BOR-7-07-CO:R:IT:C 112705 DEC
Ms. Jeanne Thompson
IKEA Wholesale, Incorporated
Plymouth Commons
Plymouth Meeting, Pennsylvania 19462
RE: Instruments of International Traffic; IIT; Pallets;
19 U.S.C. 1322; 19 C.F.R. 10.41a.
Dear Madam:
This is in response to your April 7, 1993, correspondence with
the District Director of Customs in Philadelphia, Pennsylvania.
Your letter was forwarded to the Office of Regulations and Rulings -
Carrier Rulings Branch where it was received as a request for a
determination of whether certain pallets made of wood,
particleboard, or cardboard are instruments of international traffic
pursuant to 19 U.S.C. 1322(a) and 19 C.F.R. 10.41a.
FACTS:
IKEA Wholesale U.S., Inc. ("IKEA Wholesale") is a Delaware
corporation and is a part of the IKEA Group. IKEA Wholesale is an
importer of thousands of home and office furnishings. The
merchandise is commonly imported on various pallets made of wood,
particleboard or cardboard. Approximately 99% of the merchandise
arriving in the U.S. is received at either of two terminals in
Westampton, New Jersey or Ontario, California (letter from IKEA to
U.S. Customs (May 18, 1993) (on file with U.S. Customs - Office of
Regulations and Rulings).
From the terminals, the merchandise is designated as
Normal/Transit articles or Plock articles. Normal/transit articles
are those that the IKEA U.S. retail stores order the exact quantity
that was originally shipped from Europe on a particular pallet. In
contrast, Plock articles, which comprise approximately 90% of the
goods imported on pallets, are articles that the IKEA U.S. retail
stores can order various quantities regardless of the original
received quantity on the pallet.
The pallets are designed for stacking in any IKEA warehouse
worldwide. IKEA Wholesale is responsible for the tracking and
the return of the reusable pallets to an established pool.
Currently, IKEA Wholesale is in the process of returning a
-2-
significant number of pallets to Sweden. IKEA now seeks a
determination that these pallets are instruments of international
traffic in light of their probable return to the United States.
ISSUE:
Whether the described pallets may be considered instruments of
international traffic within the meaning of 19 U.S.C. 1322(a) and
19 C.F.R. 10.41a.
LAW AND ANALYSIS:
Title 19, United States Code, section 1322(a) provides that:
Vehicles 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.
19 U.S.C. 1322(a) (1992).
Title 19, Code of Federal Regulations, section 10.41a
specifically designates lift vans, cargo vans, shipping tanks,
skids, pallets, caul boards, and cores for textile fabrics as
instruments of international traffic. Additionally, this section
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.
19 C.F.R. 10.41a(1) (1992).
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 C.F.R. 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 generally Headquarters Decisions 103232,
104766, 108084, 108658, 109665, and 109702).
The designation of a container as an instrument of
international traffic becomes operative only when it is used as such
upon its arrival into this country in foreign trade. If the
holder or container is brought into the country by a party other
than the one who is using it as an instrument of international
trade, it is subject to entry as imported merchandise.
-3-
Upon reviewing the submitted evidence, Customs is satisfied
that the requirements of establishing instrument of international
traffic status have been met. More specifically, the pallets in
question appear to be substantial, suitable for and capable of
repeated use, and used in significant numbers in international
traffic.
However, 19 C.F.R. 10.41a(d) provides that if an instrument is
. . .diverted to point-to point local traffic
within the United States, or is otherwise with-
drawn in the United States from its use as an
instrument of international traffic, it becomes
subject to entry and the payment of any applicable
duties.
19 C.F.R. 10.41a(d)(1992).
Consequently, the focus of the regulations is to provide guidance to
determine when an item, which would otherwise be an instrument of
international traffic, is diverted making it subject to entry and
duty.
The Normal/Transit articles which are shipped from a foreign
port on a pallet, taken to one of the two warehouses, and then
shipped on the same pallet to a retail store is a use of the pallet
that the regulations contemplate for an instrument of international
traffic. Similarly, the rare shipments from a foreign port directly
to a retail store on a pallet is a use in international traffic
which would not require entry and the payment of duty.
The Plock articles, which IKEA has indicated constitutes
approximately ninety percent of the goods imported on pallets
(letter from IKEA to U.S. Customs, May 18, 1993), are articles which
the IKEA retail stores can order in various quantities regardless of
the original quantity received on a particular pallet. The
diversion and corresponding liability to enter and pay duty on the
pallets arises when a pallet that is not the identical pallet on
which the merchandise being transported entered the U.S. is used to
move merchandise in local traffic from a U.S. point to another U.S.
point.
The pallets may be admitted as instruments of international
traffic and will retain their status so long as they are not used
for a purpose which is inconsistent with their use in international
traffic, such as storage of merchandise. Headquarters Ruling 106944
(Sept. 18, 1984). Therefore, storage of merchandise on a pallet
other than the pallet on which the merchandise entered the U.S.
would result in the pallet losing its IIT status. Liability to
enter the pallets and pay duty pursuant to the regulations would
arise.
-4-
HOLDING:
The pallets used to transport IKEA home and office furnishings
are instruments of international traffic pursuant to 19 C.F.R.
10.41a and may be released without entry or the payment of duty.
However, 19 C.F.R. 10.41a(d) - 10.41a(i) mandates entry and
payment of duty when the instruments of international traffic (i.e.
pallets) are diverted to local traffic or otherwise withdrawn from
its use in international traffic under circumstances such as
outlined in the Law and Analysis portion of this ruling.
Sincerely,
Acting Chief
Carrier Rulings Branch