Foreign-Based Commercial Motor Vehicles in International Traffic

Background

Pursuant to 19 U.S.C. 1322, vehicles and other instruments of international traffic shall be 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. This statutory mandate pertaining to foreign-based commercial motor vehicles is implemented in Sec. 123.14 of the Customs Regulations (19 CFR 123.14). Section 123.14(a) states that to qualify as instruments of international traffic, such vehicles having their principal base of operations in a foreign country must be arriving in the United States with merchandise destined for points in the United States, or arriving empty or loaded for the purpose of taking merchandise out of the United States. Section 123.14(c), Customs Regulations, states that with one exception, a foreign-based commercial motor vehicle, admitted as an instrument of international traffic under Sec. 123.14(a), shall not engage in local traffic in the United States. The exception, set out in Sec. 123.14(c)(1), states that such a vehicle, while in use on a regularly scheduled trip, may be used in local traffic that is directly incidental to the international schedule. Section 123.14(c)(2), Customs Regulations, provides that a foreign- based truck trailer admitted as an instrument of international traffic may carry merchandise between points in the United States on the return trip as provided in Sec. 123.12(a)(2) which allows use for such transportation as is reasonably incidental to its economical and prompt departure for a foreign country. In regard to these cabotage restrictions, Customs received a petition from the American Trucking Association (ATA) requesting a change in Customs interpretation of its regulations governing the use of foreign-based trucks in local traffic in the United States. This petition was the culmination of joint discussions beginning in July of 1994 between the ATA and the Canadian Trucking Association (CTA) to obtain mutually agreed upon parameters with respect to the liberalization of current truck cabotage restrictions in their respective countries. After reviewing the petition, Customs published a notice in the Customs Bulletin pursuant to 19 U.S.C. 1625(c)(1) (see 31 Cust. Bull. and Dec. No. 40, 7 (October 1, 1997)), which revised the interpretation of when a foreign-based truck would be considered as used in international traffic under existing Sec. 123.14. However, the proposal advanced by the ATA regarding the use of a foreign-based commercial motor vehicle, including a truck, in permissible local traffic under Sec. 123.14(c) was, of course, not addressed in the Customs Bulletin notice. To effect this change required an amendment of the regulation under the Administrative Procedure Act, 5 U.S.C. 553. Accordingly, by a document published in the Federal Register (63 FR 27533) on May 19, 1998, Customs proposed an amendment of Sec. 123.14(c)(1), which would allow certain foreign-based commercial motor vehicles, admitted as instruments of international traffic, to engage in the transportation of merchandise between

points in the United States where such local traffic is incidental to the immediately prior or subsequent engagement of such vehicles in international traffic. In addition, this revision would eliminate the current requirement that such international traffic be regularly scheduled. Furthermore, any movement of these vehicles in the general direction of an export move or as part of the return movement of the vehicles to their base country would be considered incidental to the international movement. In conjunction with the amendments to Sec. 123.14, the proposed rule also included conforming amendments to Sec. 123.16 regarding the return of the qualifying vehicles to the United States. The benefit of this liberalization of current cabotage restrictions would inure in particular to both the United States and foreign trucking industries inasmuch as it would allow more efficient and economical utilization of their respective vehicles both internationally and domestically. Thus, while prompted by the ATA petition, which was developed in concert with the CTA, as described above, the proposed amendments would be universally applicable, and not be limited to just Canadian-based vehicles.

Discussion of Comments

A total of thirty-three comments were received from the public in response to the notice of proposed rulemaking. Thirteen commenters supported the rule as proposed, although one of these commenters urged that the rule be restricted to Canadian-based vehicles. Twenty commenters opposed the rule, with fifteen of these commenters urging Customs to change the rule, if adopted, so that it would be limited to Canada. Also, the Immigration and Naturalization Service (INS) submitted a comment which, while taking no position on the proposed rule, provided clarification as to that agency's position with regard to the use of alien commercial drivers in the U.S. A discussion, together with Customs analysis, of the critical issues that were raised with respect to the proposed rule is set forth below. Comment: It was believed that the proposed expanded operation of foreign trucks in the U.S. would further encourage the employment of lower-cost foreign drivers. This would result in a significant increase in unauthorized foreign driver activity in the U.S., and induce U.S. trucking companies ultimately to pressure the INS to relax its current restrictions in this regard, thereby reducing jobs for U.S. truck drivers. Customs Response: Customs believes that the expanded use of foreign-based vehicles in the U.S., as proposed, will not have any impact on the existing limited scope of alien-driver activities in the U.S., as enforced by the INS. Customs will, of course, continue to defer to the INS in this matter. To make this clear, Sec. 123.14(c)(1) is revised to indicate that alien drivers will not be permitted to operate foreign vehicles carrying merchandise or passengers between points in the U.S., unless the drivers are in compliance with the applicable regulations of the INS. Generally, under the existing rules of the INS, as explained in its comment on the proposed rule, a nonimmigrant alien who is driving a truck or operating another commercial motor vehicle in international traffic is admitted to the U.S. only as a visitor for business (a so- called ``B-1'' classification) under the Immigration and Naturalization Act (INA), as amended (8 U.S.C. 1101(a)(15)(B)). However, while an alien who is admitted as a B-1 visitor may transport goods or passengers from a foreign country to the U.S., and may transport goods or passengers from the U.S. to a foreign country, the alien would not be permitted to engage in point-to-point transportation of goods or passengers within the U.S. This restriction is codified in the INS regulations, specifically at 8 CFR 214.2(b)(4) which also describes the permissible scope of business activities for aliens admitted under the B-1 classification, and defines the criteria for admission of B-1 visitors pursuant to Chapter 16 of the North American Free Trade Agreement (NAFTA) (Appendix 1603.A.1 to Annex 1603 of the NAFTA). Thus, while the subject rule allows for the use of commercial motor vehicles in the transportation of goods between points within the U.S., provided such use is incidental to the employment of those vehicles in international traffic as prescribed in Sec. 123.14(c)(1), an alien driver or other vehicle operator seeking admission to the U.S. as a B-1 visitor for business under these circumstances would be denied admission. In order to load and transport goods or passengers within the U.S. from one location to another (which, as noted, is outside the scope of the B-1 classification), an alien must either be a lawful permanent resident of the U.S. or must have authorization from the INS for employment in the U.S. Comment: One commenter thought that the adoption of the proposed amendments would have a negative competitive impact on the domestic- based commercial motor carrier industry, by affording lower-cost foreign carriers greater access to domestic freight markets. Customs Response: Customs does not contemplate any significant competitive impact on carriers that operate exclusively within the U.S., given the petition and strong support for the adoption of the subject rule by the American Trucking Association (ATA), which represents over 35,000 motor carriers of every type and class in the U.S. It should further be mentioned in this context that the domestic use of foreign-based commercial vehicles under the rule is strictly circumscribed by, and contingent upon, such use of the vehicles being incidental to their immediately prior or subsequent engagement in international traffic, as described in Sec. 123.14(c)(1). Comment: It was urged that the proposed amendments be limited to Canadian-based vehicles. To do otherwise, it was argued, would occasion an increase in the number of unsafe and uninsured vehicles on U.S. roads. It was also emphasized here that the reciprocity in relation to truck cabotage restrictions that would result from the adoption of the proposed amendments would exist only between Canada and the U.S. Customs Response: Our international obligations do not permit a reciprocity requirement with regard to this matter. As such, no reciprocal agreement may be required for vehicles of any country in order to engage in local traffic as prescribed under the subject regulatory amendments. Nevertheless, foreign-based vehicles must, of course, comply with the operating requirements imposed by the Department of Transportation and other U.S. Government agencies before being used as provided in Sec. 123.14(c)(1).

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 with the modification discussed above should be adopted.

Regulatory Flexibility Act and Executive Order 12866

The final rule document greatly relaxes current cabotage restrictions for both the U.S. and foreign trucking industries, enabling more efficient and economical use of their respective vehicles both internationally and domestically. As such, under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), it is certified that the rule will

not have a significant economic impact on a substantial number of small entities. Nor does the rule result in a ``significant regulatory action'' under E.O. 12866.

List of Subjects in 19 CFR Part 123

Administrative practice and procedure, Canada, Common carriers, Customs duties and inspection, Imports, International traffic, Motor carriers, Trade agreements, Vehicles.

Amendments to the Regulations

Part 123, Customs Regulations (19 CFR part 123), is amended as set forth below.

PART 123--CUSTOMS RELATIONS WITH CANADA AND MEXICO

1. The general authority citation for part 123, and the relevant specific sectional authority citation, continue to read as follows:

Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized Tariff Schedule of the United States (HTSUS)), 1431, 1433, 1436, 1448, 1624. * * * * * Sections 123.13--123.18 also issued under 19 U.S.C. 1322; * * * * * 2. Section 123.14 is amended by revising paragraph (c)(1) to read as follows:

Sec. 123.14 Entry of foreign-based trucks, busses and taxicabs in international traffic.

* * * * * (c) Use in local traffic. * * * (1) The vehicle may carry merchandise or passengers between points in the United States if such carriage is incidental to the immediately prior or subsequent engagement of that vehicle in international traffic. Any such carriage by the vehicle in the general direction of an export move or as part of the return of the vehicle to its base country shall be considered incidental to its engagement in international traffic. An alien driver will not be permitted to operate a vehicle under this paragraph, unless the driver is in compliance with the applicable regulations of the Immigration and Naturalization Service. * * * * * 3. Section 123.16 is amended by revising paragraph (b) to read as follows:

Sec. 123.16 Entry of returning trucks, busses, or taxicabs in international traffic.

* * * * * (b) Use in local traffic. Trucks, busses, and taxicabs in use in international traffic, which may include the incidental carrying of merchandise or passengers for hire between points in a foreign country, or between points in this country, shall be admitted under this section. However, such vehicles taken abroad for commercial use between points in a foreign country, otherwise than in the course of their use in international traffic, shall be considered to have been exported and must be regularly entered on return. Raymond W. Kelly, Commissioner of Customs.

Approved: January 15, 1999. John P. Simpson, Deputy Assistant Secretary of the Treasury. [FR Doc. 99-3473 Filed 2-12-99; 8:45 am] BILLING CODE 4820-02-P