BOR-07-OT:RR:BSTC:CCR H303170 TNA
Matthew R. Nicely
Daniel M. Witkowski
Hughes Hubbard & Reed LLP
1775 I Street NW, Suite 600
Washington, DC 20006
RE: Instruments of International Traffic; 19 U.S.C. § 1322(a); 19 C.F.R. §§ 10.41a(a)(1); HTSUS subheading 9803.00.50; Origin Point Brands, LLC; Collapsible Steel Container Racks
Dear Mr. Nicely:
This is in response to your February 20, 2019, ruling request to the National Commodity Specialist Division (“NCSD”) on behalf of Origin Point Brands, LLC. The NCSD forwarded your request to this office on March 11, 2019. In your submission, you request a ruling concerning whether certain collapsible steel container racks qualify as instruments of international traffic (IITs) and are therefore classifiable under subheading 9803.00.50 of the Harmonized Tariff Schedule of the United States (HTSUS). Our decision follows.
FACTS:
The following facts are from your February 20, 2019 ruling request and your March 8, 2019, email to the NCSD, which clarified your request for confidentiality for certain items contained within this ruling request. The subject items consist of collapsible steel container racks without shelves that are made in China. They are used in shipping containers to keep merchandise off the container floor, and to keep merchandise from moving around within the container. These racks’ design allows them to be lifted and moved via forklift.
The subject steel racks are manufactured in two ways. The first set of racks consist of a raised metal base into which metal vertical supports are inserted. The vertical supports can be connected at the top with additional horizontal steel poles in order to maintain a basket structure. The base dimensions of the racks vary. The height of the racks are designed to fit inside 40-foot high shipping containers. Approximately 300 of these racks are currently used in international traffic. The second type of rack consists of a raised metal base and vertical supports which can be folded into an upright position and locked in place. These racks also come in a variety of base dimensions. These racks are also designed to fit inside 40-foot shipping containers. The metal on these racks are powder coated to provide additional durability. These racks are currently still in production, but 1,500 of them are expected to be produced for circulation. Each container destined for the United States can hold up to [] of the smallest size racks, though the exact number used in any shipment will depend on the base size of the racks. Furthermore, you several hundred racks will be in use at any given time. Each steel rack is expected to make a round trip between China and the United States three to four times per year. Each rack will be in use for four to five years.
Both types of racks will be used in shipping merchandise from China to the United States. The primary ports of arrival will be Charleston, South Carolina and Houston, Texas. Once the loaded racks reach the United States, they will be emptied, and the merchandise that they transported will be put into a warehouse. The racks will be broken down and stored until there are a sufficient number of racks to fill a container, at which point the racks will be sent back to China to be reused. The racks will not go into U.S. commerce or be sent to customers receiving the merchandise they carried.
The following are images of the racks at issue and were taken from your ruling request. The first image is of an empty rack. The second and third images are of the rack holding the merchandise it transports.
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ISSUE
Whether the subject collapsible steel racks are IITs within the meaning of 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a(a)(1).
LAW AND ANALYSIS
Per 19 C.F.R. § 141.4(a), “all merchandise imported into the United States is required to be entered, unless specifically excepted.” The four exceptions to the requirement of entry are listed under 19 C.F.R. § 141.4(b), one of which is instruments of international traffic. 19 C.F.R. § 141.4(b)(3).
Subheading 9803.00.50, 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 Treasury 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.
Pursuant to 19 U.S.C. § 1322(a), IITs 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 relevant CBP regulations implementing that statute are found at 19 C.F.R. § 10.41a(a)(1) which 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.
19 C.F.R. § 10.41a(a)(1)(emphasis added).
Such instruments may be released without entry or the payment of duty, subject to the provisions of this section.
To qualify for entry-free and duty-free treatment as IITs 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 an IIT such additional articles not specifically noted in 19 C.F.R. § 10.41a(a)(1). To qualify as an IIT within the meaning of 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a(a)(1), an article used as a container or holder must be: (1) substantial, (2) suitable for and capable of repeated use, and (3) used in significant numbers in international traffic. See HQ H291037 (Jan. 9, 2018); 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).
The subject collapsible container racks are substantial inasmuch they are made of steel and have a life expectancy of four to five years. These items are also suitable for and capable of reuse, in that they are reused an average of three to four times a year for each year of their life expectancy. The concept of reuse contemplated above is for commercial shipping or transportation purposes, and not incidental or fugitive uses. See Tariff Classification Study, Sixth Supplemental Report (May 23, 1963) at 99; Holly Stores, Inc. v. United States, 697 F.2d 1387 (Fed. Cir. 1982). In addition, 300 of the first type of racks are currently in circulation, and 1,500 of the second type are expected to be in circulation once production is complete.
Furthermore, CBP has consistently held that steel racks of a similar type to the ones at issue qualify as instruments of international traffic. See HQ H286143, dated June 20, 2017 (steel racks used to transport automobile parts in sea containers); HQ H022952, dated November 22, 2006 (steel racks used to transport Honda work trucks); HQ 116240, dated July 23, 2004 (steel film frames and plastic cases); HQ H007166 (May 10, 2007) (steel racks used to transport automobile transmissions); HQ H002927 (Nov. 22, 2006) (steel racks used to import doors); HQ H113687 (Feb. 27, 1997) (collapsible metal racks used to import automobile parts). Based on the foregoing, the subject steel racks are IITs; therefore, they will qualify for entry-free and duty-free treatment as IITs pursuant to 19 C.F.R. § 10.41a(a)(1) and subheading 9803.00.50 HTSUS.
HOLDING
The subject collapsible steel container racks are IITs within the meaning of 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a(a)(1).
Sincerely,
Lisa L. Burley
Chief/Supervisory Attorney-Advisor
Cargo Security, Carriers and Restricted Merchandise Branch
Office of Trade, Regulations and Rulings
U.S. Customs and Border Protection