VES-13-18-CO:R:IT:C 112627 GEV
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.
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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
- 4 -
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