OT:RR:BSTC:CCR H309674 MNM
Mr. Leonard Noto
Global Craft Trading, Inc. 901 East E Street, Suite 201
Wilmington, CA 90744
RE: Instruments of International Traffic; 19 U.S.C. § 1322(a); 19 C.F.R. § 10.41a(a)(1); HTSUS subheading 9803.00.50; Nagano Trading; stainless steel kegs.
Dear Mr. Noto:
This is in response to your ruling request, dated January 31, 2020, and follow-up information submitted on behalf of Nagano Trading (“Nagano”). In your submission, you request a ruling concerning whether certain stainless steel beer kegs, as described below, qualify as instruments of international traffic (“IIT”) and are therefore classifiable under subheading 9803.00.50 of the Harmonized Tariff Schedule of the United States (“HTSUS”). Our decision follows.
FACTS
The subject articles are beer kegs constructed of stainless steel and used to transport beer out of the United States. Your ruling request indicates that the subject kegs will have D-system valves. You state that the subject kegs are of German origin and that Nagano anticipates an initial amount in the first of the below scenarios 6,000 kegs worth of orders and an estimated 3,000 kegs in rotation. In the second of the below scenarios Nagano estimates that they will have 3,000 kegs worth of orders.
The first scenario is one wherein empty steel beer kegs are imported from Nagano in Japan by U.S. breweries. These kegs will arrive in the Port of Los Angeles/Long Beach. Nagano owns a float of their own steel kegs and also uses two keg leasing companies. GCT handles the U.S. logistics to transport the empty kegs to the U.S. breweries to be filled with beer. Subsequently, these filled kegs will be shipped back to Nagano in Japan where the beer, not the kegs, will be dispensed and sold. After the leased kegs are dispensed in Japan, Nagano will ship them back to GCT’s warehouse in Wilmington, California, and GCT arranges the pickup of these leased kegs by the respective leasing companies. The second scenario is one wherein steel kegs owned by U.S. breweries are filled with beer in the U.S. and shipped to Nagano. When empty, Nagano returns the kegs to the U.S. breweries. Only a deposit is paid by Nagano for use of the kegs. Once returned, the deposit is refunded to Nagano.
Both of these scenarios will continue for the useful life of a keg, which can be up to 15-30 years. On average, you report that each keg will remain in the United States for approximately 45-60 days, and for no longer than one year. GCT will be filing the IIT bond in both scenarios.
ISSUE
Whether the subject stainless steel beer kegs are IITs within the meaning of 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a(a)(1).
LAW AND ANALYSIS
Pursuant to 19 U.S.C. § 1322(a), “[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 relevant CBP regulations implementing this statute are found at 19 C.F.R. § 10.41a, which authorizes the CBP Commissioner to designate as IITs such additional articles not specifically noted in that section. Once designated as such, an IIT may be released without entry or payment of duty.
Subheading 9803.00.50, Harmonized Tariff Schedule of the United States (“HTSUS”) provides, in pertinent part, 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.
Once again, the relevant CBP regulations implementing 19 U.S.C. § 1322(a) 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.
CBP has held in its published decisions that in order to qualify as an IIT pursuant to 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a(a)(1), an article must be used as a container or holder in international traffic. See 19 C.F.R. 10.41a (“in use or to be used in the shipment of merchandise in international traffic”); see also, e.g., HQ H016491 (Oct. 1, 2007); HQ 114150 (Dec. 12, 1997); and HQ 107545 (May 7, 1985). Next, the article must be substantial, suitable for and capable of repeated use, and used in significant numbers in international traffic. See, e.g., 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). CBP has interpreted “reuse” in this context to mean practical, commercial reuse, not incidental reuse. See Holly Stores, Inc. v. United States, 697 F.2d 1387, 1388 (Fed. Cir. 1982), aff’g 534 F. Supp. 818 (Ct. Int’l Trade 1981). We have, furthermore, held that “repeated use” means “more than twice.” See, e.g., HQ 108658 (Nov. 21, 1986).
Based upon a review of the information you submitted, we find that the subject stainless steel beer kegs are used as containers in international traffic, are substantial, suitable for and capable of repeated use, and used in significant numbers in international traffic. The subject beer kegs are used as containers to the extent that they are imported empty in both scenarios, and exported carrying beer that was loaded inside the United States. The subject kegs are substantial inasmuch as they are made of stainless steel. The kegs are suitable for and capable of repeated use insofar as they can be used continuously for fifteen to thirty years. Furthermore, the subject kegs are used in significant numbers in international traffic inasmuch as up to 6,000 kegs across both scenarios will be in circulation. We also find that the subject beer kegs are similar to those designated as IITs in HQ 303749 (Jun. 13, 2019), in which we granted IIT status to stainless steel kegs (some with D-system valves) with barcodes used to import beer from outside the U.S. See also, HQ 109634 (Aug. 11, 1988) (kegs of “stainless steel construction” marked “with their own unique serial numbers” that were used to import beer from the Netherlands); HQ 548257 (Mar. 19, 2003) (“reusable barrels” for beer).
Based on the foregoing, the subject stainless steel beer kegs 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.
We also provide the following information regarding the subject kegs’ tariff classification and potential duty implications for your reference. Imported steel kegs are designed for repetitive beverage transportation and distribution. You do not indicate all keg sizes, but they appear to range up to 30-liter capacity. The information provided also indicates that the valve configurations include D-system valves. Should the subject kegs enter domestic commerce, the applicable tariff classifications are as follows:
The applicable subheading for the steel kegs of a circular cross section with a capacity measuring specifically between 11.4 liters and 26.6 liters will be 7310.29.0020, HTSUS, which provides for Tanks, casks, drums, cans, boxes and similar containers, for any material (other than compressed or liquefied gas), of iron or steel, of a capacity not exceeding 300 liters, whether or not lined or heat insulated, but not fitted with mechanical or thermal equipment: Of a capacity of less than 50 liters: Other: Containers, of circular cross section, of a volume capacity between 11.4 liters and 26.6 liters, of a kind used for the conveyance of goods. The rate of duty will be free.
The applicable subheading for any other steel kegs of a capacity of less than 50 liters will be 7310.29.0055, HTSUS, which provides for Tanks, casks, drums, cans, boxes and similar containers, for any material (other than compressed or liquefied gas), of iron or steel, of a capacity not exceeding 300 liters, whether or not lined or heat insulated, but not fitted with mechanical or thermal equipment: Of a capacity of less than 50 liters: Other: Other. The rate of duty will be free.
Please also note that, should the instant goods enter domestic commerce, they may be subject to antidumping duties and countervailing duties (“AD/CVD”) for stainless steel kegs from Germany. Written decisions regarding the scope of AD/CVD orders are issued by the Enforcement and Compliance office in the International Trade Administration of the Department of Commerce and are separate from CBP tariff classification and origin rulings. You can contact them at http://trade.gov/enforcement/ (click on “Contact Us”). You can view a list of current AD/CVD cases at the United States International Trade Commission website at http://www.usitc.gov (click on “Import Injury” under “Investigations” at the top of the screen), and you can search AD/CVD deposit and liquidation messages using CBP’s AD/CVD Search tool at https://aceservices.cbp.dhs.gov/adcvdweb/.
HOLDING
The subject stainless steel beer kegs are IITs within the meaning of 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a(a)(1). Should they enter or be diverted into the commerce of the United States, however, the subject kegs are dutiable as described above.
Sincerely,
Lisa L. Burley
Chief/Supervisory Attorney-Advisor
Cargo Security, Carriers and Restricted Merchandise Branch
Office of International Trade, Regulations and Rulings
U.S. Customs and Border Protection