BOR-4-07-OT:RR:BSTC:CCI H055197 LLB
Mr. Randall Amerine
Lo Jack Supply Chain Integrity
10374 Wateridge Circle #337
San Diego, California 92121
RE: Instruments of International Traffic; 19 U.S.C. § 1322(a); 19 C.F.R. §§ 10.41a(a)(1) and (3); Covert tracking devices; Accessories; Wood Pallets; Subheadings 9803.00.50 , Harmonized Tariff Schedule of the United States Annotated (2009).
Dear Mr. Amerine:
This is in response to your March 6, 2009, letter, supplemented by your consultant, Ms. Mary Alexander's, March 30, 2009, letter. In your March 6, 2009, letter, you request a ruling concerning whether your company's Covert Tracking Devices, as described below, qualify as accessories to instruments of international traffic (IIT) under 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a(a)(1) and (3), and therefore, qualify for duty-free treatment under subheading 9803.00.50 of the Harmonized Tariff Schedule of the United States (HTSUS)(2009). Our decision follows.
FACTS
The following facts are from your March 6, 2009, letter and the above-referenced March 30, 2009, letter. The subject Covert Tracking Devices (CTDs) are small wireless and wired locator General Positioning Devices that are capable of being tracked through an internal antenna using GPS and cellular technology. In Mexico, Lo Jack SCI's (Lo Jack) customers would insert or attach the CTDs to wooden pallets or intermodal shipping containers, or hide them in the cargo for shipment to the United States or through the United States to Canada. The intermodal shipping containers are standard heavy-duty steel or aluminum closures with sealable doors. The containers are 40 x 8 x 8.6 feet with an internal volume of 2,385 cubic feet. The wooden pallets are "stringer" and "block" design 42 x42, 48 x 48, and 40 x 48 inches. Once the merchandise reaches its destination, the customer removes the tracking devices from their pallets, intermodal containers, or from its hiding place in the cargo. The anticipated life cycle of the CTDs is 52 uses per customer and approximately 5,000 CTDs will be used each year.
ISSUE
Whether the CTDs are accessories of IITs, specifically, the intermodal shipping containers and pallets, as described above, under 19 U.S.C. § 1322(a)(1999) and 19 C.F.R. § 10.41a(a)(3).
LAW AND ANALYSIS
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 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.
You assert that the CTDs should be given duty-free treatment under 9803.50.00, HTSUS, inasmuch as they are accessories of IITs. 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 Customs and Border Protection (CBP) regulations promulgated under the authority of 19 U.S.C. § 1322(a) provide 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 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). Historically, CBP has held in its published decisions that in order 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 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).
Further, IITs as used in 19 C.F.R. § 10.41a, "includes the normal accessories and equipment imported with any such instrument which is a "container" as defined in Article 1 of the Customs Convention on Containers. See 19 C.F.R. § 10.41a(a)(3). 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.
Thus, in order to be considered an accessory to an IIT under 10.41a(a)(3), not only would the instrument for which the accessory will be used have to be an IIT under 19 C.F.R. § 10.41a(a)(1), but also a "container" pursuant to the foregoing Convention.
You assert that the CTDs will be attached to intermodal containers and wood shipping pallets, as described above, or be hidden among the cargo. With regard to the intermodal containers, CBP has held that those instruments are IITs under 19 C.F.R. § 10.14a(a)(1) as well as "containers" pursuant to the Convention. See HQ H044900 (Dec. 18, 2008) and HQ 116684 (Aug. 17, 2006). With regard to the pallets, CBP has consistently ruled that certain wooden pallets meet the qualifications of being an IIT. See HQ 112705 (May 21, 1993) and HQ 103073 (Jan. 11, 1978). However, based on our review of the facts that you provided in your ruling request, we cannot conclude that the wooden pallets 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 the March 30, 2009, letter, the rack is not fully or partially enclosed. With regard to element (vi), a pallet cannot have an internal volume, e.g. three dimensions, of one cubic metre or more, e.g. cubic capacity, when a pallet 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 pallets are capable of. We note that the CTDs, when embedded in the cargo itself, would not qualify as an accessory of an IIT. When embedded in the cargo or shipment, the CTDs serve no purpose to the IIT itself, rather, it would be more akin to being an accessory of the cargo, e.g. the container would not be tracked, the merchandise would be tracked.
Upon reviewing your request and supporting documentation, we find that the intermodal containers, as described above, meet the requirements of an IIT and as a "container" under the Convention. Therefore, the CTDs when attached or placed within such container, would be considered an accessory to an IIT within the meaning of 19 C.F.R. § 10.41a(a)(3). Accordingly, the foregoing use of the CTDs would qualify for duty-free treatment under subheading 9803.00.50 of the HTSUS. However, although the pallets are considered IITs, they are not "containers" pursuant to the Convention. Accordingly, the CTDs cannot be accessories to the wooden pallets under 19 C.F.R. § 10.41a(a)(3) and will not qualify for duty-free treatment under subheading 9803.00.50, HTSUS. In addition, the CTDs use inside the cargo itself would not qualify as an accessory to an IIT insofar as the CTD would be used to track the merchandise and not the instrument, i.e. the container, itself.
HOLDING
The CTDs, as described above, are hereby designated as accessories to IITs within the meaning of 19 U.S.C. § 1322(a) and pursuant to 19 C.F.R. § 10.41a(a)(3) when used with intermodal containers; however, the CTDs are not accessories to IITs under the foregoing authority if they are used with pallets or embedded within the cargo.
Sincerely,
Glen E. Vereb, Chief
Cargo Security, Carriers and Immigration Branch