HQ 110965: Canadian Rail Cars; International Traffic

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 110965

                          July 9, 1990

BOR-7-03-CO:R:P:C 110965 GV

CATEGORY:  Carriers

Michael F. Mitri, Esq.
Donohue and Donohue
1177 Summer Street
Stamford, Connecticut 06905

RE:  Canadian Rail Cars; International Traffic

Dear Mr. Mitri:

     This is in response to your letter dated March 27, 1990,
on behalf of Exxon Chemical Americas ("ECA"), requesting a ruling
to determine the dutiability of rail cars under 19 CFR 123.12(a).

FACTS:

     ECA plans to import chemical resins from Canada in rail cars
for delivery to its U.S. customers.  ECA will be the importer of
record, although particular customers of ECA may be listed on the
transportation documents as the ultimate consignees.  The rail
cars are owned or leased by Esso Chemical Canada ("ECC"), an
affiliate of ECA.  The cars are of either Canadian or U.S.
manufacture, and those cars produced in the U.S. have been
formally entered and cleared through Canadian Customs.  The cars
are used by ECC primarily for local traffic in Canada and will be
used on shipments to the U.S., to be returned to Canada promptly
after unloading.

     The rail cars will be loaded with resin at ECC's plant in
Sarnia, Ontario, Canada.  The route which the cars will take from
the plant to the U.S. will almost always (i.e., approximately 95%
of the time) be as follows:  in Canada, the cars will be routed
over the Canadian National Railroad and will cross the border
into the U.S. at Port Huron, Michigan.  In the U.S., they will
travel over the Grand Trunk Western Railway from Port Huron to
South Bend, Indiana and then will be transported by Conrail to
East St. Louis, Missouri.  This route is subject to modification
when required by U.S. customers.

     In East St. Louis, the rail cars will be temporarily stored
at ECA's lease track prior to final delivery to the U.S.
customer.  Normally, the cars will be shipped to the customer
within 2 to 4 weeks after arrival, although occasionally cars may
                              - 2 -

remain at the lease track for up to 6 months due to lack of
customer demand, product supply, or other reasons.  Also, in some
cases, ECA may be required to direct the cars from the lease
track to U.S. customers other than those initially named as
consignees.  However, in all cases, the cars will not be unloaded
until they reach their final U.S. destination.

     After unloading at the customer's site, the rail cars will
be returned empty to ECC's plant in Sarnia.  Most cars will be
"reverse-routed" through Port Huron on the outward trip, although
cars which have been delivered to customers in outlying areas of
the U.S. may cross the Canadian border at other points.  In all
cases, the cars will depart promptly and will travel by the most
economical and direct route available.  ECA does not anticipate
that any of the subject rail cars will be used for local U.S.
traffic on the return to Canada.  Any such local use would in all
cases be consistent with the cars' economical and prompt return
to Canada.

ISSUE:

     Whether the use of foreign railroad equipment as described
above constitutes an engagement in local traffic in violation of
19 CFR 123.12(a)(1) or (2).

LAW AND ANALYSIS:

     Section 141.4, Customs Regulations (19 CFR 141.4), provides
that entry as required by title 19, United States Code, section
1484(a) (19 U.S.C. 1484(a)), shall be made of every importation
whether free or dutiable and regardless of value, except for
intangibles and articles specifically exempted by laws or
regulations from the requirements for entry.  Since the foreign
rail cars in question are not exempted under General Note 4,
Harmonized Tariff Schedule of the United States (HTSUS; 19 U.S.C.
1202, as amended), they are subject to entry and payment of any
applicable duty if not specifically exempted by law and
regulations.

     Instruments of international traffic may be entered without
entry and payment of duty under the provisions of title 19,
United States Code, section 1322 (19 U.S.C. 1322).  To qualify as
instruments of international traffic, foreign railroad equipment
other than locomotives may proceed on the inward trip to the
place of complete unloading for any merchandise imported therein
(see section 123.12(a)(1), Customs Regulations (19 CFR
123.12(a)(1)).

     In addition, section 123.12(a)(2), Customs Regulations (19
CFR 123.12(a)(2)) states that foreign railroad equipment other
than locomotives may be used on the outward trip in through
trains crossing the boundary or for such local traffic as is
                              - 3 -

reasonably incidental to its economical and prompt departure for
a foreign country (i.e., in the general direction of the country
of origin, or to the home route junction point, over a route
which the equipment would ordinarily otherwise travel empty).

     Section 10.41(d), Customs Regulations (19 CFR 10.41(d)),
provides, in part, that any foreign-owned vehicle brought into
the United States for the purpose of carrying merchandise between
points in the United States for hire or as an element of a
commercial transaction, except as provided for in section
123.12(a), is subject to treatment as an importation of
merchandise from a foreign country and a regular Customs entry
therefore shall be made.  Section 123.12(c), Customs Regulations
(19 CFR 123.12(c)), provides that any violation of section
123.12, is subject to forfeiture under section 592, Tariff Act of
1930, as amended (19 U.S.C. 1592).

     In regard to the facts under consideration, we note that on
the inward trip although the Canadian rail cars will be stopping
temporarily at an intermediary point (i.e., ECA's lease track
yard in East St. Louis), no merchandise will be loaded at that
point, nor will the cars be unloaded until they reach their final
U.S. destination.  It is therefore apparent that this movement
constitutes a movement in international traffic as permitted by
section 123.12(a)(1).

     In addition, in view of the fact that after their unloading
the subject rail cars will be returned empty to ECC's plant in
Sarnia, Ontario (either "reverse-routed" through Port Huron or by
the most economical and direct route available), their outward
trip is in compliance with the provisions of section
123.12(a)(2).  Although ECA does not anticipate that any of the
subject rail cars will be used for local U.S. traffic on the
return trip to Canada, it should be noted that in the event such
a movement does take place, the above facts are also in accord
with the provisions of section 123.12(a)(2).

HOLDING:

     The use of foreign railroad equipment as described above
does not constitute an engagement in local traffic in violation
of 19 CFR 123.12(a)(1) or (2).

                                   Sincerely,




                                   B. James Fritz
                                   Chief
                                   Carrier Rulings Branch