BOR-4-07-OT:RR:BSTC:CCI H022952 LLB
Ms. Laurie Peach
American Honda Motor Co., Inc.
1919 Torrance Boulevard
Torrance, California 90501-2746
RE: Instruments of International Traffic; 19 U.S.C. § 1322(a); 19 C.F.R. §§ 10.41a(a)(1)-(2) and 10.41(a)(g); Collapsible Steel Racks; Work Trucks; subheadings 8609.00.0000 and 9803.00.50 , Harmonized Tariff Schedule of the United States Annotated (2008); Repair parts
Dear Ms. Peach:
This is in response to your February 5, 2008, letter, supplemented by your March 10, 2008 letter. In your February 5, 2008, letter, you request a ruling concerning whether collapsible steel racks, as described below, qualify as instruments of international traffic (IIT) under 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a(a)(1), and therefore, qualify for duty-free treatment under subheading 9803.00.50 of the Harmonized Tariff Schedule of the United States (HTSUS)(2008).1 In addition, you inquire as to whether the steel racks may be classified under subheading 8609.00.00, HTSUS (2008) and whether the repair parts for the steel racks, when imported separately, may also qualify for duty-free treatment under subheading 9803.00.50, HTSUS. Our decision follows.
FACTS
The following facts are from your February 5, 2008, and your March 10, 2008, letters. The subject steel racks will be used to hold Honda work trucks. The steel racks will be imported empty from China, inspected in the United States, and then shipped to Guadalajara, Mexico where they will be loaded with work trucks to be transported by 53 foot trailer trucks (ten trucks per trailer truck load) to the United States. Once the trucks are unloaded in the U.S., the racks will be broken down and sent back to Mexico (95 racks per trailer truck load).
The steel racks are made of heavy gauge steel, have four collapsible posts, and an open top. The racks also have pockets on the bottom to facilitate movement by a fork lift truck. You have included pictures of loaded racks as well as the schematics of the racks. The anticipated life cycle of the racks is 20 uses and approximately 5,000 racks will be used each year. Honda may also import spare parts to permit the repair of the racks that are damaged during transportation.
ISSUES
1. Whether the steel racks may receive treatment as instruments of international traffic under 19 U.S.C. § 1322(a)(1999) and 19 C.F.R. § 10.41a(a)(1)(2008).
2. Whether the steel racks are considered "containers" within the meaning of 10.41a(g)(2008).
3. Whether the repair parts described herein may be entered duty-free pursuant to 19 C.F.R. § 10.41a(a)(2)(2008).2
LAW AND ANALYSIS
Issue 1
Subheading 9803.50.00, HTSUS provides for the duty-free treatment of:
Substantial containers and holders, if products of the United States (including shooks and staves of United States production when returned as boxes or barrels containing merchandise), or if of foreign production and previously imported and duty (if any) thereon paid, or if of a class specified by the Secretary of the Treasury3 as instruments of international traffic, repair components for containers of foreign production which are instruments of international traffic, and accessories and equipment for such containers, whether the accessories and equipment are imported with a container to be reexported separately or with another container, or imported separately to be reexported with a container . . .
(footnote and emphasis added). Subchapter 98 of the HTSUS only applies to:
(a) Substantial containers or holders which are subject to tariff treatment as imported articles and are:
(i) Imported empty and not within the purview of a provision which specifically exempts them from duty; or
(ii) Imported containing or holding articles, and which are not of a kind normally sold therewith or are entered separately therefrom; and (b) Certain repair components, accessories and equipment.
See U.S. Note 1, et seq., Chapter 98, HTSUS.
You assert that the subject steel racks should be given duty-free treatment under 9803.50.00, HTSUS, inasmuch as they are instruments of international traffic. Pursuant to 19 U.S.C. § 1322(a), instruments of international traffic shall be excepted from the application of the Customs laws to the extent that such terms and conditions are prescribed in regulations or instructions. The Customs and Border Protection (CBP) regulations promulgated under the authority of 19 U.S.C. § 1322(a) provides in pertinent part:
Lift vans, cargo vans, shipping tanks, skids, pallets, caul boards, and cores for textile fabrics, arriving (whether loaded or empty) in use or to be used in the shipment of merchandise in international traffic are hereby designated as "instruments of international traffic" . . . The Commissioner of Customs [now CBP] is authorized to designate as instruments of international traffic, . . ., such additional articles or classes of articles as he shall find should be so designated. Such instruments may be released without entry or the payment of duty, subject to the provisions of this section.
19 C.F.R. § 10.41a(a)(1)(emphasis added).
To qualify for entry-free and duty-free treatment as instruments of international traffic under the aforementioned statutory and regulatory authority, the article must be a substantial container or holder. As stated above, CBP is authorized to designate as instruments of international traffic such additional articles not specifically noted in 19 C.F.R. § 10.41a(a)(1). Historically, CBP has held in its published decisions that in order to qualify as an instrument of international traffic within the meaning of 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a(a)(1), an article must be substantial, suitable for and capable of repeated use, and used in significant numbers in international traffic. See HQ H016491 (Oct. 1, 2007); HQ 114150 (Dec. 12, 1997); HQ 107545 (May 7, 1985); Treas. Dec. 71-159, Cust. B. & Dec. 296 (June 18, 1971); 99 Treas. Dec. 533, No. 56247 (Aug. 26, 1964).4
CBP has consistently ruled that certain collapsible steel racks meet the qualifications of being instruments of international traffic. See HQ H007166 (May 10, 2007) (steel racks used to import automobile transmissions); HQ H002927 (Nov. 22, 2006) (steel racks used to import doors); HQ 116047 (Dec. 1, 2003) citing HQ 113687 (Feb. 27, 1997) (steel racks used to import automobile parts) HQ 112303 (Aug. 14, 1992) and HQ 115959 (July 7, 2003) (collapsible steel crates).
Upon reviewing your request and supporting documentation, we find that the steel racks, as described above, meet the requirements of an instrument of international traffic. The racks are substantial in that they are made with heavy-gauge steel; the racks are suitable and capable of repeated use insofar as they can be used 20 times; and the racks will be used in significant numbers in international traffic inasmuch as 5,000 of the racks will be used each year to transport work trucks from Mexico to the United States. Based on the foregoing, the subject steel racks are instruments of international traffic. As such, the racks are eligible for treatment under subheading 9803.50.00, HTSUS, if they are imported empty as you assert and are not within the purview of a provision which specifically exempts them from duty at the time of entry as required by U.S. Note 1, Chapter 98, HTSUS.
Issue 2
You argue that the subject steel racks are "containers" pursuant to 19 C.F.R. § 10.41a(g)(1), which provides in pertinent part:
. . . a container (as defined in Article 1 of the Customs Convention on Containers) that is designated as an instrument of international traffic is deemed to remain in international traffic provided that the container exits the U.S. within 365 days of the date on that it was admitted under this section.
The Customs Convention on Containers defines the term "container" as an:
. . . article of transport equipment (lift-van, movable tank or other similar structure) :
(i) fully or partially enclosed to constitute a compartment intended for containing goods;
(ii) of a permanent character and accordingly strong enough to be suitable for repeated use;
(iii) specially designed to facilitate the carriage of goods, by one or more modes of transport, without intermediate reloading;
(iv) designed for ready handling, particularly when being transferred from one mode of transport to another;
(v) designed to be easy to fill and to empty; and
(vi) having an internal volume of one cubic metre or more;
the term "container" shall include the accessories and equipment of the container, appropriate for the type concerned, provided that such accessories and equipment are carried with the container. The term "container" shall not include vehicles, accessories or spare parts of vehicles, or packaging. Demountable bodies, are to be treated as containers;
Customs Convention on Containers, 1972, Ch. 1, Art. 1(c), et seq.
Based on our review of the facts that you provided in your ruling request, we cannot conclude that the subject steel racks are "containers" within the meaning of the foregoing Convention. Although it appears that elements (ii) -(iv) have been met, we cannot conclude that elements (i), (v), and (vi) have been met. With regard to element (i), based on the photos and dimensions of the rack you submitted with your ruling request, the rack is not fully or partially enclosed. The sides of the rack are open notwithstanding the four upright posts. The posts appear to facilitate the stacking of the steel racks rather than "containing" the work trucks insofar as the trucks are secured to the bottom of the rack by the tire-sized grooves and the front and back of the trucks are tethered to the bottom of the rack. With regard to element (vi), we are not convinced that the steel racks have an internal volume, e.g. three dimensions, of one cubic metre or more, e.g. cubic capacity, when the container has no sides. Last, with regard to element (v), filling and emptying, much like element (i) which requires full or partial enclosure and element (iv), which requires cubic capacity, implies that the container have volume, which as we have stated, we do not believe the racks are capable of.
Issue 3
You assert that the repair parts5 for the steel racks are subject to duty-free entry pursuant to 19 C.F.R. § 10.41a(a)(2), which provides in pertinent part:
Repair components, accessories, and equipment for any container of foreign production which is an instrument of international traffic may be entered or withdrawn from warehouse for consumption without the deposit of duty if the person making the entry or withdrawal from warehouse files a declaration that the repair component was imported to be used in the repair of a container of foreign production which is an instrument of international traffic, or that the accessory or equipment is for a container of foreign production which is an instrument of international traffic. The port director must be satisfied that the importer of the repair component, accessory, or equipment had the declared intention at the time of importation.
Consistent with the foregoing regulation, CBP has held that repair parts for foreign-produced instruments of international traffic would receive duty-free treatment if the remaining conditions of the regulation were met. See HQ 113339 (Mar. 10, 1995) and HQ 113135 (June 21, 1994) (holding that repair components for refridgerated containers may be entered duty-free); see also, HQ 116622 (Mar. 13, 2006) (holding that repair components for tank containers may be entered duty-free). The subject steel racks are made in China, e.g. of foreign production, and as stated in Issue 1 above, these racks would be considered instruments of international traffic. As such, upon entry of the upright supports, if Honda files a declaration that the upright supports are to be used in the repair of the subject steel racks and the port director where the upright supports are entered is satisfied that they were intended to be imported as repair components for the steel racks at the time of importation, the upright supports may be entered without the deposit of duty.
You assert that the subject steel racks may also be classified in subheading 8609.00.0000, HTSUS (2008). The classification of steel racks are under the purview of another branch within this office. As such, this branch is not issuing a ruling with regard to this issue and will refer the issue to the Tariff Classification and Marking Branch for their direct response to you.
HOLDING
1. The steel racks, as described above, are hereby designated as instruments of international traffic within the meaning of 19 U.S.C. § 1322(a) and pursuant to 19 C.F.R. § 10.41a(a)(1).
2. The steel racks are not "containers" within the meaning of 19 U.S.C. § 10.41a(g)(1).
3. The upright supports for the steel racks as described above may be entered duty-free as repair components pursuant to 19 C.F.R. § 10.41a(a)(2) if Honda files the appropriate declaration with the port director at the time of importation and the port director is satisfied that the upright supports were intended to be imported as repair components for the steel racks at the time of importation.
Sincerely,
Glen E. Vereb
Chief
Cargo Security, Carriers and Immigration Branch
1 Hereinafter, references to subheading 9803.50.00, HTSUS are to the 2008 version of that subheading.
2 Hereinafter, references to all subsections of 19 C.F.R. § 10.41a are to the 2008 version of that regulation.
3 Customs revenue functions have been delegated to the Secretary of Homeland Security by the Secretary of Treasury, with exceptions herein not applicable, under the authority of the Homeland Security Act of 2002, Pub. L. 107-296. See Treas. Dep't Order 100-16 (May 15, 2003).
4 The requirement that an article be "substantial" is not only a threshold requirement under 9803.50.00, supra, but also a requirement for an article to be an instrument of international traffic pursuant to CBP decisions. The origin for the criterion found in CBP decisions that an article be "substantial" is found in Schedule 8, Item 808.00 of the Tariff Schedule of the United States (1963)(TSUS), the predecessor provision to 9803.50.00, HTSUS. Likewise, the criterion that an article be "suitable for and capable of repeated use" is found in Schedule 8, Item 808.00, TSUS, Headnote 6(b)(ii)(stating that the article must be capable of "reuse"). Although the requirement that an article be capable of reuse is no longer under subheading 9803.50.00, HTSUS (the successor provision to Item 808.00, TSUS), to receive duty-free treatment thereunder nevertheless, "reuse" is still required, pursuant to CBP decisions, for an article to be considered an instrument of international traffic.
5 Initially we note that insofar as the only repair parts specifically mentioned in your ruling request are the upright supports (legs), this ruling will only apply to those repair parts.