[Federal Register Volume 62, Number 151 (Wednesday, August 6, 1997)]
[Rules and Regulations]
[Pages 42209-42212]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20648]
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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).
[[Page 42210]]
SUPPLEMENTARY INFORMATION:
Background
Under 19 U.S.C. 1322, vehicles and other instruments of
international traffic are excepted from the application of the Customs
laws to such extent and subject to such terms and conditions as may be
prescribed in regulations or instructions of the Secretary of the
Treasury. The Customs Regulations issued under the authority of 19
U.S.C. 1322 are contained in Sec. 10.41a.
Instruments of international traffic so designated pursuant to
Sec. 10.41a may, as provided therein, be released without a Customs
entry which would otherwise be required. Such instruments are also
stated to be duty-free in subheading 9803.00.50, Harmonized Tariff
Schedule of the United States.
Section 10.41a(d) provides that if an instrument of foreign origin,
or of U.S.-origin that has been increased in value or improved in
condition by a process of manufacture or other means while abroad, is
released under Sec. 10.41a and is subsequently diverted to point-to-
point local traffic within the United States, or is otherwise withdrawn
from its use as an instrument of international traffic, it becomes
subject to entry and the payment of any applicable duty.
However, Sec. 10.41a(f) sets forth certain uses to which an
instrument of international traffic may properly be put in the United
States that would not constitute a diversion to unpermitted point-to-
point local traffic within the U.S. or a withdrawal from its use in
international traffic.
Specifically, Sec. 10.41a(f) provides that, except for the
application of the coastwise trade laws (see Sec. 4.93, Customs
Regulations (19 CFR 4.93)), no part of Sec. 10.41a precludes (1) the
use of an instrument in picking up and delivering loads at intervening
points in the United States while en route between the port of arrival
and the point of destination of its imported cargo, (2) the use of an
instrument while en route from such point of destination of imported
cargo to a point where export cargo is to be loaded or to an exterior
port of departure by a reasonably direct route to, or nearer to, the
place of such loading or departure, or (3) the use of a ``container''
as defined in the Customs Convention on Containers (together with its
normal accessories and equipment if imported therewith), when such
container arrives empty while en route between the port of arrival and
a point where export cargo is to be loaded or from that point to an
exterior port of departure by a reasonably direct route to, or nearer
to, the place of such loading or departure, provided that such point-
to-point traffic is incidental to the efficient and economical
utilization of the instrument in the course of its use in international
traffic.
By a document published in the Federal Register on October 4, 1996
(61 FR 51849), Customs proposed to amend Sec. 10.41a(f) so as to apply
only to instruments of international traffic other than containers as
defined in Article 1 of the Customs Convention on Containers, and to
add a new paragraph (g) to Sec. 10.41a, that would provide that such
containers would be deemed to remain in international traffic as long
as they exited the U.S. within 365 days of the date of their admission
to the U.S. This would be so regardless of the fact that the containers
engaged in point-to-point local traffic while in the United States
during this period.
This proposal was intended to simplify Customs treatment of
containers for both the public as well as Customs itself in that the
more difficult-to-apply requirements set forth in Sec. 10.41a(f) would
no longer apply to containers, these requirements constituting a
restrictive and cumbersome impediment to the efficient and economical
utilization of such containers while in the U.S.
Inasmuch as containers specially designed and equipped for carriage
by one or more modes of transport were duty-free under subheading
8609.00.00, Harmonized Tariff Schedule of the United States, Customs
expected little or no loss of revenue to the Government under the
proposal.
Eight comments were submitted in response to the notice of proposed
rulemaking, five of which fully supported the proposal. A discussion,
together with Customs analysis, of the questions raised about the
proposed rule appears below.
Discussion of Comments
Comment
One commenter believed that the proposal would permit a more
flexible use of railcars.
Customs Response
While Sec. 10.41a(g) will facilitate intermodal transportation
insofar as the domestic movement of the subject containers is
concerned, it must be emphasized that foreign railcars, which may
sometimes be used to transport such containers, are still governed by
the provisions of Sec. 123.12, Customs Regulations (19 CFR 123.12), as
to the permissible domestic traffic in which they may engage. Pursuant
to Article 1, section (b)(v), of the Customs Convention on Containers,
the term ``container'' expressly excludes vehicles. Thus, railcars are
not containers within the scope of, and are not covered by,
Sec. 10.41a(g).
Comment
One commenter suggested that Secs. 123.14 and 123.16, Customs
Regulations (19 CFR 123.14, 123.16), be amended to permit Canadian
tractors and trailers to engage in point-to-point local traffic within
the United States, similar to that permitted for containers in proposed
Sec. 10.41a(g).
Customs Response
Customs has this suggestion under consideration. Such a proposal
would be the subject of a separate publication in the Federal Register,
should Customs decide to proceed therewith.
Comment
One commenter requested that certain wooden containers, which were
capable of being enlarged by the use of removable sections, and were
used to import bearings, be included in proposed Sec. 10.41a(g).
Customs Response
Customs is satisfied that the wooden containers, which were
described in literature furnished by the commenter, fall within the
purview of Sec. 10.41a(g).
Comment:
Two commenters, on behalf of various container lessors, owners and
operators, raised a number of objections to proposed Sec. 10.41a(g).
Specifically, these commenters stated that requiring entry for
containers remaining in the U.S. in excess of the 365-day limit would
impose an onerous financial and paperwork burden on the container
owner, in terms of the administrative costs of tracking and monitoring
the subject containers, and making arrangements, if necessary, for
their entry.
Moreover, in the case of a leasing company, the 365-day limit would
be very difficult, or impossible, to comply with, because if a
container were on lease to a shipping line, the section leasing company
would not know when it entered the United States; and should the
container be returned to the leasing company by the shipping line, the
lessor would not know how much of the 365-day period had expired.
In addition, entry would be required for containers left in the
U.S. in excess of the 365-day period, even though they might have
remained unused at a depot during this time and thus posed no
competitive threat to any domestic or other transport.
[[Page 42211]]
To this latter end, it was declared that, from time to time, a
container could remain in the U.S. in excess of the 365-day limit, for
example, because of a reduced demand therefor, as in a recession, or
because the container had been stored/stacked in a manner which
precluded its ready accessibility (although one commenter remarked that
the time a container remained unused in this manner averaged only a few
days or weeks). In a recession, a leasing company's containers, rather
than those owned by a shipping company, were asserted to be more likely
to remain unused at a depot, since the shipper would rely on its own
containers during an economic slowdown, returning any leased containers
to the lessor.
Yet, notwithstanding these objections, the commenters stated that
they would nevertheless support proposed Sec. 10.41a(g) as long as they
had the option of continuing to operate under existing Sec. 10.41a(f).
Customs Response
Customs believes that Sec. 10.41a(g) significantly alleviates the
burden of tracking and monitoring containers otherwise imposed by
Sec. 10.41a(f), inasmuch as Sec. 10.41a(g) focuses solely on the dates
of a container's admission to, and subsequent exit from, the U.S. As
such, Sec. 10.41a(g) will simplify Customs administration of the
applicable statutory and regulatory authority, and, moreover, it will
better facilitate the domestic use of containers for the parties
concerned, by basically permitting their unrestricted, and hence more
efficient and economical, use within the U.S. In addition, the records
necessary to track and monitor the movements of containers under
Sec. 10.41a(g) are those that are otherwise generated and retained in
the ordinary course of business. A reference to this latter effect is
included in Sec. 10.41a(g)(2).
By contrast, as pointed out by the commenters who unreservedly
supported the amendment, Sec. 10.41a(f) has consumed unduly burdensome
amounts of time and effort expended in container tracking and
recordkeeping; has created much confusion and misunderstanding as to
which domestic uses of containers are or are not permitted thereunder;
and has caused an inefficient and uneconomical deployment of containers
and related facilities, resulting in higher costs for carriers and
shippers.
Consequently, Customs has concluded that containers as defined in
Article 1 of the Customs Convention on Containers will, as initially
proposed, be governed solely by Sec. 10.41a(g), in place of current
Sec. 10.41a(f) with its cumbersome restrictions in this regard.
Entry pursuant to Sec. 10.41a(g) would be required only when the
container remained in the U.S. in excess of the 365-day period, an
occurrence that should be relatively rare especially in the case of a
container remaining unused at a depot, given the fact that the time a
container so remains in the U.S. ordinarily averages at most only a few
weeks, as stated by one of the commenters. Thus, it fairly appears that
the container industry is already generally operating well within the
365-day limit.
Nevertheless, in light of the concerns expressed by the commenters
with respect to any possible revisions in their business practices that
may be incurred as a result of the adoption of Sec. 10.41a(g), Customs
has determined that the effec-tive date of the final rule should be
delayed for 120 days from the date of publication of this document in
the Federal Register, in order to mitigate any possible administrative
impact resulting from its implementation. In this respect, Customs
calculation of the 365-day period for subject containers already in the
United States would begin as of the aforementioned date without regard
to any prior time expended by the containers in this country.
Conclusion
In view of the foregoing, and following careful consideration of
the comments received and further review of the matter, Customs has
concluded that the proposed amendments should be adopted.
In addition, Sec. 10.41a(f)(1) is changed by adding a phrase which
makes clear that containers are no longer covered thereunder, and are
governed instead by Sec. 10.41a(g)(1)-(3); to this end, a cross
reference to Sec. 10.41a(g)(1)-(3) is also included in
Sec. 10.41a(f)(1).
Furthermore, the last sentence of Sec. 10.41a(g)(3), as proposed,
is changed, and an additional sentence is added thereafter, in order to
clarify and confirm that if any container is removed from international
traffic and thus becomes subject to entry under 19 U.S.C. 1484, the
determination of the value of the container for entry purposes must be
effected in the manner prescribed by the Customs valuation law (19
U.S.C. 1401a).
Regulatory Flexibility Act and Executive Order 12866
The amendments simplify the Customs treatment of containers for the
importing public in that the more difficult-to-apply requirements set
forth in Sec. 10.41a(f) will no longer apply to containers. As such,
pursuant to the provisions of the Regulatory Flexibility Act (5 U.S.C.
601 et seq.), it is certified that the amendments will not have a
significant economic impact on a substantial number of small entities.
Accordingly, these amendments are not subject to the regulatory
analysis or other requirements of 5 U.S.C. 603 or 604, nor do they
result in a ``significant regulatory action'' under E.O. 12866.
List of Subjects in 19 CFR Part 10
Alterations, Bonds, Customs duties and inspection, Exports,
Imports, Preference programs, Repairs, Reporting and recordkeeping
requirements, Trade agreements.
Amendments to the Regulations
Part 10, Customs Regulations (19 CFR part 10), is amended as set
forth below.
PART 10--ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE,
ETC.
1. The general authority for part 10 is revised, and the specific
authority for Sec. 10.41a continues, to read as follows:
Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized
Tariff Schedule of the United States (HTSUS)), 1321, 1481, 1484,
1498, 1508, 1623, 1624, 3314;
* * * * *
Sections 10.41, 10.41a, 10.107 also issued under 19 U.S.C. 1322;
* * * * *
2. Section 10.41a is amended by revising paragraph (f) to read as
follows; by redesignating paragraphs (g), (h) and (i), as (h), (i) and
(j), respectively; and adding a new paragraph (g) to read as follows:
Sec. 10.41a Lift vans, cargo vans, shipping tanks, skids, pallets, and
similar instruments of international traffic; repair components.
* * * * *
(f)(1) Except as provided in paragraph (j) of this section, 12 an
instrument of international traffic (other than a container as defined
in Article 1 of the Customs Convention on Containers that is governed
by paragraphs (g)(1)-(3) of this section) may be used as follows in
point-to-point traffic, provided such traffic is incidental to the
efficient and economical utilization of the instrument in the course of
its use in international traffic:
(i) Picking up and delivering loads at intervening points in the
United States while en route between the port of arrival and the point
of destination of its imported cargo; or
(ii) Picking up and delivering loads at intervening points in the
United States
[[Page 42212]]
while en route from the point of destination of imported cargo to a
point where export cargo is to be loaded or to an exterior port of
departure by a reasonably direct route to, or nearer to, the place of
such loading or departure.
(2) Neither use as enumerated in paragraph (f)(1)(i) or (ii) of
this section constitutes a diversion to unpermitted point-to-point
local traffic within the United States or a withdrawal of an instrument
in the United States from its use as an instrument of international
traffic under this section.
(g)(1) Except as provided in paragraph (j) of this section, a
container (as defined in Article 1 of the Customs Convention on
Containers) that is designated as an instrument of international
traffic is deemed to remain in international traffic provided that the
container exits the U.S. within 365 days of the date on which was
admitted under this section. An exit from the U.S. in this context
means a movement across the border of the United States into a foreign
country where either:
(i) All merchandise is unladen from the container; or
(ii) Merchandise is laden aboard the container (if the container is
empty).
(2) The person who filed the application for release under
paragraph (a)(1) of this section is responsible for keeping and
maintaining such records, otherwise generated and retained in the
ordinary course of business, as may be necessary to establish the
international movements of the containers. Such records shall be made
available for inspection by Customs officials upon reasonable notice.
(3) If the container does not exit the U.S. within 365 days of the
date on which it is admitted under this section, such container shall
be considered to have been removed from international traffic, and
entry for consumption must be made within 10 business days after the
end of the month in which the container is deemed removed from
international traffic. When entry is required under this section, any
containers considered removed from international traffic in the same
month may be listed on one entry. Such entry may be made at any port of
entry. Under 19 U.S.C. 1484(a)(1)(B), the importer of record is
required, using reasonable care, to complete the entry by filing with
Customs the declared value, classification and rate of duty applicable
to the merchandise. The importer of record must use the value of the
container as determined in accordance with section 402, Tariff Act of
1930 (19 U.S.C. 1401a), as amended by the Trade Agreements Act of 1979
(TAA).
* * * * *
George J. Weise,
Commissioner of Customs.
Approved: June 25, 1997.
John P. Simpson,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 97-20648 Filed 8-5-97; 8:45 am]
BILLING CODE 4820-02-P
