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HQ 111163


March 26, 1991

BOR-7-07-CO:R:IT:P 111163 BEW

CATEGORY: CARRIER

Ms. Kate Shrank
Customs Group Leader
Subaru-Isuzu Automotive Inc.
Post Office Box 5689
Lafayette, indiana 47903

RE: Collapsible steel packing crates as instruments of international traffic

Dear Ms. Shrank:

This is in reference to your letter of May 24, 1990, addressed to the District Director of Customs, Cleveland, Ohio, and your letter of March 13, 1991, in which you asked that we classify certain collapsible steel crates as instruments of international traffic (IIT).

FACTS:

You state that you intend to use collapsible steel packing crates (crates) for shipments of automobile components (engines) from Fuji Heavy Industries in Tokyo, Japan, for assembly in the United States. You state that the crate will be packed inside ocean going shipping containers and will make the journey between Tokyo and Lafayette, Indiana. The racks when loaded will be packed inside containers and utilized on a regular basis in shipments between the United States and Japan. The racks may be collapsed when not in use. The racks are made of steel and are valued at approximately $150 each and have a life expectancy of between 15 and 20 years. You state that the racks will be used four (4) to five (5) times (round trip - form Japan to USA and back to Japan) per year. The racks are the property of Fuji Heavy Industries and are not sold.

You state that the crates will be manufactured in Japan and shipped to S.I.A. (Subaru-Isuzu Automotive) Inc., in Lafayette, Indiana. You state that the goods will normally be entered only at West Coast ports, ie. Long Beach, Los Angeles, and Seattle, and that Chicago and Indianapolis will be used as a port of entry for air shipments.

You state that such crates will each bear an label showing the name "FUJI HEAVY INDUSTRIES LTD.", a logo, TYPE NO. and country of origin information.

ISSUE:

Whether the described collapsible steel packing crates used for the transportation of automobile components (engines) may be treated as instruments of international traffic within the meaning of 19 U.S.C. 1322(a) and section 10.41a of the Customs Regulations (19 CFR 10.41a).

LAW AND ANALYSIS:

Section 322(a), Tariff Act of 1930, as amended (19 U.S.C. 1322(a)), provides that "[v]ehicles and other IIT, of any class specified by the Secretary of the Treasury, shall be granted the customary exceptions from the application of the customs laws to the extent and subject to such terms and conditions as may be prescribed in regulations or instructions of the Secretary of the Treasury."

The Customs Regulations issued under the authority of section 322(a) are in section 10.41a (19 CFR 10.41a). Paragraph (a)(l) of section 10.41a designates as IIT lift vans, cargo vans, shipping tanks and certain other named articles and states that other articles may be designated as IIT by the Commissioner of Customs in decisions to be published in the weekly Customs Bulletin. Once designated as instruments of international traffic, these items may be released without entry or the payment of duty, subject to the provisions of section 10.41a.

Section 10.41a(a)(1) also authorizes the Commissioner of Customs to designate other items as instruments of international traffic in decisions to be published in the weekly Customs Bulletin. Once designated as instruments of international traffic, these items may be released without entry or the payment of duty, subject to the provisions of section 10.41a.

To qualify as an "instrument of international traffic" within the meaning of 19 U.S.C. 1322(a) and the regulation promulgated pursuant thereto (19 CFR 10.41a et seq.), an article must be used as a container or holder. The article must be substantial, suitable for and capable of repeated use, and used in significant numbers in international traffic. (See subheading 9803.00.50, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), and former Headnote 6(b)(ii), Tariff Schedules of the United States (HTSUS), as well as Headquarters Decisions 104766; 108084; 108658; 109665; and 109702).

The concept of reuse contemplated above is for commercial shipping or transportation purposes, and not incidental or fugitive uses. Tariff Classification Study, Sixth Supplemental Report (May 23, 1963) at 99. See Holly Stores, Inc. v. United States, 697 F.2d 1387 (Federal Circuit, 1982).

In Holly Stores, supra, the court determined that "reuse" in the context of former General Headnote 6(b)(ii) "has been consistently interpreted to mean practical, commercial reuse, not incidental reuse." (Emphasis added). In that case, articles of clothing were shipped into this country on wire or plastic coat hangers. Evidence showed that the hangers were designed to be, and were of fairly durable construction and that it would be physically possible to reuse them. However, the court found that only about one percent of the hangers were reused in any way at all, and that those uses were of a noncommercial nature. The court held that the uses of these hangers beyond shipping them once from overseas to the United States were purely incidental, and concluded that the hangers were "not designed for, or capable of, reuse". Subsequent Customs rulings on this matter have held that single use is not sufficient; reuse means more than twice (Headquarter rulings 105567 and 108658). Furthermore, it is our position that the burden of proof to establish reuse is on the applicant, even though the applicant may not be the party reusing the instrument.

We find that the crates under consideration are used as containers or holders, that they are substantial, suitable for and capable of repeated use, and that they will be used in significant numbers in international traffic. We further find that the crates under consideration are similar to crates which were designated as IIT's in Treasury Decision 70-236 (steel frame platforms, with steel mesh sides, used to carry snowmobiles parts), and similar to stands or cases composed of steel, wood or steel mesh coated with fiberglass, used by Rolls Royce for transportation of parts of an aircraft engine which were designate as IIt in Treasury Decision 74-195.

The designation of a container or holder as an IIT becomes effective only when used as such upon its arrival in this country in foreign trade, either empty or with merchandise. If the holder or container is brought into the country by a party other than the one who is using it as an IIT, it is subject to entry as imported merchandise. The principal on the IIT bond is the party who is using the holder or container as an IIT.

HOLDING:

The collapsible steel packing crates under consideration qualify for treatment as instruments of international traffic and may be released under the procedures set forth in section 10.41a, Customs Regulations.

Sincerely,

B. James Fritz

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