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HQ 112627


May 18, 1993

VES-13-18-CO:R:IT:C 112627 GEV

CATEGORY: CARRIER

Deputy Regional Director
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90831

RE: Vessel Repair Entry No. 410-0002202-4; Lashing Rods; 19 U.S.C. 1322, 1466; SEA-LAND PRODUCER V-229

Dear Sir:

This is in response to your memorandum dated March 16, 1993, forwarding a petition for review of a denial of an application for relief, issued in the form of a letter from you dated December 29, 1992. Our findings are set forth below.

FACTS:

The SEA-LAND PRODUCER is a U.S.-flag vessel owned and operated Sea-Land Services, Inc. ("Sea-Land"). Certain merchandise, including container lashing rods, was purchased for use aboard the vessel at Yokohama, Japan, in September of 1992. Subsequent to those purchases the vessel arrived in the United States at Oakland, California on October 6, 1992. A vessel repair entry was filed on October 7, 1993.

Sea-Land timely filed an application for relief requesting that container lashing rods listed on the entry be considered instruments of international traffic and therefore not subject to entry and the payment of duty. Customs Deputy Regional Director for the Pacific Region, in a letter dated December 29, 1992, denied the application based on a previous Headquarters internal advice concerning a different vessel operator but addressing this same issue (Ruling 112469, dated October 13, 1992).

Pursuant to an authorized extension of time, Sea-Land filed a petition for review. The petitioner reiterates its claim that foreign-purchased container lashing rods which are components of a container securing or lashing system designed to prevent containers carried aboard a vessel from toppling, lifting, sliding, or tilting are instruments of international traffic and- 2 -
therefore non-dutiable. The petitioner states that these lashing rods are made of forged steel, designed and intended to be used for the life of the vessel, and are used in significant numbers. In support of this claim, the petitioner cites Treasury Decision (T.D.) 82-147 and submits the following: a "Guide for Certification of Container Securing Systems" produced by the American Bureau of Shipping (ABS) (Attachment A); and a diagram of a container lashing system which includes the lashing rods in question (Attachment B).

ISSUE:

Whether foreign-purchased container lashing rods which are used as components of a securing system for the transportation of containers aboard vessels are instruments of international traffic within the meaning of 19 U.S.C. 1322(a) and 10.41a, Customs Regulations (19 CFR 10.41a) so as to be exempt from duty pursuant to 19 U.S.C. 1466.

LAW AND ANALYSIS:

Title 19, United States Code, 1466, provides in pertinent part for payment of an ad valorem duty of 50 percent of the cost of foreign repairs to or equipment purchased for a vessel documented under the laws of the United States to engage in the foreign or coastwise trade.

"Dutiable equipment" has been defined to include:

...portable articles necessary or appropriate for the navigation, operation, or maintenance of a vessel, but not permanently incorporated in or permanently attached to its hull or propelling machinery, and not constituting consumable supplies. Admiral Oriental, supra., (quoting T.D. 34150, (1914))

Title 19, United States Code, 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 322(a) are contained in 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 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.

In regard to the facts now under consideration, we note that T.D. 82-147 held twist-lock stackers used by steamship operators to secure containers to the deck of a vessel and to other stacked containers to be instruments of international traffic. The underlying rationale for this decision was that the twist-lock stackers are similar to other articles deemed instruments of international traffic (e.g., container adapters (T.D. 68-296), inflatable dunnage units (C.I.E. 525/63), and automotive frame
spacers (T.D. 69-220)) in their function and otherwise meet the requirements of an instrument of international traffic (i.e., substantial, suitable for and capable of repeated use, and used in significant numbers).

Accordingly, in view of the fact that container lashing rods, like twist-lock stackers, are components of the container lashing system, and possess the same characteristics required of an instrument of international traffic as do those article discussed above, they are designated as such, rather than vessel equipment, and are not subject to entry or the payment of duty.

HOLDING:

Foreign-purchased container lashing rods which are used as components of a securing system for the transportation of containers aboard vessels are instruments of international traffic within the meaning of 19 U.S.C. 1322(a) and 10.41a, Customs Regulations (19 CFR 10.41a) so as to be exempt from duty pursuant to 19 U.S.C. 1466.

The advice supplied in case no. 112469, to the extent that it conflicts with the decision in this case, is hereby revoked.

Sincerely,

Acting Chief

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