[Federal Register Volume 61, Number 36 (Thursday, February 22, 1996)]
[Rules and Regulations]
[Pages 6772-6780]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3905]
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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procedures applicable to aircraft turbine fuel which is withdrawn from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
