a result of the adoption of Sec. 10.41a(g), Customs 
has determined that the effec-tive date of the final rule should be 
delayed for 120 days from the date of publication of this document in 
the Federal Register, in order to mitigate any possible administrative 
impact resulting from its implementation. In this respect, Customs 
calculation of the 365-day period for subject containers already in the 
United States would begin as of the aforementioned date without regard 
to any prior time expended by the containers in this country.

Conclusion

    In view of the foregoing, and following careful consideration of 
the comments received and further review of the matter, Customs has 
concluded that the proposed amendments should be adopted.
    In addition, Sec. 10.41a(f)(1) is changed by adding a phrase which 
makes clear that containers are no longer covered thereunder, and are 
governed instead by Sec. 10.41a(g)(1)-(3); to this end, a cross 
reference to Sec. 10.41a(g)(1)-(3) is also included in 
Sec. 10.41a(f)(1).
    Furthermore, the last sentence of Sec. 10.41a(g)(3), as proposed, 
is changed, and an additional sentence is added thereafter, in order to 
clarify and confirm that if any container is removed from international 
traffic and thus becomes subject to entry under 19 U.S.C. 1484, the 
determination of the value of the container for entry purposes must be 
effected in the manner prescribed by the Customs valuation law (19 
U.S.C. 1401a).

Regulatory Flexibility Act and Executive Order 12866

    The amendments simplify the Customs treatment of containers for the 
importing public in that the more difficult-to-apply requirements set 
forth in Sec. 10.41a(f) will no longer apply to containers. As such, 
pursuant to the provisions of the Regulatory Flexibility Act (5 U.S.C. 
601 et seq.), it is certified that the amendments will not have a 
significant economic impact on a substantial number of small entities. 
Accordingly, these amendments are not subject to the regulatory 
analysis or other requirements of 5 U.S.C. 603 or 604, nor do they 
result in a ``significant regulatory action'' under E.O. 12866.

List of Subjects in 19 CFR Part 10

    Alterations, Bonds, Customs duties and inspection, Exports, 
Imports, Preference programs, Repairs, Reporting and recordkeeping 
requirements, Trade agreements.

Amendments to the Regulations

    Part 10, Customs Regulations (19 CFR part 10), is amended as set 
forth below.

PART 10--ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE, 
ETC.

    1. The general authority for part 10 is revised, and the specific 
authority for Sec. 10.41a continues, to read as follows:

    Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized 
Tariff Schedule of the United States (HTSUS)), 1321, 1481, 1484, 
1498, 1508, 1623, 1624, 3314;
* * * * *
    Sections 10.41, 10.41a, 10.107 also issued under 19 U.S.C. 1322;
* * * * *
    2. Section 10.41a is amended by revising paragraph (f) to read as 
follows; by redesignating paragraphs (g), (h) and (i), as (h), (i) and 
(j), respectively; and adding a new paragraph (g) to read as follows:


Sec. 10.41a  Lift vans, cargo vans, shipping tanks, skids, pallets, and 
similar instruments of international traffic; repair components.

* * * * *
    (f)(1) Except as provided in paragraph (j) of this section, 12 an 
instrument of international traffic (other than a container as defined 
in Article 1 of the Customs Convention on Containers that is governed 
by paragraphs (g)(1)-(3) of this section) may be used as follows in 
point-to-point traffic, provided such traffic is incidental to the 
efficient and economical utilization of the instrument in the course of 
its use in international traffic:
    (i) Picking up and delivering loads at intervening points in the 
United States while en route between the port of arrival and the point 
of destination of its imported cargo; or
    (ii) Picking up and delivering loads at intervening points in the 
United States

[[Page 42212]]

while en route from the point of destination of imported cargo to a 
point where export cargo is to be loaded or to an exterior port of 
departure by a reasonably direct route to, or nearer to, the place of 
such loading or departure.
    (2) Neither use as enumerated in paragraph (f)(1)(i) or (ii) of 
this section constitutes a diversion to unpermitted point-to-point 
local traffic within the United States or a withdrawal of an instrument 
in the United States from its use as an instrument of international 
traffic under this section.
    (g)(1) Except as provided in paragraph (j) of this section, a 
container (as defined in Article 1 of the Customs Convention on 
Containers) that is designated as an instrument of international 
traffic is deemed to remain in international traffic provided that the 
container exits the U.S. within 365 days of the date on which was 
admitted under this section. An exit from the U.S. in this context 
means a movement across the border of the United States into a foreign 
country where either:
    (i) All merchandise is unladen from the container; or
    (ii) Merchandise is laden aboard the container (if the container is 
empty).
    (2) The person who filed the application for release under 
paragraph (a)(1) of this section is responsible for keeping and 
maintaining such records, otherwise generated and retained in the 
ordinary course of business, as may be necessary to establish the 
international movements of the containers. Such records shall be made 
available for inspection by Customs officials upon reasonable notice.
    (3) If the container does not exit the U.S. within 365 days of the 
date on which it is admitted under this section, such container shall 
be considered to have been removed from international traffic, and 
entry for consumption must be made within 10 business days after the 
end of the month in which the container is deemed removed from 
international traffic. When entry is required under this section, any 
containers considered removed from international traffic in the same 
month may be listed on one entry. Such entry may be made at any port of 
entry. Under 19 U.S.C. 1484(a)(1)(B), the importer of record is 
required, using reasonable care, to complete the entry by filing with 
Customs the declared value, classification and rate of duty applicable 
to the merchandise. The importer of record must use the value of the 
container as determined in accordance with section 402, Tariff Act of 
1930 (19 U.S.C. 1401a), as amended by the Trade Agreements Act of 1979 
(TAA).
* * * * *
George J. Weise,
Commissioner of Customs.

    Approved: June 25, 1997.
John P. Simpson,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 97-20648 Filed 8-5-97; 8:45 am]
BILLING CODE 4820-02-P