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HQ 112303


August 14, 1992

BOR-7-07-CO:R:IT:C 112303 MLR

CATEGORY: CARRIER

John F. McManus
C. Itoh Express (America) Inc.
335 Madison Avenue
New York, N.Y. 10017

RE: Instruments of International Traffic; 19 U.S.C. 1322(a); Collapsible Steel Packing Crates

Dear Mr. McManus:

This is in reference to your letter dated August 3, 1992, requesting that certain collapsible steel packing crates be designated as instruments of international traffic (IIT).

FACTS:

Subaru-Isuzu Automotive, Inc. (S.I.A.) intends to use collapsible steel packing crates to import automobile components (V-6 engines). The crates will measure 1,500 millimeters (mm) by 2,245mm by 970mm, weigh 180 kilograms, and be marked with "ISUZU, Isuzu Motors Limited, Type UC-625, Made in Japan". Isuzu Motors Ltd, of Toyko, Japan, will manufacture approximately 1500 crates which have an estimated life of 5 to 10 years.

The crates will be packed inside a forty-foot shipping container. When the crate is extended and loaded, only three to six of them will be loaded in each container. The crates will arrive at the ports of Los Angeles (Long Beach), Seattle, and Tacoma through Chicago for entry at S.I.A.'s Foreign Trade Sub- zone in Lafayette (Port of Indianapolis). From there, S.I.A. will assemble the engines into completed motor vehicles at its Lafayette plant. The empty crates will then be returned to Japan for re-use, with approximately 120 crates fitting into one shipping container. C. Itoh Express (America) Inc. will act as the traffic coordinator in the United States for S.I.A.

ISSUE:

Whether collapsible steel packing crates used for the transportation of automobile components (V-6 engines) may be designated as instruments of international traffic within the meaning of 19 U.S.C. 1322(a) and section 10.41a, Customs Regulations (19 CFR 10.41a).

LAW AND ANALYSIS:

Title 19, United States Code, section 1322(a) {19 U.S.C. 1322(a)}, provides that "[v]ehicles and other instruments of international traffic, of any class specified by the Secretary of the Treasury, 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."

The Customs Regulations issued under the authority of section 322(a) are contained in section 10.41a (19 CFR 10.41a). Section 10.41a(a)(1) specifically designates lift vans, cargo vans, shipping tanks, skids, pallets, caul boards, and cores for textile fabrics as instruments of international traffic.

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 (TSUS), 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.

Upon reviewing the information provided, we are of the opinion the above requirements have been met. In addition, Customs has previously ruled that collapsible steel packing crates of a similar use as those under consideration qualify as instruments of international traffic pursuant to 19 U.S.C. 1322(a) and section 10.41a, Customs Regulations (see Customs Ruling 110300).

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.

For purposes of this ruling, we will assume that there is no diversion of the crates from a use in international traffic. More particularly, we will assume that the crates will not be used for storing the engines, and that the use of the crates in the manufacturing facility where the engines are needed and unloaded, is not an incidental use.

HOLDING:

Reusable, collapsible steel packing crates used to import certain automobile engines from Japan are designated as instruments of international traffic within the meaning of 19 U.S.C. 1322(a) and section 10.41a, Customs Regulations (19 CFR 10.41a).

Sincerely,

B. James Fritz

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