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HQ 115707




August 30, 2002

BOR-4-07-RR:IT:EC 115707 LLO

CATEGORY: CARRIER

Jack Kilmartin
Yamato Customs Brokers USA, Inc.
377 Oyster Point Boulevard, Suite 15
South San Francisco, California 94080

RE: Instruments of International Traffic; “Returnable Pallets”, 19 U.S.C. 1322;19 C.F.R. 10.41a; Subheading 9803.00.50, HTSUSA

Dear Mr. Kilmartin:

We received your request for a ruling to designate specifically described “returnable pallets” as instruments of international traffic under 19 U.S.C. §1322. Our ruling on the matter is set forth below.

FACTS:

The “returnable pallets” at issue are designed to facilitate the international shipment of sensitive electronic equipment. The pallets are made in Japan and China and imported through the Port of Oakland and San Francisco. Each “returnable pallet” is designed to carry 360 compact disc drives and consists of six components. You indicate that the pallet is designed to withstand between 15 and 20 trips between the seller’s manufacturing plants in Asia and the buyers’ distribution facilities in the U.S. and Europe. The pallets will not be used by U.S. domestic carriers, except to deliver the loaded or empty pallets between international ports and distribution facilities. Loaded pallets will ship by air-freight and empty pallets will be returned in forty foot ocean shipping containers. The initial order of pallets to be used for international traffic is 250.

ISSUE:

Whether the described pallets may be considered instruments of international traffic within the meaning of 19 U.S.C. §1322 and 19 C.F.R. §10.41a.

LAW AND ANALYSIS:

Title 19 U.S.C. §1322(a), provides that “vehicles and other instruments of international traffic (hereafter IIT), of any class specified by the Secretary of 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 Treasury.”

The Customs regulations issued under the authority of 19 U.S.C. §1322 are in 19 C.F.R. §10.41a. Paragraph (a)(1) of section 10.41a designates as IIT certain named articles (including pallets) 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. Such IIT may be released without entry or the payment of duty, subject to the provisions of section 10.41a

To qualify as an IIT within the meaning of 19 U.S.C. §1322(a), and the regulations issued thereunder an article must meet the following requirements:

-be used as a container or holder;
-substantial;
-suitable for and capable of repeated use; -and used in significant numbers in international traffic.

The term “repeated use,” as used above has been deemed applicable to commercial shipping or transportation purposes and not incidental uses. In Holly Stores, Inc. v. U.S., 697 F.2d 1387 (Fed. Circuit 1982) the court determined that “reuse” has been consistently interpreted to mean “practical, commercial reuse not incidental reuses.” Subsequent Customs rulings on this matter have held that a single use is not sufficient to constitute the “repeated use” requirement necessary to be deemed an IIT; repeated use means more than two uses.

Upon review of the information presented in your letter and accompanying photographs, we are of the opinion that the pallets in question act as holders for compact disc drives and sensitive electronic equipment and therefore fit the first requirement that the items in question be used as a container or holder. The pallets in question are substantial, as well as suitable and capable of repeated use as outlined in the facts portion of this ruling and based upon the information provided. Finally, the facts provided imply that 250 units have been ordered for the use outlined, which constitutes a significant number of the holders that are expected to be used in international traffic. Consequently, in view of the above analysis, and in light of the fact that pallets are specified in section 10.41(a)(1), we find that the subject pallets qualify as instruments of international traffic pursuant to 19 U.S.C. 1322(a).

Since the pallets will be designated as IIT, they are not subject to entry or payment of any applicable duty. It should be noted that if the “returnable pallets” are diverted from international traffic and are used domestically, they will cease to be considered instruments of international traffic.

HOLDING:

The subject pallets used to transport compact disc drives and other electronic equipment are designated as instruments of international traffic within the meaning of 19 U.S.C. §1322(a) and 19 C.F.R. §10.41a. These pallets are therefore classifiable under subheading 9803.00.50, HTSUSA.

Sincerely,

Glen E. Vereb
Acting Chief

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