CBP Says Duty-Free Bonded Warehouse May Also Sell Goods for Domestic Use
A class 9 bonded warehouse operator may sell merchandise for domestic use in addition to duty-free goods, said CBP in a May 15 internal advice ruling, HQ H161256. The ruling comes in response to a request from the operator to the Port of New York/Newark that was passed up to headquarters. The internal advice request was submitted to CBP headquarters in 2011, the ruling said. Due "to changes in business conditions" the operator was considering selling merchandise to customers domestically in addition to duty-free merchandise and asked for agency input, said CBP.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Previously, travelers visiting Manhattan placed orders at a duty-free retail store for duty-free merchandise at the warehouse, the ruling said. The merchandise is then "delivered to the air or sea port where the customer will depart the United States with the merchandise" and "any merchandise not claimed is redelivered to the warehouse via courier." To begin selling goods for domestic use too, the operator would wait for CBP authorized release of merchandise, it said.
Specifically, according to an operations manual provided by the operator, upon sale of the merchandise to the customer for domestic use, the operator's customs broker would "prepare a warehouse withdrawal for consumption that details the merchandise to be withdrawn from the store and prepares a consumption entry," it said. The broker would then notify "the operator upon receipt of CBP’s authorization for release of the merchandise by transmitting an electronic copy of the CBP Form 3461 with the assigned entry number and CBP authorization. The customer is then authorized to pick up the merchandise at the retail store." Duties owed on the merchandise are paid electronically by the operator to CBP within 10 business days after release of the merchandise, it said.
The regulatory requirements for duty-free goods are clear that once the merchandise is entered and duties, taxes and fees are assessed, it is no longer “conditionally duty-free merchandise,” said CBP. While selling duty-free merchandise from a class 9 bonded warehouse for domestic consumption without entry would violate the regulations, "there is no prohibition against selling duty-paid merchandise from a class 9 warehouse, provided that it is physically segregated from the merchandise that has not yet been entered," said CBP.
As a result, CBP ruled that "merchandise that has not been previously entered for consumption may be withdrawn from a class 9 bonded warehouse for sale and domestic use, provided that customs entry is made and applicable duties, taxes and fees are remitted to CBP." The agency also wanted to make clear that the ruling was specific in nature. "We note that this ruling addresses the narrow question of whether duty free merchandise may be withdrawn from a class 9 bonded warehouse, if entry is made and all duties, taxes and fees are remitted to CBP," it said. "This ruling in no way affects the criteria for the establishment of class 9 warehouses."