Interpretation ID: 2354y
401 S. Woodward - Suite 370
Birmingham, MI 48009
Re: Request for Ruling Imported Vehicles - FTZ
Dear Mr. Kulics:
This is in reply to your letter of December 5, l989, to the attention of Taylor Vinson of this Office, on behalf of your clients Liphardt Associates and Pierre Enterprises, Inc.
You have informed us that Liphardt is an Independent Commercial Importer (ICI) under EPA regulations. The vehicles it imports are modified by Pierre. Both entities have the identical mailing address. This location is within a Foreign Trade Zone. You have also informed us that Liphardt/Pierre (L/Pe) will apply for status as a Registered Importer under 49 CFR Part 592. It is the practice of L/PE to transport its nonconforming vehicles directly from the vessel into the Zone, to perform conformance modifications in the Zone, and then file a consumption entry, post bond, and submit conformance documentation to DOT. After DOT and EPA have released the vehicle, it is delivered to its owner.
You have requested that L/Pe "be allowed to submit conformity packets to your agency prior to the submission of the consumption entry package, i.e., upon submission of the FTZ entry [transportation of the vehicle into the Zone], so that it may enter the vehicle as 'conforming.'" Under this plan, the current method of operation would remain much the same, except that L/Pe would prepare an HS-7 Declaration Form at the time the vehicle is transported into the Zone. This Form would be submitted to DOT along with a conformity package, for review and release, if appropriate. Then, when the actual consumption entry is filed, the vehicle would be entered as "conforming" merchandise. The purpose of this request "is to eliminate the costs associated with posting a special bond purely for DOT purposes", and to speed "up the process of importation, thus reducing the costs associated with storage." As you state, "What L/Pe proposes is that it be allowed to close out the obligation while the vehicle is still in the custody of the Customs Service."
In substantiation of your request, you have called our attention to certain provisions of l9 CFR Part l46 Foreign Trade Zones, specifically section 146.2 outlining the obligations of Customs' supervision, section 146.10 providing for examination of merchandise necessary to facilitate the proper administration of any law that Customs is authorized to enforce, and section 146.31 stating that admission of merchandise into a Zone is subject to the regulations of the Federal agency concerned.
Under the facts as stated in your letter, we have concluded that your clients must provide a DOT bond under the National Traffic and Motor Vehicle Safety Act of l966 (l5 U.S.C. 1381 et seq.), as amended by the Imported Vehicle Safety Compliance Act of l988 (P. L. 100-562), but that there is no legal reason why its obligations to DOT may not be satisfied before the conformed vehicle enters the customs territory of the United States.
As we understand it, the Foreign Trade Zone Act of l934 (l9 U.S.C. 81a et seq.) is intended to establish areas into which merchandise may be imported temporarily, "without being subject to the customs laws of the United States", before being sent "into customs territory of the United States" (section 81c(a)). A Zone therefore is a legal fiction established solely for the administration of customs laws. Section 2(a) of the l988 Act repealed the authority of the Customs Service over the importation of vehicles subject to the l966 Act. Accordingly, the new regulation governing the importation of nonconforming motor vehicles on and after January 31, l990, 49 CFR Part 591, is not a "customs law" (unlike the existing regulation which is a joint regulation with DOT that specifically applies to importation into the customs territory of the United States (19 CFR 12.80(b)).
In pertinent part, section 108(a)(1)(A) of the l966 Act (l5 U.S.C. 1397(a)(10(A)) prohibits the importation "into the United States" of nonconforming vehicles. Although a Zone is not generally considered customs territory, in this instance they are both within the United States, and an arrangement which defines the "United States" as comprising both customs territory and foreign trade zones has been upheld as valid (Klockner, Inc., v. United States (1984) 8 CIT 3, 590 F. Supp. 1266). Under section 108(c)(1) of the l966 Act, as amended (l5 U.S.C. 1397(c)(1)), a nonconforming vehicle "shall be refused entry into the United States" unless "an appropriate bond" has been furnished to ensure that the vehicle will be brought into conformity within a reasonable time after such importation."
Therefore, because 49 CFR Part 591 is not a "customs law", any distinction between a Zone and customs territory is legally irrelevant for purposes of the l966 Act. Further, because both a Zone and the customs territory are physically within the boundaries of the United States, an importation of a nonconforming vehicle into either a Zone or the customs territory requires an accompanying DOT conformance bond.
Nevertheless, the l988 Act does not impose any restrictions upon either DOT or your clients that prohibits them from entering conformed vehicles into customs territory. However, we see the procedure a bit differently than the one you discussed. The HS-7 Form and its accompanying bond must be completed not later than the admission of the vehicle into the Zone. Customs retains its role of sending these documents to DOT. When conformance work is completed, L/Pe provides certification to DOT. Because of the current low volume of nonconforming imports, we anticipate that our review will be completed within two weeks of receipt of the certification. If the certification is acceptable, the bond is released, and L/Pe may then enter the vehicle as no longer subject to DOT conformance regulations (or, as you express it, "conforming merchandise"). Thus, L/Pe will be able to close out its obligation while the vehicle remains in the custody of Customs, even though it is not freed from the bond requirement.
As a final comment on the time factor, we intend to require complete documentation only for the initial make, model, and model year (assuming that the initial submission is acceptable). Although L/Pe must keep verification records on each vehicle it conforms, certifications subsequent to an initial submission need not be accompanied by documents, and could be transmitted by FAX. As we see it, these simple certifications would not require extensive review, improving our ability to respond in a more timely manner.
Sincerely,
Stephen P. Wood Acting Chief Counsel
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