United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1993 HQ Rulings > HQ 0112134 - HQ 0112398 > HQ 0112393

Previous Ruling Next Ruling


HQ 112393


August 14, 1992

BOR-7-07-CO:R:IT:C 112393/112273 MLR

CATEGORY: CARRIER

Bruce N. Shulman, Esq.
Stein, Shostak, Shostak & O'Hara
1620 L Street, N.W., Suite 807
Washington, D.C. 20036-5605

RE: Instruments of International Traffic; Pallet Set; 19 U.S.C. 1322

Dear Mr. Shulman:

This is in response to your letter dated July 30, 1992, on behalf of Tokico (USA), Inc., requesting a ruling that certain pallet sets be designated as instruments of international traffic (IIT). Our ruling is set forth below.

FACTS:

Tokico (USA) Inc. of Berea, Kentucky, uses re-usable pallet sets when importing automotive struts from Japan. The pallet sets are made of molded plastic and manufactured in Japan. The sets are constructed to enable secure stacking of multiple trays onto a base pallet, with a cap protecting the top. Each set is approximately 47 1/4" in length and 44 3/4" in width. The record contains photographs of the pallet sets in question.

The sets will arrive at Los Angeles, Seattle, Louisville, and Detroit. The pallet sets may be delivered to a shock absorber manufacturing facility in Kentucky, where Tokico will further assemble and manufacture the imported struts for delivery to various automobile manufacturers. After Tokico has removed the struts, the empty pallet sets will be shipped back to Japan and used to transport automotive struts to the United States. It is anticipated that Tokico will ship the empty pallet sets back to Japan approximately every two to four weeks.

The pallet sets may also be delivered to Tokico in Detroit, where it maintains a two-week inventory of struts for use in supplying a joint venture between an American and Japanese manufacturer of automobiles. Tokico will deliver the filled pallet sets to the joint venture every day. It is anticipated that the empty pallet sets will be returned to Tokico by the joint venture on a daily basis, and that Tokico will send the empty pallet sets back to Japan for eventual reimportation of automotive struts.

ISSUE:

Whether re-usable, plastic pallet sets used to import certain automotive struts from Japan 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 (HTSUS), 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 pallets 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 T.D. 76-203, T.D. 68-56, and Customs Ruling 109378 and 111979).

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.

Since we have designated the pallets as instruments of international traffic, they are classifiable under the third proviso of 9803.00.50 of the Harmonized Tariff Schedule of the United States. However, contrary to the markings required by 19 CFR 10.41b for holders or containers of United States manufacture for which free clearance under subheading 9801.00.10, HTSUS, is claimed; or for holders or containers of foreign manufacture for which free clearance under subheading 9803.00.50, HTSUS, is claimed; section 10.41a does not provide that designated instruments of international traffic be marked in any particular manner. The applicant is required to properly identify the instruments to the satisfaction of Customs officers as those covered by the required bond. Please check with the district director of the planned port of entry to determine what method of identification is satisfactory. Customs Ruling 101901.

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

HOLDING:

Reusable, plastic pallet sets used to import certain automotive struts 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

Previous Ruling Next Ruling

See also: