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HQ 113554




August 31, 1995

BOR-7-07-R:IT:C 113554 GEV

CATEGORY: CARRIER

Frank Heidt, Jr.
City Manager
Fritz Companies, Inc.
Liberty Building
7001 Chatham Center Drive, Suite 100
Savannah, Georgia 31405

RE: Instruments of International Traffic; Shipping Units; Spools; Bobbins; Pads; Pallets; Yarn; 19 U.S.C. ? 1322

Dear Mr. Heidt:

This is in response to your letter and accompanying documentation, submitted on behalf of your client, KBK Inc., requesting a ruling that certain shipping units for synthetic yarn are instruments of international traffic. Our ruling on this matter is set forth below.

FACTS:

KBK will import synthetic yarn from Japan in shipping units comprised of heavy duty, rigid plastic spools (bobbins), pads and pallets. There will be approximately 90 kgs. of yarn per spool. Each of these Japanese origin units will consist of a pallet with four (4) spools and two (2) pads per spool. Approximately 40 pallets will be contained in one 40-foot container. The units are capable of repeated use and will be so used by KGK Inc. with each unit having a life expectancy of three (3) years. There will be 1000 units in continuous use over the course of any one year. The business will be operating beyond one year. Each unit will be imported and exported through the Port of Savannah and is permanently marked with the manufacturer's name, "Asahi Chemical Co., Ltd."

ISSUE:

Whether shipping units for synthetic yarn which are composed of heavy duty, rigid plastic spools (bobbins), pads and pallets may be designated as instruments of international traffic within the meaning of 19 U.S.C. ? 1322(a) and ? 10.41a, Customs Regulations (19 CFR ? 10.41a).

LAW AND ANALYSIS:

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 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 ? 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 - 3 -

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 your request and the accompanying documentation, we are of the opinion the above requirements have been met. In addition, Customs has previously ruled that pallets qualify as instruments of international traffic pursuant to 19 U.S.C. ? 1322(a) and ?10.41a, Customs Regulations, as do plastic spools (bobbins) used for the transportation of yarn and thread (see T.D. 56543).

HOLDING:

Shipping units for synthetic yarn which are composed of heavy duty, rigid plastic spools (bobbins), pads and pallets are designated as instruments of international traffic within the meaning of 19 U.S.C. ? 1322(a) and ? 10.41a, Customs Regulations (19 CFR ?10.41a).

Sincerely,

Arthur P. Schifflin

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