BOR-4-07:OT:RR:BSTC:CCI H218556 WRB
Lawrence W. Hanson, Esq.
The Law Office of Lawrence W. Hanson, P.C.
One Riverway
Suite 2300
Houston, TX 77056
RE: Instruments of International Traffic; 19 U.S.C. § 1322(a); 19 CFR 10.41a; Shipping Containers and Boxes
Dear Mr. Hanson:
This is in response to your letter, dated September 19, 2011, in which you requested a ruling on behalf of your client, Shin-Etsu America, Inc. (“SEH-A”), on whether certain shipping containers qualify as “instruments of international traffic” within the meaning of 19 U.S.C. § 1322(a) and 19 CFR § 10.41a. Our ruling is set forth below.
FACTS:
Shin-Etsu America, Inc., is part of the largest producer of semiconductor silicon in the world; Shin-Etsu Handotai, Ltd. (“SEH”), headquartered in Tokyo, and is an integral part of the Shin-Etsu group of companies. In its Vancouver, Washington, facility, SEH-A manufactures single-crystal silicon ingots, polished and epitaxial wafers, and provides service and engineering support for customers.
Silicon wafers are sliced from an ultra-pure crystalline ingot, polished, and processed by SEH-A’s customers through the addition of circuit patterns arranged in tiny patterns to produce computer chips. These chips are then separated and packaged into electronic components that are at the heart of many products, including computers, lasers, automotive electronics, telecommunications and consumer products. The silicon wafers are manufactured to extremely precise specifications and require delicate handling to avoid damaging the wafers.
Front Opening Shipping Boxes:
In order to handle, package, transport, and ship the silicon wafers, SEH-A and its parent company have developed specialized carrying cases and containers for the silicon wafer products. The wafers are stored and transported in proprietary containers called Front Opening Shipping Boxes or “FOSB” boxes. The FOSB boxes are manufactured by a Shin Etsu subsidiary and are specifically designed to hold various sizes of silicon wafers. FOSB boxes are manufactured from polycarbonate plastic and are designed to be completely sealed, to prevent contaminants from entering the container and damaging the wafers. FOSB boxes are used to transport wafers through various stages of the manufacturing quality control testing area of SEH-A’s factory and the wafers are packed and shipped in the same FOSB box.
The FOSB boxes are used as containers and holders for silicon wafers and are manufactured from hard polycarbonate plastic. FOSB boxes are loaded with wafers and covered in an aluminum and/or plastic protective covering for an added layer of protection. Silicon wafers are shipped to SEH-A’s customers in loaded FOSB boxes designed to maintain the cleanliness and integrity of the product upon arrival. The durable manufacture of FOSB boxes allows for multiple shipments and uses. The FOSB boxes cost approximately $41.00 each and are reused again and again for shipment, packaging, and protection of silicon wafers. SEH-A estimates eleven thousand (11,000) FOSB boxes are being used with many of those used in the international shipment of various silicon wafers and the remainder used for storage and eventual transport of silicon wafers.
The Front Opening Shipping Boxes are depicted below:
Hyboxes and SKY Cubes:
The delicate nature of the silicon wafer products requires two levels of protection when transporting or shipping the products. The wafers are sealed and secured first inside the FOSB boxes, which are then wrapped with a protective covering. The sealed FOSB boxes are then packed in plastic and foam boxes referred to as “Hyboxes” or polypropylene and polyethylene boxes called “SKY Cubes” for shipment. Each Hybox or SKY Cube holds approximately twelve FOSB boxes surrounded by protective foam secured by a tight-fitting plastic shell. The sole purpose and design of the Hyboxes and Sky Cubes is to protect FOSB boxes and their silicon wafer contents during transport and shipment. The durability and reusability of the Hyboxes & Sky Cubes makes them suitable for international shipping and protecting their contents. SEH-A uses the more durable SKY Cubes for ocean and land freight arrangements while the lighter Hyboxes are used for international air freight operations.
Hyboxes are used for international air freight operations as containers and holders for FOSB boxes and indirectly for silicon wafer products. The Hybox is a protective shipping container for FOSB boxes and silicon wafers. The Hybox is constructed of several pieces of plastic and foam that form a secure container for shipping the FOSB boxes, both full of wafers as well as empty. The Hyboxes are able to be disassembled and folded into a compact size when not in use and reassembled into their fully functional form when FOSB boxes are ready for shipment. Hyboxes are manufactured in Germany for SEH-A’s parent company in Japan and imported into the United States from Japan. SEH-A currently owns 500 Hyboxes which will be integrated into the shipping process in the next year.
The SKY Cubes are very similar to Hyboxes in both form and function but are manufactured from plastics in Japan. SKY Cubes contain plastic and styrofoam internals that organize and secure the FOSB boxes for shipping. SEH-A and its parent company in Japan use an estimated 1000 Sky Cubes for shipment of FOSB boxes and silicon wafers.
Hyboxes and SKY Cubes cost approximately $550.00 each and are designed to be reused many times. SEH-A estimates one thousand (1000) SKY Cubes are presently in use along with five hundred (500) Hyboxes being integrated into SEH-A’s international shipping operations for customers who require air freight or other specialized shipping instructions as well. The majority of these SKY Cubes and Hyboxes are currently used for shipment of FOSB boxes containing silicon wafers.
The Hybox and SKY Cube are depicted below, illustrating the similarities and slight differences between SKY Cubes and Hyboxes:
ISSUE:
Whether the shipping containers described above qualify as “instruments of international traffic” within the meaning of 19 U.S.C. § 1322(a) and 19 CFR § 10.41a?
LAW AND ANALYSIS:
Title 19, United States Code, section 1322(a) (19 U.S.C. § 1322(a)), provides, in pertinent part, that “[v]ehicles and other instruments of international traffic…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…” The CBP Regulations issued under the authority of § 1322(a) are contained in section 10.41 et seq. (19 CFR § 10.41a). Pursuant to 19 CFR 10.41a(a)(1), the Commissioner of Customs and Border Protection (CBP) is authorized to designate as IITs such additional articles not specifically noted in that section. Once designated as such, the instruments may be released without entry or payment of duty. To qualify as an IIT within the meaning of 19 U.S.C. § 1322(a) and the regulations promulgated pursuant thereto (19 CFR § 10.41 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 Harmonized Tariff Schedule of the United States (“HTSUS”) subheading 9803.00.50; Tariff Schedule of the United States Headnote 6(b)(ii). See also CBP Rulings HQ 104766 and HQ 108084. 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). CBP has consistently held that single use is not sufficient; reuse means more than twice. See, e.g., CBP Rulings HQ 105567 and HQ 108658.
Subheading 9803.50.00, HTSUS (2010) provides, in pertinent part, for the duty free treatment of:
Substantial containers and holders, if products of the United States . . . , 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 supplied).
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 ask that the subject shipping containers be considered as 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), 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 CFR § 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 CFR § 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 CFR § 10.41a(a)(1), a container or holder 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).
We have previously considered similar merchandise. In HQ 116641, dated June 15, 2006, we examined the use of reusable plastic cassettes for the shipment of finished computer hard disks. The cassette body consisted of three pieces; a top piece and bottom piece consisting of polypropylene, and a middle piece, consisting of polycarbonate, which held the disks. In that matter, finished disks were placed into the cassette body, one disk per slot, for a total 25 disks per cassette. We are of the opinion that the subject Front Opening Shipping Boxes, or “FOSB” boxes, are sufficiently similar in function and design to be analogous to the cassettes discussed in HQ 116641.
Similarly, in HQ 115108, dated August 24, 2000, we examined shipping hampers designed to protect delicate ceramic logs during transit. The hampers consisted of pallets and tops, plastic outer rings, plastic and cardboard pads, and form trays. The plastic bottom pallet formed the bottom of the hamper; the plastic top pallet formed the cover or lid of the hamper; the plastic outer ring formed the four sides of the hamper and could be folded down for return voyages; the plastic pad was placed on the top of the bottom pallet; the form tray was used to stack the ceramic logs within the hamper; and, the cardboard pad was used between each ceramic log. Likewise, HQ 112503, dated December 2, 1992, we examined certain collapsible, hardwood containers utilized for the transport and protection of large rolls of audio and visual magnetic tape. These containers were constructed of hardwood and reinforced steel and/or cast iron panels, and were self-collapsing, able to be folded for efficient storage and transport. We are further of the opinion that the subject Hyboxes and SKY Cubes are similar in function to the pallets designated as IITs in ruling HQ 115108 and HQ 112503.
Upon reviewing the request, the subject FOSB boxes, as well as the SKY Cubes and Hybox containers, appear to be substantial, suitable for, and capable of repeated use, and will be used in significant numbers in international traffic. Furthermore, CBP has previously ruled that items of similar use and construction as the subject merchandise qualify as “instruments of international traffic” pursuant to 19 U.S.C. § 1322(a) and 19 CFR § 10.41a. Accordingly, the FOSB boxes, as well as the SKY Cubes and Hybox containers, qualify as “instruments of international traffic.” The instruments may be released without entry or payment of duty and are eligible for treatment under subheading 9803.00.50, Harmonized Tariff Schedule of the United States (“HTSUS”).
HOLDING:
The Front Opening Shipping Boxes or “FOSB” boxes, as well as the SKY Cubes and Hybox containers, described in the FACTS section above qualify as “instruments of international traffic” within the meaning of 19 U.S.C. § 1322(a) and 19 CFR § 10.41a and may be released without entry or the payment of duty.
Sincerely,
George Frederick McCray
Supervisory Attorney-Advisor/Chief
Cargo Security, Carriers and Immigration Branch
Office of International Trade, Regulations & Rulings
U.S. Customs and Border Protection