HQ 113222: Harbor Maintenance Fee; In-bond transit; Exportation; 26 U.S.C. 4461, 4462

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 113222

                         October 2, 1994

VES-5-CO:R:IT:C 113222 GEV

CATEGORY:  Carriers

Ronald W. Gerdes, Esq.
Sandler, Travis & Rosenberg, P.A.
1341 G Street, N.W.
Washington, D.C. 20005-3105

RE:  Harbor Maintenance Fee; In-bond transit; Exportation;
     26 U.S.C.  4461, 4462

Dear Mr. Gerdes:

     This is in response to your letter dated September 23, 1993,
on behalf of your client, Philips Consumer Electronics Company
("Philips") of Greeneville, Tennessee, requesting reconsideration
of ruling no. 112822, dated September 20, 1993, regarding the
applicability of the Harbor Maintenance Fee (HMF) to certain
shipments of cargo.  

FACTS:

     Philips has contracted with American President Lines ("APL")
and Neptune Orient Lines ("NOL") to ship merchandise from the Far
East to Juarez, Mexico, the site of one of Philip's manufacturing
facilities.  The cargo arrives by vessel at Los Angeles where it
is unladen and reshipped by rail to El Paso on a Transportation
and Exportation Bond (T&E) filed on behalf of, and in the name
of, the steamship line.  The cargo is then trucked to Juarez. 
The entire transaction, from the Far East to Juarez, will be on
the same bill of lading.  After a shipment arrives in Juarez it
is broken down with some of it remaining in Mexico, some sold to
third countries and some returning to the United States.  The
cargo returning to the United States is shipped by truck on a new
bill of lading, without clearing Mexican customs, for
distribution to various locations within the United States.

     In response to counsel's ruling request dated July 22, 1993,
Customs issued ruling no. 112822, dated September 20, 1993, which
held that cargo returning to the United States as described above
was not exempt from the payment of the HMF pursuant to 26 U.S.C.
 4462(d).  By letter dated September 23, 1993, counsel requested
that Customs reconsider the ruling in light of additional                               - 2 -

information not included in the original ruling request.  In
addition, counsel requested a meeting with Customs officials to
further discuss the matter.  Customs agreed to both requests.  

     In a letter dated October 27, 1993, the additional
information referenced above was submitted to Customs and
included copies of the shipping contracts between Philips and the
steamship lines involved (i.e., APL and NOL) and paperwork filed
with Mexican Customs.  A meeting to discuss this matter was held
at Customs Office of Regulations & Rulings on December 2, 1993 at
which time counsel was given an opportunity to submit further
evidence in support of Philips' position.  To that end, by letter
dated July 13, 1994, counsel submitted a copy of a representative
sample of an APL bill of lading annotated with the master T&E
number, a sample of a separate paper T&E filed by NOL for each
bill of lading, and a copy of a relevant page from the vessel
manifest.
     
ISSUE:

     Whether cargo that is shown to be destined for the United
States on the importer's purchase documents and that is shipped
from Los Angeles through Mexico to the importer in the United
States is entitled to the exemption from the HMF provided by 
26 U.S.C.  4462(d)(1).

LAW AND ANALYSIS:

     The HMF, codified at 26 U.S.C.  4461, 4462, provides
Federal funding for the maintenance of any channel or harbor in
the United States which is not an inland waterway and is open to
public navigation.  The Customs Regulations promulgated pursuant
to the aforementioned statutory authority are set forth in 19 CFR
 24.24.

     Specifically, 26 U.S.C.  4461(a) and (b), as amended by 
 11214 of the Omnibus Budget Reconciliation Act of 1990 (Pub. L.
101-508), provide for the assessment of a tax (i.e., HMF) on any
port use in an amount equal to 0.125 percent of the value of the
commercial cargo involved.  "Port use" for purposes of assessing
the HMF is defined as either the loading of commercial cargo on,
or the unloading of commercial cargo from, a commercial port
subject to the HMF. (26 U.S.C.  4462((a)(1)(A)(B))

     Certain cargoes are exempted from the application of the
HMF.  Specifically, 26 U.S.C.  4462(d)(1) provides, in pertinent
part, that:

          "...the tax imposed by section 4461(a) shall 
          not apply to bonded commercial cargo entering 
          the United States for transportation and direct
          exportation to a foreign country." (emphasis added)

                              - 3 -

     It is further provided in 26 U.S.C.  4462(d)(2) that the
exemption set forth in  4462(d)(1) applies unless, with respect
to cargo exported to Mexico:  (1) The Secretary of the Treasury
determines that Mexico has imposed a substantially equivalent
port use fee on commercial vessels or commercial cargo using
Mexican ports; or (2) a study made pursuant to Pub. L. 99-662
finds the fee is not likely to cause significant economic loss to
a U.S. port or diversion of a significant amount of cargo to a
port in a contiguous country.
     
     In ruling no. 112822 we noted that although the shipments
under consideration enter the United States at Los Angeles for
bonded transportation to Mexico, they are subsequently trucked
back to the United States pursuant to the express original
intention of the importer when it purchased the articles. 
Consequently, it was Customs position that the return of this
cargo to the United States renders its movement other than an
"exportation" which is defined in 19 CFR  101.1(k) as meaning:

          "...a severance of goods from the mass of 
          things belonging to this country with the
          intention of uniting them to the mass of
          things belong to some foreign country.  
          The shipment of merchandise abroad with
          the intention of returning it to the 
          United States...is not an exportation."

     Accordingly, we held that since the returning cargo does not
constitute an exportation from the United States as defined
above, it would not be entitled to the exemption from payment of
the HMF set forth in 26 U.S.C.  4462(d)(1).  Furthermore, we
stated that while it is correct that the trucking of the cargo in
question from Mexico back to the United States does not con-
stitute "port use" as defined in the HMF statute (26 U.S.C. 
 4462(a)(1)(A)(B)), this does not obviate the required payment
of the HMF when the cargo in question was unloaded at the port of
Los Angeles, a port subject to the HMF (see 19 CFR 
 24.24(b)(1)).  

     Upon reviewing the supplemental information submitted and
discussed at length in the two meetings subsequent to our issuing
ruling no. 112822, we are of the opinion that our decision in
that ruling that the HMF is applicable to the cargo returning to
the United States is correct.  Accordingly, our holding in ruling
no. 112822 is affirmed.
                              - 4 -
     
HOLDING:

     Cargo that is shown to be destined for the United States on
the importer's purchase documents and that is shipped from Los
Angeles through Mexico to the importer in the United States is
not entitled to the exemption from the HMF provided by 26 U.S.C. 
 4462(d)(1).

                              Sincerely




                              Stuart P. Seidel
                              Director, International Trade
                              Compliance Division