BOR-7-07-CO:R:IT:C 112393/112273 MLR
Bruce N. Shulman, Esq.
Stein, Shostak, Shostak & O'Hara
1620 L Street, N.W., Suite 807
Washington, D.C. 20036-5605
RE: Instruments of International Traffic; Pallet Set;
19 U.S.C. 1322
Dear Mr. Shulman:
This is in response to your letter dated July 30, 1992, on
behalf of Tokico (USA), Inc., requesting a ruling that certain
pallet sets be designated as instruments of international traffic
(IIT). Our ruling is set forth below.
FACTS:
Tokico (USA) Inc. of Berea, Kentucky, uses re-usable pallet
sets when importing automotive struts from Japan. The pallet
sets are made of molded plastic and manufactured in Japan. The
sets are constructed to enable secure stacking of multiple trays
onto a base pallet, with a cap protecting the top. Each set is
approximately 47 1/4" in length and 44 3/4" in width. The record
contains photographs of the pallet sets in question.
The sets will arrive at Los Angeles, Seattle, Louisville,
and Detroit. The pallet sets may be delivered to a shock
absorber manufacturing facility in Kentucky, where Tokico will
further assemble and manufacture the imported struts for delivery
to various automobile manufacturers. After Tokico has removed
the struts, the empty pallet sets will be shipped back to Japan
and used to transport automotive struts to the United States. It
is anticipated that Tokico will ship the empty pallet sets back
to Japan approximately every two to four weeks.
The pallet sets may also be delivered to Tokico in Detroit,
where it maintains a two-week inventory of struts for use in
supplying a joint venture between an American and Japanese
manufacturer of automobiles. Tokico will deliver the filled
pallet sets to the joint venture every day. It is anticipated
that the empty pallet sets will be returned to Tokico by the
joint venture on a daily basis, and that Tokico will send the
empty pallet sets back to Japan for eventual reimportation of
automotive struts.
ISSUE:
Whether re-usable, plastic pallet sets used to import
certain automotive struts from Japan may be designated as
instruments of international traffic within the meaning of 19
U.S.C. 1322(a) and section 10.41a, Customs Regulations (19 CFR
10.41a).
LAW AND ANALYSIS:
Title 19, United States Code, section 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
section 322(a) are contained in section 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.
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 section 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 (HTSUS), and former Headnote 6(b)(ii), Tariff Schedules
of the United States (TSUS), 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.
Upon reviewing the information provided, we are of the
opinion the above requirements have been met. In addition,
Customs has previously ruled that pallets of a similar use as
those under consideration qualify as instruments of international
traffic pursuant to 19 U.S.C. 1322(a) and section 10.41a, Customs
Regulations (see T.D. 76-203, T.D. 68-56, and Customs Ruling
109378 and 111979).
The designation of a container or holder as an IIT becomes
effective only when used as such upon its arrival in this country
in foreign trade, either empty or with merchandise. If the
holder or container is brought into the country by a party other
than the one who is using it as an IIT, it is subject to entry as
imported merchandise. The principal on the IIT bond is the party
who is using the holder or container as an IIT.
Since we have designated the pallets as instruments of
international traffic, they are classifiable under the third
proviso of 9803.00.50 of the Harmonized Tariff Schedule of the
United States. However, contrary to the markings required by 19
CFR 10.41b for holders or containers of United States manufacture
for which free clearance under subheading 9801.00.10, HTSUS, is
claimed; or for holders or containers of foreign manufacture for
which free clearance under subheading 9803.00.50, HTSUS, is
claimed; section 10.41a does not provide that designated
instruments of international traffic be marked in any particular
manner. The applicant is required to properly identify the
instruments to the satisfaction of Customs officers as those
covered by the required bond. Please check with the district
director of the planned port of entry to determine what method of
identification is satisfactory. Customs Ruling 101901.
For purposes of this ruling, we will assume that there is no
diversion of the pallet sets from a use in international traffic.
More particularly, we will assume that the pallet sets will not
be used for storing the struts, and that the use of the pallet
sets in the manufacturing facilities where the struts are needed
and unloaded, is not an incidental use.
HOLDING:
Reusable, plastic pallet sets used to import certain
automotive struts from Japan are designated as instruments of
international traffic within the meaning of 19 U.S.C. 1322(a) and
section 10.41a, Customs Regulations (19 CFR 10.41a).
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch