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

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.

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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).

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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point local traffic within the United States, or is otherwise withdrawn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.

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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

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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