Warehouse Withdrawals; Aircraft Fuel Supplies; Pipeline Transportation in Bond of Merchandise

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Parts 10, 18 and 113

[T.D. 96-18]

RIN 1515-AB67

Warehouse Withdrawals; Aircraft Fuel Supplies; Pipeline

Transportation in Bond of Merchandise

AGENCY: Customs Service, Treasury.

ACTION: Notice of interim regulations, solicitation of comments.

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SUMMARY: The amendments contained in this document are being published

as interim regulations to implement certain statutory amendments to the

Customs laws regarding recordkeeping for merchandise transported by

pipeline and duty-free withdrawals from Customs bonded warehouses of

aircraft turbine fuel. These statutory amendments are contained in the

Customs modernization provisions of the North American Free Trade

Agreement Implementation Act. Also, the interim regulations clarify the

procedures applicable to aircraft turbine fuel which is withdrawn from

a Customs bonded warehouse for certain duty-free use and is commingled

with other lots of fuel before being so used.

DATES: Interim rule effective April 8, 1996; comments must be received

on or before March 25, 1996.

ADDRESSES: Written comments (preferably in triplicate) must be

submitted to U.S. Customs Service, ATTN: Regulations Branch, Franklin

Court, 1301 Constitution Avenue, NW., Washington, D.C. 20229, and may

be inspected at the Regulations Branch, 1099 14th Street, NW., Suite

4000, Washington, D.C.

FOR FURTHER INFORMATION CONTACT: William G. Rosoff, Office of

Regulations and Rulings, (202-482-7040).

SUPPLEMENTARY INFORMATION:

Background

On December 8, 1993, the President of the U.S. signed into law the

North American Free Trade Agreement Implementation Act (Pub. L. 103-

182, 107 Stat. 2057). Title VI of this Act, popularly known as the

Customs Modernization Act (the Act) amended certain Customs laws.

Section 664 of the Act amended the Customs laws by the insertion of a

new section 553a, Tariff Act of 1930 (19 U.S.C. 1553a), and section 665

of the Act amended section 557(a), Tariff Act of 1930, as amended (19

U.S.C. 1557(a)).

Under the new 19 U.S.C. 1553a, merchandise in Customs custody that

is transported by pipeline may be accounted for on a quantitative

basis. The term ``merchandise in Customs custody,'' is meant to

comprise bonded merchandise (e.g., merchandise which has not been

entered for consumption, including merchandise transported in bond,

merchandise from a Customs bonded warehouse, or merchandise from a

foreign trade zone) (see legislative history for this provision in

H.R.Rep.No. 103-361, 103d Cong., 1st Sess., Pt. 1, 150-151 (1993), and

S.Rep.No. 103-189, 103d Cong., 1st Sess., 97 (1993)). Section 1553a

[[Page 6773]]

provides for the use of the bill of lading or equivalent document of

receipt, issued by the pipeline carrier to the shipper and accepted by

the consignee, to account for the quantity of merchandise transported

and to maintain the identity of that merchandise. Unless Customs has

reasonable cause to suspect fraud, the provision authorizes Customs to

accept the bill of lading, or equivalent document of receipt, for this

purpose. Under 19 U.S.C. 1553a, the shipper, pipeline operator, and

consignee are subject to the recordkeeping requirements of sections 508

and 509, Tariff Act of 1930, as amended (19 U.S.C. 1508, 1509).

The background to, and reasons for, the addition of 19 U.S.C. 1553a

to the Customs laws are explained in the legislative history for the

Act (H.Rep.No. 361, ibid., and S.Rep.No. 189, ibid.). Currently, there

is no provision in the Customs laws or regulations governing the

transportation of bonded merchandise by pipeline. The general

provisions currently governing transportation in bond (entry for

immediate transportation and entry for transportation and exportation;

sections 552 and 553, Tariff Act of 1930, as amended (19 U.S.C. 1552,

1553)), do not authorize the commingling of bonded merchandise with

non-bonded merchandise in the transportation. Most merchandise

transported by pipeline is commingled and is susceptible to

quantitative accounting (see H.Rep.No. 189, ibid.). Analogous to the

amendment to 19 U.S.C. 1557(a) (discussed below), the new provision

permits the effective use of modern fuel transportation systems and

will reduce administrative costs and paperwork for the industry and the

Government.

Under the amendment to 19 U.S.C. 1557(a), turbine fuel may be

withdrawn from a Customs bonded warehouse for use under section 309,

Tariff Act of 1930, as amended (19 U.S.C. 1309), without the payment of

duty if an amount equal to the quantity of fuel withdrawn is shown to

be used as provided for in section 1309 within 30 days of withdrawal.

Under section 1309, in part, articles may be withdrawn from any Customs

bonded warehouse free of duty for supplies of foreign or U.S. vessels

or aircraft actually engaged in foreign trade or trade between the U.S.

and any of its possessions, or between Hawaii and any other part of the

U.S. or between Alaska and any other part of the U.S. Section 1309

contains an exception under which the provisions for free withdrawals

in that section are not applicable to petroleum products for vessels or

aircraft in voyages or flights exclusively between Hawaii or Alaska and

any airport or Pacific coast seaport of the U.S.

Under the amended 19 U.S.C. 1557(a), duties are required to be

deposited on turbine fuel which was withdrawn in excess of the quantity

shown to have been used under 19 U.S.C. 1309 during the 30-day period

following withdrawal of the fuel. Such duties must be deposited by the

40th day after the date of withdrawal of the fuel. Interest on the

duties is payable from the date of withdrawal.

The background to, and reasons for, the amendment to 19 U.S.C.

1557(a) are explained in the legislative history for the Act (H.Rep.No.

361, ibid., and S.Rep.No. 189, ibid.). According to these reports, the

nature of major airport fueling systems is that different lots (bonded,

imported, domestic, etc.) of turbine fuel are commingled in a common

hydrant system. Under the law and regulations before the amendment of

19 U.S.C. 1557(a), Customs considered withdrawal of fuel from storage

tanks at airports into the common hydrant system as withdrawal from

bonding. Therefore, in order for such bonded fuel to qualify for the

duty-free treatment authorized under 19 U.S.C. 1309, Customs required

daily accounting for the commingled bonded fuel.

According to the industry, identifying the turbine fuel which is

used for flights qualifying under 19 U.S.C. 1309 and that used for non-

qualifying flights at the time that turbine fuel is entered into the

common hydrant system is impracticable and, if possible, would result

in great administrative expense and excessive paperwork. Alternatively,

requiring multiple hydrant systems (for different lots of turbine fuel)

is physically impracticable at most airports and would also result in

great expense.

According to this legislative history, the amendment to 19 U.S.C.

1557(a) will permit the effective use of modern fueling systems at U.S.

airports. It will also permit the intended use of existing law (i.e.,

19 U.S.C. 1309) permitting the duty-free withdrawal of supplies for

qualifying aircraft. Further, it will substantially reduce

administrative costs and paperwork for the industry and administrative

costs for the Government.

Because Customs is aware of some confusion regarding the

possibility of similar treatment of turbine fuel removed from a foreign

trade zone for flights qualifying under 19 U.S.C. 1309, we are noting

in this document that there is no provision for foreign trade zones in

the Act similar to the amendment to 19 U.S.C. 1557(a) effected by

section 665 of the Act. It is true that the legislative history to

section 637 of the Act amending the statute governing formal entry (19

U.S.C. 1484) indicates that Congress intended that Customs, in

developing regulations for periodic entry, should allow for weekly and

monthly entries for merchandise shipments from general purpose foreign

trade zones and subzones (see H.Rep.No. 361, ibid., at 136). The

amendments effected by section 637 of the Act, however, are general

amendments regarding formal entry requirements and procedures, under

which amendments to the regulations governing formal entry (see parts

141, 142, and 143) are under consideration. By contrast, the sections

of the Act implemented by this document are specific provisions

relating to the subject matter of this document, and not to removals of

turbine fuel from foreign trade zones. As stated above, no such

provision (i.e., specifically governing removal from a foreign trade

zone of turbine fuel for use on qualifying flights under 19 U.S.C.

1309) was enacted in the Act. Therefore, because this document is

intended to implement the specific provisions effected by sections 664

and 665 of the Act, no specific provision is promulgated in this

document providing for periodic entries of turbine fuel removed from a

foreign trade zone for use on qualifying flights under 19 U.S.C. 1309.

(We do note, however, that the regulations implementing section 664 of

the Act may affect turbine fuel removed from a foreign trade zone and

transported by pipeline to the location where it may be loaded on

qualifying flights under 19 U.S.C. 1309.)

Pipeline Transportation in Bond

The Customs Regulations generally pertaining to the transportation

of merchandise in bond are currently found in part 18. These interim

regulations implement the new 19 U.S.C. 1553a by the addition to part

18 of a new Sec. 18.31. Generally, this new Sec. 18.31 provides that

merchandise may be transported by pipeline under the procedures

provided for in part 18, unless otherwise specifically provided. The

new Sec. 18.31 provides for the acceptance by Customs of a bill of

lading or equivalent document of receipt to account for the quantity of

merchandise transported and to maintain the identity of the

merchandise, under the circumstances provided in the statute (i.e., the

bill of lading or equivalent document of receipt must be issued by the

pipeline operator to the shipper and accepted by

[[Page 6774]]

the consignee and there must be no reasonable cause for Customs to

suspect fraud).

Basically, the new Sec. 18.31 adopts the current procedures for

transportation in bond, as applicable to pipeline transportation. That

is, generally, merchandise to be transported in bond between ports in

the U.S. is delivered to a common carrier, contract carrier, freight

forwarder, or private carrier bonded for that purpose. The carrier

prepares an in-bond document and takes receipt of the merchandise. The

in-bond document (which also serves as the transportation entry or

withdrawal), with receipt of the merchandise by the carrier noted

thereon, together with a Customs control card or carnet, is used as the

in-bond manifest for the merchandise to its port of destination.

Delivery of the merchandise at the port of destination is required

within 30 days after the date of receipt by the carrier at the port of

origin, or 60 days after such date if the merchandise is transported on

board a vessel engaged in the coastwise trade (except for transit air

cargo in which case 10 days is given, under Sec. 122.118). Within 2

days of arrival of the merchandise at the port of destination, the

delivering carrier is required to report the arrival to Customs by

surrendering the in-bond manifest to Customs at that port.

Under its bond, the initial carrier is responsible for any

shortage, irregular delivery, or nondelivery at the port of destination

or exportation. Specific provision is made for transshipment to one or

more other conveyances, diversion to a different port, the different

kinds of transportation entry or withdrawal which may be made (i.e.,

for immediate transportation, exportation, and transportation and

exportation), change of the foreign destination of merchandise entered

or withdrawn for transportation and exportation, retention of

merchandise on the dock, and the splitting of a shipment of merchandise

for exportation.

In addition to incorporating these general requirements, the new

Sec. 18.31 provides for the inclusion of the bill of lading or

equivalent document of receipt with the Customs in-bond document for

merchandise to be transported in bond by pipeline. Provided that there

are no discrepancies between the bill of lading or equivalent document

of receipt and the other documents making up the in-bond manifest for

the merchandise, and provided that Customs has no reasonable cause to

suspect fraud, the bill of lading or equivalent document of receipt is

to be accepted by Customs at the port of destination or exportation as

establishing the quantity and identity of the merchandise transported.

In cases in which the initial carrier transfers or transships

merchandise to another conveyance or carrier, the new Sec. 18.31

generally adopts the procedures in the current provision for

transshipment (Sec. 18.3). Basically, those procedures require the in-

bond document accompanying the merchandise to be presented to Customs

at the place of transshipment for execution of a certificate of

transfer on the document. The notated document then accompanies the

merchandise to its port of destination or exportation. If the

merchandise is to be transshipped to more than one conveyance,

additional copies of the in-bond document are required.

In addition to these procedures, the new Sec. 18.31 provides that,

if a pipeline is the initial carrier, a copy of the bill of lading or

equivalent document of receipt shall be delivered to the person in

charge of the conveyance to which the merchandise is transferred, and

if the merchandise is transferred to more than one conveyance, to the

person in charge of each of the conveyances. If the initial carrier is

not a pipeline, the new Sec. 18.31 provides for the delivery, along

with the in-bond document, of the bill of lading or equivalent document

of receipt issued by the pipeline operator to the shipper to the

appropriate Customs official at the port of destination or exportation.

As is currently provided in Sec. 18.3, the in-bond document will be

executed by Customs with the certificate of transfer in either case

(i.e., if a pipeline is the initial carrier or if the initial carrier

is not a pipeline).

The new Sec. 18.31 also makes it clear, as is currently provided in

part 18 (see Sec. 18.8), that the initial carrier is responsible for

any discrepancies, including shortages, irregular deliveries, or

nondeliveries at the port of destination or exportation. As provided in

19 U.S.C. 1553a, the new Sec. 18.31 provides that the shipper, pipeline

operator, and consignee are subject to the recordkeeping requirements

in 19 U.S.C. 1508 and 19 U.S.C. 1509, as provided in 19 CFR part 162.

To make it clear to the public that the Customs Regulations

pertaining to transportation in bond apply to transportation by

pipeline, the definition of ``common carrier'' in Sec. 18.1(a)(1) is

amended to specifically include a common carrier of merchandise owning

or operating a pipeline.

Withdrawal of Fuel From Warehouse

The Customs Regulations pertaining to the withdrawal of merchandise

from a Customs bonded warehouse are found in part 144. Under

Sec. 144.35, the withdrawal from warehouse of supplies and equipment

for vessels and aircraft are provided for in subpart D of part 144 and

Secs. 10.59 through 10.65. The latter contain specific provisions on

the duty-free treatment of supplies for foreign or U.S. vessels and

aircraft actually engaged in foreign trade under 19 U.S.C. 1309.

Pursuant to Sec. 10.59(d), although the provisions in Secs. 10.59

through 10.64 are written in terms of vessels, they are made applicable

to aircraft insofar as they may be so applicable. Specific provisions

for the withdrawal of fuel as supplies under 19 U.S.C. 1309 for vessels

or aircraft are provided in Sec. 10.62.

These interim regulations implement the amendment to 19 U.S.C.

1557(a) by the addition of a new Sec. 10.62b to part 10. Under the new

Sec. 10.62b, turbine fuel intended for use as supplies on aircraft

under 19 U.S.C. 1309 which is withdrawn from a Customs bonded warehouse

is entitled to duty-free treatment under 19 U.S.C. 1309 if an amount

equal to or exceeding the quantity of such fuel is established to have

been used on aircraft qualifying for duty-free treatment under 19

U.S.C. 1309 within 30 days after the withdrawal of the fuel from the

Customs bonded warehouse. For the procedures for such withdrawals,

Sec. 10.62b adopts the procedures now provided for in Secs. 10.59

through 10.65. Section 10.62b provides that withdrawals under that

provision shall be annotated to show the kind of withdrawal.

If less fuel than was withdrawn is used within 30 days of

withdrawal on qualifying aircraft, a withdrawal for consumption must be

filed and duties must be paid for the excess of fuel withdrawn over

that used on qualifying aircraft. The withdrawal for consumption must

be filed and the duties must be paid, with interest, by the 40th day

after the date of withdrawal of the fuel. Interest is calculated from

the date of withdrawal at the rate of interest established under 26

U.S.C. 6621.

The new Sec. 10.62b provides for two alternative ways of

establishing use by qualifying aircraft of fuel in an amount equal to

or exceeding the quantity of the fuel withdrawn under the provision.

In the first alternative, the person withdrawing the aircraft

turbine fuel submits records (e.g., ``uplift'' or refueling tickets)

prepared in the normal course of business effecting the transfer

[[Page 6775]]

to aircraft of fuel in an amount equal to or exceeding the quantity of

the fuel withdrawn which is not entered and on which duties are not

paid and objective evidence that the aircraft to which the fuel was

transferred were actually used in trade qualifying for the privileges

provided in 19 U.S.C. 1309. These records must identify the aircraft to

which the fuel is transferred by aircraft company name, flight number,

flight origin and destination, and date of flight, or other means of

identification satisfactory to Customs.

In the second alternative, the person withdrawing the aircraft

turbine fuel files a certification (documentary or electronic)

certifying: (1) The intended use under 19 U.S.C. 1309 of all of the

fuel withdrawn; (2) the transfer to qualifying aircraft within 30 days

of the date of withdrawal from warehouse of an amount of fuel equal to

or exceeding the quantity of the fuel withdrawn which is not entered

and on which duties are not paid; (3) the use of all aircraft onto

which the fuel, which is not entered and on which duties are not paid,

was uplifted in trade qualifying for treatment under 19 U.S.C. 1309;

and (4) that the person making the certification has evidence

(documentary or electronic) available for Customs inspection at a named

place which supports each of these statements. Under the second

alternative, the person making the certification must promptly provide

evidence supporting the claim, including the records described in the

other alternative means of establishing use of the fuel on a qualifying

aircraft (above), upon request by Customs. The records or certification

are required to be submitted to Customs by the 40th day after the date

of withdrawal of the fuel unless the fuel was withdrawn under a blanket

permit to withdraw, in which case the records or certification are

required to be submitted by the 40th day after all of the fuel covered

by the blanket permit has been withdrawn.

The new Sec. 10.62b provides for liquidated damages against the

person withdrawing turbine fuel under the section, under the provisions

of Sec. 113.62, for failure to account for such turbine fuel. Failure

to account for such turbine fuel includes: (1) The failure to file,

within 40 days from the date of withdrawal, a withdrawal for

consumption and pay applicable duty, with interest, on the quantity of

fuel withdrawn in excess of the quantity of fuel established to have

been used on qualifying aircraft within 30 days of withdrawal; (2) the

failure to timely file the evidence or certification, provided for in

the new Sec. 10.62b, establishing such use of the fuel which is not

entered and on which duties are not paid; or (3) the failure to

promptly provide, upon request by Customs, the evidence required to

support the claim for treatment under the new Sec. 10.62b. A conforming

amendment is made to Sec. 113.62, containing the basic importation and

entry bond conditions.

The new Sec. 10.62b provides that ``blanket'' withdrawals, under

existing regulations except as specifically provided in the provision,

may be used for withdrawals under this provision. Under a blanket

withdrawal, all or part of the merchandise entered into a warehouse may

be withdrawn, at different times if desired, without further Customs

approval (i.e., after approval of the blanket permit) (see 19 CFR

19.6(d)).

Because it is anticipated that blanket withdrawals will be the

predominant form of withdrawal under the amended 19 U.S.C. 1557(a) and

because of the need for certainty as to the time of withdrawal under

the amended 19 U.S.C. 1557(a), we are describing in detail the

requirements and procedures for blanket withdrawals under Sec. 10.62b.

As noted above, unless otherwise provided in Sec. 10.62b, these

procedures are provided for in existing regulations, specific

provisions of which are cited in the following description, along with

citations to the appropriate paragraphs in the new Sec. 10.62b.

As is true currently under Sec. 10.62, blanket withdrawals under

Sec. 10.62b may only be used when all of the turbine fuel in a Customs

bonded tank is intended only for loading duty-free as supplies on

aircraft qualifying for the privileges provided for in 19 U.S.C. 1309

(Sec. 10.62(a)). Unlike other blanket withdrawals (see Secs. 10.62(a)

and 19.6(d)(1)), turbine fuel withdrawn under these blanket withdrawal

procedures may be delivered at ports other than the port of withdrawal

(Sec. 10.62b(g)(2)).

Applications for permission for blanket withdrawals under

Sec. 10.62b are filed with Customs by the withdrawer on the warehouse

entry, or on the warehouse entry/entry summary when used as an entry

(Sec. 10.62b(g)(1)). The warehouse entry or entry/entry summary must be

annotated to indicate that permission for blanket withdrawal is sought

(Secs. 19.6(d)(1) and 10.62b(g)(1)). Customs acceptance of a properly

completed application for a blanket permit to withdraw constitutes

approval of the blanket permit to withdraw (Sec. 10.62b(g)(3)).

A copy of the approved blanket permit to withdraw is delivered to

the warehouse proprietor after which fuel may be withdrawn under the

terms of the permit (Sec. 10.62b(g)(4)). The blanket permit may be

revoked by Customs in favor of individual applications and permits if

the permit is found to be used for other purposes or if necessary to

protect the revenue or properly enforce any law or regulation

administered by Customs (Sec. 19.6(d)(1)). Withdrawals under an

approved blanket permit may be made without any further Customs

approval and are documented by the placement in the warehouse

proprietor's permit file folder of a copy of a commercially acceptable

document of receipt (such as a ``withdrawal ticket'') issued by the

warehouse proprietor, identified with a unique alpha-numeric code

(Secs. 19.6(d)(2) and 10.62b (g)(4) and (g)(5)). These documents of

receipt are required to contain the identity of the withdrawer,

identity of the warehouse and tank from which the fuel is withdrawn,

date of withdrawal, type of merchandise withdrawn, and quantity of

merchandise withdrawn (Sec. 10.62b(g)(5) (i) through (v)).

For blanket withdrawals, the date of withdrawal, for purposes of

calculating the 30-day period in which fuel must be used on qualifying

aircraft under 19 U.S.C. 1557(a), begins with the date on which

physical removal of the fuel from the warehouse commences

(Sec. 10.62b(g)(6)). That is, if removal of fuel begins at 10:00 PM on

``day one'' and is not completed until some time on ``day two'' or

later, all of the fuel must be used on qualifying aircraft within 30

days from ``day one'' to qualify for treatment under that provision.

If, within the 30-day period following withdrawal under a blanket

permit, less fuel is used on qualifying aircraft than was withdrawn, a

withdrawal for consumption must be filed and duties must be paid for

the excess of fuel withdrawn over that used on qualifying aircraft. As

provided by the amended 19 U.S.C. 1557(a) and these interim regulations

(Sec. 10.62b(e)), the withdrawal for consumption must be filed and the

duties must be paid, with interest, by the 40th day after the date of

withdrawal of the fuel.

When all of the fuel covered by an entry for which a blanket permit

to withdraw was issued has been withdrawn, the warehouse proprietor

prepares a blanket permit summary on a copy of Customs Form 7506 or a

form on the letterhead of the proprietor, bearing the words ``BLANKET

PERMIT SUMMARY'' in capital letters conspicuously printed or stamped in

the top margin (Secs. 19.6(d)(4) and 10.62b(g)(7)). The blanket permit

summary is required to provide an accounting of the disposition of the

merchandise covered by the blanket

[[Page 6776]]

permit by stating, in summary form, the unique alpha-numeric codes for,

and information required on the withdrawal documents, as well as the

identity of the warehouse entry to which the withdrawals are attributed

(Secs. 19.6(d)(4) and 10.62b(g)(7)). The warehouse proprietor is

required to certify on the blanket permit summary that the merchandise

listed therein was withdrawn in compliance with Secs. 10.62, 10.62b,

and 19.6(d) (Secs. 19.6(d)(4) and 10.62b(g)(8)). The blanket permit

summary is placed in the warehouse proprietor's permit file folder and

treated as provided in Sec. 19.12, regarding warehouse recordkeeping,

storage, and security requirements (Sec. 19.6(d)(4)).

By the 40th day after all of the fuel covered by the blanket permit

has been withdrawn, the person withdrawing aircraft turbine fuel is

required to submit to Customs either the records or the evidence

provided for in Sec. 10.62b(c) (Sec. 10.62b(d) and (g)(9)).

Discretionary authority is given to the port director to require

submission of a summary of these records or evidence, along with the

evidence required to establish use of fuel on qualifying aircraft, in

electronic form. Such submissions must be in a format compatible with

Customs systems (Sec. 10.62b(g)(9)).

The new Sec. 10.62b provides that the person withdrawing aircraft

turbine fuel from warehouse under the provision is subject to the

recordkeeping requirements in 19 U.S.C. 1508 and 19 U.S.C. 1509, as

provided for in part 162.

Conforming amendments are made to the general provisions for

withdrawal under 19 U.S.C. 1309 in Secs. 10.60 and 10.62. In the case

of the amendment to Sec. 10.60, the amendment concerns the general

requirement that supplies to be used at a port other than the port of

withdrawal from warehouse must be withdrawn on a withdrawal for

transportation in bond. The amendment makes it clear that this general

requirement is inapplicable in the case of withdrawals under the new

Sec. 10.62b. In the case of the amendment to Sec. 10.62, the amendment

alerts the public to the fact that there is an alternative provision

for aircraft turbine fuel withdrawn from warehouse, provided for in

Sec. 10.62b, to the general procedures and requirements for withdrawal

of bunker fuel under 19 U.S.C. 1309.

The interim regulation also promulgates by regulation, in the new

Sec. 10.62b, a position taken by Customs in interpretative rulings

regarding the commingling in a single hydrant fueling system of

aircraft turbine fuel from a Customs bonded warehouse with domestic or

other fuel when the fuel from the warehouse is intended for use under

19 U.S.C. 1309. Generally, under these rulings, dated October 20, 1989

(File: 221483), May 8, 1990 (File: 222258), and April 29, 1991 (File:

222914), Customs permitted such commingling if two basic conditions

were met. The first of these conditions was that the hydrant system

must be physically configured so that once the fuel from the warehouse

was introduced or commingled into the single hydrant system, it could

not be removed otherwise than by being pumped into aircraft. The second

of these conditions was that the commingled fuel must be accounted for

on the basis of a 24-hour accounting period (i.e., entry must be made

and duty paid for any quantity of the fuel from the warehouse which was

introduced into the hydrant system when a like quantity was not loaded

on aircraft qualifying for duty-free treatment under 19 U.S.C. 1309

within 24 hours of the introduction of the fuel from the warehouse into

the hydrant system). The rulings held that the requirement for

accounting on the basis of a 24-hour period meant that the fuel from

the warehouse introduced or commingled into the single hydrant system

must be loaded onto a qualifying aircraft in the same 24-hour period

(defined as a 24 hour period beginning at 12:01 a.m. and ending at

12:00 midnight). The legislative history for the amendment to 19 U.S.C.

1557(a), described above, recognized and confirmed the foregoing

Customs interpretations of the then applicable law and regulations.

As stated above, the position taken in these rulings is implemented

in the new Sec. 10.62b. Paragraph (a) of that section contains a

provision making the position taken in these rulings the general rule.

That is, paragraph (a) provides that, unless otherwise provided (the

provision for withdrawal from warehouse under the amended 19 U.S.C.

1557(a), provided for in the other paragraphs of Sec. 10.62b, does, of

course, otherwise provide), aircraft turbine fuel withdrawn from a

Customs bonded warehouse for use under 19 U.S.C. 1309 may be commingled

with domestic or other aircraft turbine fuel only upon approval by the

authorized Customs official. Customs approval for such commingling

would have to be obtained under the appropriate provisions in the

Customs Regulations (subpart D of part 144).

Under paragraph (a) of Sec. 10.62b, the authorized Customs official

may approve such commingling if the fueling system in which the

commingling occurs contains physical safeguards preventing the possible

unauthorized entry into the Customs territory of the fuel. The

commingled fuel must be accounted for in the same 24-hour period in

which it was commingled and must be exported or used under 19 U.S.C.

1309 within that 24-hour period or entered or withdrawn for

consumption, with duty deposited, as required under the appropriate

regulations (see part 144). As noted above, the specific provision for

the duty-free withdrawal of aircraft turbine fuel from a Customs bonded

warehouse if the fuel is used on an aircraft qualifying for duty-free

treatment under 19 U.S.C. 1309, provided for in the amendment to 19

U.S.C. 1557(a) and paragraphs (b) through (h) of Sec. 10.62b, is an

exception from the above-described general rule.

Delayed Effective Date and Public Comment Requirements

The agency intends that these interim regulations will become

effective on the 45th day following the date of publication, i.e., 15

days after the close of the comment period. The agency believes it has

good cause under 5 U.S.C. 553(b)(B) and 553(d) (1) and (3) of the

Administrative Procedure Act (APA) (5 U.S.C. 553) to promulgate interim

regulations because the regulations provide an immediate benefit to

both the Government and the public by reducing administrative costs and

paperwork pursuant to specific statutory authority. These interim

regulations are intended to implement Congressional intent embodied in

sections 553a and 557(a), Tariff Act of 1930, as amended (19 U.S.C.

1553a and 1557(a)), and specifically stated in the legislative history

to those provisions, as described above.

Furthermore, existing rights and obligations are not changed

otherwise than as authorized by the new statutory provisions. The

agency believes that the affected public wants these new statutory

provisions to become effective as soon as possible so that the public

can benefit from the efficiencies and savings resulting therefrom. In

addition, the agency does not believe the public needs time to conform

its conduct so as to avoid violation of these regulations (i.e.,

because the new provisions are permissive, not restrictive). The due

and timely execution of the agency's responsibilities would be

unnecessarily impeded by a time consuming notice and comment period.

The agency believes such delay is unnecessary because it does not

expect the public to object to the regulations being promulgated as

they merely provide the relief that Congress intended.

Even though, based on the discussion set forth above, Customs

believes the

[[Page 6777]]

amendments in this document may be promulgated on an interim basis and

could be effective immediately, Customs is providing a 45-day delayed

effective date, with a 30-day comment period preceding that effective

date. This represents a practical compromise between the need for

temporal urgency and the desirability for public participation in the

rulemaking process.

In the spirit of the APA, the agency is soliciting public comment

regarding both the substance of these interim regulations and Customs

decision to promulgate these regulations on an interim basis with the

effective date delayed for that period of time necessary to review any

relevant comments. Unless the comments show that there exists good

cause for not making the regulations effective on an interim basis, the

regulations will become effective on an interim basis on the 45th day

following the date of publication.

Comments

Consequently, the agency hereby solicits comments on both the

substance of these regulations and their intended effective date. The

comments should clearly state whether they address the substance of the

interim rule or the agency's determination to make the rule effective

on an interim basis. If, based on the comments, good cause is shown

that the regulations should not become effective on an interim basis, a

document will be issued withdrawing the interim regulations before

their effective date. If no such good cause is shown, the interim

regulations will go into effect. The agency will then be able to gain

experience with the interim regulation, fully consider substantive

comments, and decide whether the interim regulation needs amendment

before its promulgation as a final rule. All substantive comments

received timely will be considered and will be addressed in the final

rule document.

Consideration will be given to any written comments (preferably in

triplicate) that are timely submitted to Customs. All such comments

received from the public pursuant to this notice of rulemaking will be

available for public inspection in accordance with the Freedom of

Information Act (5 U.S.C. 552), Sec. 1.4, Treasury Department

Regulations (31 CFR 1.4), and Sec. 103.11(b), Customs Regulations (19

CFR 103.11(b)), during regular business days between the hours of 9:00

a.m. and 4:30 p.m. at the Regulations Branch, 1099 14th Street, NW.,

Suite 4000, Washington, D.C.

Regulatory Flexibility Act and Executive Order 12866

Since this document is not subject to the notice and public

procedure requirements of 5 U.S.C. 553, it is not subject to the

provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).

This document is not a ``significant regulatory action'' under E.O.

12866.

Paperwork Reduction Act

This regulation is being issued without prior notice and public

procedure pursuant to the Administrative Procedure Act (5 U.S.C. 553).

For this reason, the collection of information contained in this

regulation has been reviewed and, pending receipt and evaluation of the

public comments, approved by the Office of Management and Budget (OMB)

in accordance with the requirements of the Paperwork Reduction Act (44

U.S.C. 2507) under control number 1515-0209.

The collection of information in this regulation is in Sec. 10.62b.

This information is required by Customs to ensure compliance with the

statute authorizing the described procedure. This information will be

used to verify that turbine fuel withdrawn from a Customs bonded

warehouse under 19 U.S.C. 1557(a) is used on aircraft qualifying for

duty-free withdrawal of fuel supplies, as required under the law. The

likely recordkeepers are businesses.

Estimated total annual reporting and/or recordkeeping burden: 240

hours.

Estimated average annual burden hours per recordkeeper: 12 hours.

Estimated number of respondents and/or recordkeepers: 20.

Estimated annual frequency of responses: 12.

Comments concerning the collection of information and the accuracy

of the estimated average annual burden, and suggestions for reducing

this burden should be directed to the Office of Management and Budget

(OMB), Attention: Desk Officer for the Department of the Treasury,

Office of Information and Regulatory Affairs, Washington, D.C. 20503. A

copy should also be sent to the Regulations Branch, Office of

Regulations and Rulings, U.S. Customs Service, 1301 Constitution

Avenue, N.W., Washington, D.C. 20229.

Drafting Information

The principal author of this document was Paul G. Hegland, Entry

Rulings Branch, U.S. Customs Service. However, personnel from other

offices participated in its development.

List of Subjects

19 CFR Part 10

Customs duties and inspection, Exports, Imports, Reporting and

recordkeeping requirements, Shipments.

19 CFR Part 18

Bonded transportation, Common carriers, Customs duties and

inspection, Exports, Imports.

19 CFR Part 113

Common carriers, Customs duties and inspection, Exports, Freight,

Laboratories, Reporting and recordkeeping requirements, Surety bonds.

Amendments

Title 19, Chapter I, parts 10, 18 and 113 of the Customs

Regulations (19 CFR parts 10, 18 and 113) are amended as set forth

below:

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

ETC.

1. The general authority for part 10 continues to read as follows,

and specific authority, for new Sec. 10.62b, is added 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;

* * * * *

Sec. 10.62b also issued under 19 U.S.C. 1557;

* * * * *

2. Section 10.60 is amended by revising the first sentence of

paragraph (d) to read as follows:

Sec. 10.60 Forms of withdrawals; bond.

* * * * *

(d) Except as otherwise provided in Sec. 10.62b, relating to

withdrawals from warehouse of aircraft turbine fuel to be used within

30 days of such withdrawal as supplies on aircraft under Sec. 309,

Tariff Act of 1930, as amended, when the supplies are to be laden at a

port other than the port of withdrawal from warehouse, they shall be

withdrawn for transportation in bond to the port of lading. * * *

* * * * *

3. Section 10.62 is amended by revising the first sentence of

paragraph (a) to read as follows:

Sec. 10.62 Bunker fuel oil.

(a) Withdrawal under section 309, Tariff Act of 1930, as amended

(19 U.S.C. 1309). Except as otherwise provided in Sec. 10.62b, relating

to withdrawals from warehouse of aircraft

[[Page 6778]]

turbine fuel to be used within 30 days of such withdrawal as supplies

on aircraft under section 309, Tariff Act of 1930, as amended (19

U.S.C. 1309), when all the bunker fuel oil in a Customs bonded tank is

intended only for lading duty free as supplies on vessels under section

309 at the port where the tank is located, delivery of the oil, by

Customs bonded carrier, cartman, or lighterman (including bonded

pipelines), under withdrawals on Customs Form 7506, either single or

blanket, may be made without the presence of a Customs officer. * * *

* * * * *

4. Section 10.62b is added to read as follows:

Sec. 10.62b Aircraft turbine fuel.

(a) General. Unless otherwise provided, aircraft turbine fuel

withdrawn from a Customs bonded warehouse for use under section 309,

Tariff Act of 1930, as amended (19 U.S.C. 1309), may be commingled with

domestic or other aircraft turbine fuel after such withdrawal only if

such commingling is approved by the appropriate Customs official for

the port where the commingling occurs. The appropriate Customs official

may approve such commingling if the fueling system in which the

commingling will occur contains adequate physical safeguards to prevent

the possible unauthorized entry into the Customs territory of the

bonded fuel. Such commingled fuel must be accounted for in the same 24-

hour period in which it was commingled and must be--

(1) Exported within that 24-hour period;

(2) Used under section 309 within that 24-hour period; or

(3) Entered or withdrawn for consumption, with duty deposited, as

required under the applicable regulations (see part 144 of this

chapter).

(b) Duty-free withdrawal from warehouse of aircraft turbine fuel

under section 557(a), Tariff Act of 1930, as amended (19 U.S.C.

1557(a)). Turbine fuel intended for use as supplies on aircraft under

section 309, Tariff Act of 1930, as amended, and withdrawn from a

Customs bonded warehouse shall be entitled to the privileges provided

for in section 309 if an amount equal to or exceeding the quantity of

such fuel is established, as provided for in paragraph (c) of this

section, to have been used on aircraft qualifying for the privileges

provided for in section 309 within 30 days after the withdrawal of the

fuel from the Customs bonded warehouse. Withdrawal of aircraft turbine

fuel under this paragraph shall be in accordance with the procedures in

Secs. 10.59 through 10.64, unless otherwise provided in this section.

Withdrawals under this paragraph shall be annotated with the term

``Withdrawal under 19 CFR 10.62b(b)''.

(c) Establishment of use of fuel by qualifying aircraft.

(1) The person withdrawing aircraft turbine fuel under paragraph

(b) of this section shall establish that an aircraft qualifying for the

privileges provided for in section 309, Tariff Act of 1930, as amended,

used fuel in an amount equal to or exceeding the quantity of the fuel

withdrawn which is not entered and upon which duties are not paid by

submitting to Customs, within the time provided in paragraph (d) of

this section, either--

(i) Records prepared in the normal course of business effecting the

transfer to identified (e.g., by aircraft company name, flight number,

flight origin and destination, and date of flight) aircraft of fuel in

an amount equal to or exceeding the quantity of the fuel withdrawn

which is not entered and on which duties are not paid and objective

evidence that the aircraft to which the fuel was transferred were

actually used in trade qualifying for the privileges provided in

section 309, Tariff Act of 1930, as amended; or

(ii) A certification (documentary or electronic) that:

(A) All of the fuel withdrawn was intended for use on aircraft

entitled to the privileges provided for in section 309;

(B) Within 30 days of the date of withdrawal from warehouse, an

amount of fuel equal to or exceeding the quantity of the fuel withdrawn

which is not entered and on which duties are not paid was transferred

as supplies to aircraft entitled to the privileges provided for in

section 309;

(C) All of the aircraft, to which the fuel which is not entered and

on which duties are not paid was transferred as supplies, were used in

a trade provided for in section 309; and

(D) The person making the certification possesses evidence

(documentary or electronic) available for Customs inspection at a named

place which supports each of the above statements.

(2) Upon request by Customs, the person who submits the

certification provided for in paragraph (c)(1) of this section shall

promptly provide the evidence required to support the claim for

treatment under this section (including the records described in

Sec. 10.62b(c)(1)(i)) and Secs. 10.62 and 19.6(d) and each of the

statements in the certification.

(d) Time for establishment of use of fuel by qualifying aircraft.

The person withdrawing aircraft turbine fuel under paragraph (b) of

this section shall submit the records or certification provided for in

paragraph (c) of this section by the 40th day after the date of

withdrawal of the fuel unless the fuel was withdrawn under a blanket

withdrawal under paragraph (g) of this section. If the fuel was

withdrawn under a blanket withdrawal, the person withdrawing aircraft

turbine fuel under this section shall submit the records or

certification provided for in paragraph (c) of this section by the 40th

day after all of the fuel covered by the blanket permit to withdraw has

been withdrawn.

(e) Treatment of turbine fuel withdrawn but not used on qualifying

aircraft within 30 days. If turbine fuel is withdrawn from a Customs

bonded warehouse under paragraph (b) of this section but fuel in an

amount less than the quantity withdrawn is established to have been

used within 30 days of the date of withdrawal from warehouse on

aircraft qualifying for the privileges provided for in section 309,

Tariff Act of 1930, as amended, a withdrawal for consumption shall be

filed and duties shall be deposited for the excess of fuel so withdrawn

over that used on aircraft so qualifying. Such withdrawal shall be

filed and such duties shall be deposited by the 40th day after the date

of withdrawal of the fuel in accordance with the procedures in

Sec. 144.38 of this chapter. Interest shall be payable and deposited

with such duties, calculated from the date of withdrawal at the rate of

interest established under 26 U.S.C. 6621.

(f) Liquidated damages. Failure to account for turbine fuel

withdrawn under paragraphs (b) through (h) of this section shall result

in liquidated damages against the person withdrawing the turbine fuel,

as provided for under Sec. 113.62 of this chapter. Such failure to

account for turbine fuel includes:

(1) The failure to timely file the withdrawal for consumption and

payment of duty, with interest, on the quantity of fuel so withdrawn in

excess of the quantity of fuel established to have been used on

qualifying aircraft within 30 days of withdrawal, as provided for in

paragraph (e) of this section;

(2) The failure to timely file the evidence or certification

establishing such use of the fuel which is not entered and on which

duties are not paid, as provided for in paragraph (c) of this section;

or

[[Page 6779]]

(3) The failure to promptly provide the evidence required to

support the claim for treatment under paragraph (b) of this section,

upon request by Customs, as provided for in paragraph (c)(2) of this

section.

(g) Blanket withdrawals. Blanket withdrawals, as provided for in

Secs. 10.62 and 19.6(d), may be used for withdrawals from warehouse

under section 557(a), Tariff Act of 1930, as amended, and paragraphs

(b) through (h) of this section, under the procedures provided in

Secs. 10.62 and 19.6(d) except that--

(1) Application by the withdrawer for a blanket permit to withdraw

shall be on the warehouse entry, or on the warehouse entry/entry

summary when used as an entry, annotated with the words ``Some or all

of the merchandise will be withdrawn under blanket permit per

Secs. 10.62, 10.62b, and 19.6(d).'';

(2) Turbine fuel withdrawn under a blanket permit as authorized in

this paragraph may be delivered at a port other than the port of

withdrawal;

(3) Customs acceptance of a properly completed application for a

blanket permit to withdraw, on the warehouse entry or warehouse entry/

entry summary, will constitute approval of the blanket permit to

withdraw;

(4) A copy of the approved blanket permit to withdraw will be

delivered to the warehouse proprietor, whereupon fuel may be withdrawn

under the terms of the blanket permit;

(5) The withdrawal document to be placed in the proprietor's permit

file folder (see Sec. 19.6(d)(2)) will be a commercially acceptable

document of receipt (such as a ``withdrawal ticket'') issued by the

warehouse proprietor, identified with a unique alpha-numeric code and

containing the following information:

(i) Identity of withdrawer;

(ii) Identity of warehouse and tank from which fuel is withdrawn;

(iii) Date of withdrawal;

(iv) Type of merchandise withdrawn; and

(v) Quantity of merchandise withdrawn.

(6) The date of withdrawal, for purposes of calculating the 30-day

period in which fuel must be used on qualifying aircraft under this

section, shall be the date on which physical removal of the fuel from

the warehouse commences;

(7) The blanket permit summary prepared by the proprietor as

provided for in Sec. 19.6(d)(4) shall be prepared when all of the fuel

covered by the blanket permit has been withdrawn and shall account for

all merchandise withdrawn under the blanket permit, as required by

Sec. 19.6(d)(4), by stating, in summary form, the unique alpha-numeric

codes and information required in paragraph (g)(5) of this section, as

well as the identity of the warehouse entry to which the withdrawal is

attributed;

(8) The certification on the blanket permit summary (see

Sec. 19.6(d)(4)) shall be that the merchandise listed thereunder was

withdrawn in compliance with Secs. 10.62, 10.62b, and 19.6(d); and

(9) The person withdrawing aircraft turbine fuel under these

blanket procedures shall submit the records or certification provided

for in Sec. 10.62b(c) by the 40th day after all of the fuel covered by

the blanket permit has been withdrawn (see Sec. 10.62b(d)). At the

discretion of the port director for the port where blanket withdrawal

was approved, submission of the records and evidence required to

establish use of the fuel on qualifying aircraft may be required to be

submitted electronically, in a format compatible with Customs

electronic record-keeping systems.

(h) Recordkeeping. The person withdrawing aircraft turbine fuel

from warehouse under this section is subject to the recordkeeping

requirements in 19 U.S.C. 1508 and 1509, as provided for in part 162 of

this chapter.

PART 18--TRANSPORTATION IN BOND AND MERCHANDISE IN TRANSIT

1. The general authority for part 18 is revised to read, and

specific authority for new Sec. 18.31 is added, as follows:

Authority: 5 U.S.C. 301, 19 U.S.C. 66, 1202 (General Note 20,

HTSUS), 1551, 1552, 1553, 1624;

* * * * *

Sec. 18.31 also issued under 19 U.S.C. 1553a.

2. Section 18.1 is amended by revising the second sentence of

paragraph (a)(1) to read as follows:

Sec. 18.1 Carriers, application to bond.

(a)(1) * * * For the purposes of this section, the term ``common

carrier'' means a common carrier of merchandise owning or operating a

railroad, steamship, pipeline, or other transportation line or route. *

* *

* * * * *

3. Part 18 is amended by adding a center heading and new

Sec. 18.31, following Sec. 18.27, to read as follows:

Merchandise Transported by Pipeline

Sec. 18.31 Pipeline transportation of bonded merchandise.

(a) General. Merchandise may be transported by pipeline under the

procedures in this part, as appropriate and unless otherwise

specifically provided for in this section.

(b) Bill of lading to account for merchandise. Unless Customs has

reasonable cause to suspect fraud, Customs shall accept a bill of

lading or equivalent document of receipt issued by the pipeline

operator to the shipper and accepted by the consignee to account for

the quantity of merchandise transported by pipeline and to maintain the

identity of the merchandise.

(c) Procedures when pipeline is only carrier. When a pipeline is

the only carrier of bonded merchandise and there is no transfer to

another carrier, the bill of lading or equivalent document of receipt

issued by the pipeline operator to the shipper shall be included with,

and made a part of, the Customs in-bond document (see Sec. 18.2(b)). If

there are no discrepancies between the bill of lading or equivalent

document of receipt and the other documents making up the in-bond

manifest for the merchandise, and provided that Customs has no

reasonable cause to suspect fraud, the bill of lading or equivalent

document of receipt shall be accepted by Customs at the port of

destination or exportation (see Secs. 18.2(d) and 18.7) as establishing

the quantity and identity of the merchandise transported. The pipeline

operator shall be responsible for any discrepancies, including

shortages, irregular deliveries, or nondeliveries at the port of

destination or exportation (see Sec. 18.8).

(d) Procedures when there is more than one carrier (i.e., transfer

of the merchandise).

(1) Pipeline as initial carrier. When a pipeline is the initial

carrier of bonded merchandise and the merchandise is transferred to

another conveyance (either a different mode of transportation or a

pipeline operated by another operator), the procedures in Sec. 18.3 and

paragraph (c) of this section shall be followed, except that--

(i) When the merchandise is to be transferred to one conveyance, a

copy of the bill of lading or equivalent document issued by the

pipeline operator to the shipper shall be delivered to the person in

charge of the conveyance for delivery, along with the in-bond document,

to the appropriate Customs official at the port of destination or

exportation; or

(ii) When the merchandise is to be transferred to more than one

conveyance, a copy of the bill of lading or equivalent document issued

by the pipeline operator to the shipper shall be delivered to the

person in charge of each additional conveyance, along with the two

additional copies of the in-bond

[[Page 6780]]

document, for delivery to the appropriate Customs official at the port

of destination or exportation.

(2) Transfer to pipeline from initial carrier other than a

pipeline. When bonded merchandise initially transported by a carrier

other than a pipeline is transferred to a pipeline, the procedures in

Sec. 18.3 and paragraph (c) of this section shall be followed, except

that the bill of lading or other equivalent document of receipt issued

by the pipeline operator to the shipper shall be delivered, along with

the in-bond document, to the appropriate Customs officer at the port of

destination or exportation.

(3) Initial carrier liable for discrepancies. In the case of either

paragraph (d)(1) or (d)(2) of this section, the initial carrier shall

be responsible for any discrepancies, including shortages, irregular

deliveries, or nondeliveries, at the port of destination or exportation

(see Sec. 18.8).

(e) Recordkeeping. The shipper, pipeline operator, and consignee

are subject to the recordkeeping requirements in 19 U.S.C. 1508 and

1509, as provided for in part 162 of this chapter.

PART 113--CUSTOMS BONDS

1. The general authority for part 113 continues to read as follows:

Authority: 19 U.S.C. 66, 1623, 1624.

2. Section 113.62 is amended by revising the paragraph (b)

introductory text to read as follows:

Sec. 113.62 Basic importation and entry bond conditions.

* * * * *

(b) Agreement to Make or Complete Entry. If all or part of imported

merchandise is released before entry under the provisions of the

special delivery permit procedures under 19 U.S.C. 1448(b), released

before completion of the entry under 19 U.S.C. 1484(a), or withdrawn

from warehouse under 19 U.S.C. 1557(a) (see Sec. 10.62b of this

chapter), the principal agrees to file within the time and in the

manner prescribed by law and regulation, documentation to enable

Customs to: * * *

* * * * *

Michael H. Lane,

Acting Commissioner of Customs.

Approved: October 4, 1995.

John P. Simpson,

Deputy Assistant Secretary of the Treasury.

[FR Doc. 96-3905 Filed 2-21-96; 8:45 am]

BILLING CODE 4820-02-P