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HQ 224147


April 12, 1993

FOR-2-04-CO:R:C:E 224147 JRS

CATEGORY: FOREIGN TRADE ZONE

Director, Office of Cargo Enforcement and Facilitation
Office of Inspection and Control
U.S. Customs Service
Washington, D.C. 20229

RE: Domestic "Zone Restricted" Merchandise Withdrawn from a Foreign Trade Zone to a Bonded Warehouse Pending Exportation; 19 U.S.C. 81c(a), fourth proviso; 19 U.S.C. 1555; T.D. 83-139; 19 CFR 146.70(c); C.S.D. 82-112; HQ 215998 L, dated July 18, 1983; HQ 221893 JR, dated January 16, 1990; Partial Release from Warehouse; 19 CFR 19.6(d)

Dear Sir:

This is in response to your request for a ruling (Your FILE: WAR-1-IC:C MB, dated August 20, 1992) as to whether the storing of domestic "zone restricted" status merchandise in a bonded warehouse is permitted under the provisions of 19 CFR 146.70(c) and not contrary to 19 U.S.C. 1555 and, if so, whether the partial release procedures as provided in 19 CFR 19.6(d) are applicable.

FACTS:

Clarification is requested on an "information letter," (221893 JR, dated January 16, 1990), issued to United Exports Trading Association, Inc. (UETA, Inc.) and an earlier ruling, (215998 L, dated July 18, 1983) on the above-referenced subject. No facts were submitted.

ISSUE:

Whether domestic merchandise withdrawn from a foreign trade zone in "zone-restricted" status may be stored in a bonded warehouse. If so, whether the partial release procedures as provided in 19 CFR 19.6(d) are applicable.

LAW AND ANALYSIS:

We do not find a conflict to exist between our "information letter" of January 16, 1990 (221893) and our previous ruling of July 18, 1983 (215998). The two cases are distinguishable as set forth below.

In 215988, Customs held that domestic beer on which internal revenue taxes have not been paid may be placed in a foreign trade zone in "zone-restricted" status, and, on and after July 18, 1983 (48 FR 27536, T.D. 83-139), may be transferred to a bonded warehouse pending exportation. Such beer must be identified as "zone-restricted" beer which may not be withdrawn for consumption under 19 CFR 146.70(c).

In 221893, based upon the facts provided, American beer, at least a portion of every shipment, was apparently shipped to Mexico solely for the purpose of reimportation to the United States in order to avoid the payment of internal revenue tax, which otherwise would have been required if shipped directly to UETA, Inc. in the United States, and then distributed by UETA, Inc. in Mexico. We concluded that the American goods could not be considered "imported merchandise" under 19 U.S.C. 1555 since the returned American goods were never "exported" within the meaning of 19 CFR 101.1(k), that is, a valid exportation for Customs purposes was never effectuated. See 17 Op. Atty. Gen. 579 (1883).

Moreover, in 221893, the American beer was not in "zone- restricted" status as it was never admitted into a foreign trade zone and, therefore, there would be no such limitation of 19 CFR 146.70(c), namely, that the merchandise could only be exported. Although UETA, Inc. intended to sell it only for exportation, there would be nothing that would prevent them from selling the beer for consumption and perhaps avoiding internal revenue tax. Whereas, in 215988, beer goes directly to a FTZ in "zone- restricted" status, is deemed exported, and no tax is ever due. In 215998, the "exportation" and "importation" cannot be done with a design to circumvent tax as in 221983 since upon "importation" into warehouse tax is deferred until entry for consumption, which of course cannot occur because the beer can only be exported within 5 years pursuant to 19 U.S.C. 1557. The key is intent. There can be no intent to return the beer to Customs territory for consumption, and under 19 CFR 146.70, beer cannot be entered for consumption, only exported.

Domestic merchandise in "zone-restricted" status does not become foreign merchandise (see C.S.D. 82-112), nor does it become imported merchandise. The statute (19 U.S.C. 81c(a), fourth proviso), provides, that if "zone-restricted" merchandise is permitted to be entered for consumption from a zone, it is subject to the provisions of former paragraph 1615(f) of 19 U.S.C. 1201 (now subheading 9801.00.80, HTSUS). "Zone- restricted" merchandise may be moved to a bonded warehouse not because it became imported merchandise but because the regulation was promulgated to facilitate exportation (see discussion in T.D. 83-139). Please note that the Customs Service did not rely on 19 U.S.C. 1555 as its authority to permit the transfer of "zone- restricted" merchandise from a zone to a Customs bonded warehouse pending exportation, without obtaining the approval of the Foreign-Trade Zones Board.

It is our opinion that the partial release procedures from a of 19 CFR 19.6(d) would be applicable to the instant case.

HOLDING:

Domestic merchandise withdrawn from a foreign trade zone in "zone-restricted" status may be stored in a bonded warehouse before its actual exportation as required by 19 CFR 146.70(c). The partial release procedures as provided in 19 CFR 19.6(d) are applicable to this case. You may provide a copy of this decision to the inquirer.

Sincerely,

John Durant, Director

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