BOR-07-OT:RR:BSTC:CCR H312157 TNA
Cameron W. Roberts
Roberts & Kehagiaris LLP
Attorneys and Counselors at Law
One World Trade Center, Suite 2350
Long Beach, CA 90831
RE: Instruments of International Traffic; 19 U.S.C. § 1322(a); 19 C.F.R. §§ 10.41a(a)(1), 10.41a(a)(2); HTSUS subheading 9803.00.50; CFR Rinkens, LLC; Steel Container Racks; accessories
Dear Mr. Roberts:
This is in response to your July 7, 2020 ruling request on behalf of CFR Rinkens, LLC. In your submission, you request a ruling concerning whether certain 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 July 7, 2020 ruling request, your August 5, 2020 supplemental submission, and your August 17, 2020 email. The subject items are three types of collapsible steel racks used inside of shipping containers to keep the vehicles off the floor, increase storage space, and prevent the vehicles from moving. CFR purchases the racks at issue from Trans Rak International (“Trans Rak”). Trans Rak’s Chinese manufacturing facility ships the racks to Los Angeles, where CFR inspects them and arranges for them to be used for the export of vehicles from the United States to a foreign destination. When the racks are returned to the United States for repositioning, they are brought in through New York, Houston, Miami, Charleston, Long Beach or Oakland.
The R-Rak, is designed to fit inside a nine foot, six inch high cube container. Each R-Rak consists of four vertical posts and two transverse frames. Each post is individually secured to the side of the container by the top side rail lashings and to the floor by either nailing/screwing or ratchet and webbing. In a 40-foot container, two R-Raks are used, consisting of a total of eight vertical posts that accommodate four vehicles. Once the four posts are fitted to the container the two wheel support frames are laid out in between them. A vehicle being transported is driven onto the frames and then lashed to them by ratchet straps that are placed over the wheels. The frames are then lifted by chain hoists into the position in which they will remain during transportation. In this raised position, the frames are bolted to the posts to make a rigid framework that supports the vehicle. Upon return to CFR’s base in the United States, the R-Raks are packed flat, bolted and strapped together into sixty sets and can be stacked into five-feet high, forty-foot containers. There are approximately 4900 R-Raks in circulation.
The following are images of the R-racks, taken from CFR Rinken’s ruling request. The collapsible racks at issue are shown in blue in these images.
The second type racks, the El-Raks, is a system designed to allow vehicles to be loaded and secured on wheeled cassettes outside the shipping container, before the rack is moved into the container by a forklift. The El-Rak is then secured inside the container using straps, bolts and screws. The El-Rak can hold up to four vehicles inside a single forty-foot container. There are approximately 300 El-Raks in circulation. These racks are used in an average of 11,000 shipments per year.
The following is an image of the El-Rak, taken from CFR Rinken’s ruling request:
The third type of rack, the SKD Assembly, is a derivative of the R-Rak that is used to secure partially disassembled vehicles within shipping containers. It consists of the same posts as the R-Rak but uses a moveable wheeled dolly instead of instead of a wheeled tray on which the vehicle frame or body is mounted. The SKD Assembly is used to transport partially assembled vehicles that would not otherwise fit into a container. There are approximately 10 SKD-Raks in circulation, and another 120 to 200 SKD-Raks are expected to be in circulation by the end of 2020.
The following is an image of the SKD Assembly, taken from CFR Rinken’s ruling request:
Each rack is reused four times a year within a 90-day transportation cycle. These racks have a lifespan of ten years.
ISSUES
Whether the subject steel racks are IITs within the meaning of 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a(a)(1).
Whether the subject steel racks are accessories to IITs within the meaning of 19 C.F.R. § 10.41a(a)(2).
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 container racks are substantial inasmuch they are made of steel and have a life expectancy of ten years. These items are also suitable for and capable of reuse, in that they are reused 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, there are approximately 4900 R-Raks, 300 El-Raks, and 10 SKD-Raks in circulation at any one time. These racks are used in 11,000 shipments per year.
As an initial matter, we note that there are only ten SKD-Raks currently in circulation. 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 HQ 105567 and HQ 108658. In HQ 113041 (June 1, 1994), we held that 22 piston/ram pans could not be designated as IITs because they were not used in significant numbers in international traffic. In HQ H282408 (April 12, 2017), we held that laser module cases could not be designated IITs because only 25 cases were in circulation. As a result, the subject SKD-Raks cannot be designated as IITs because there are insufficient numbers of them currently in circulation. Although your ruling request states that you expect another 120 to 200 SKD-Raks to be in circulation by the end of the year, we can only rule on the number that are currently in circulation.
With respect to the R-Racks and El-Racks, we examine whether they meet the criteria for IITs. In HQ H282408 (April 12, 2017), locking fixtures attached to the cargo for stabilization during transport rather than attaching to any of the pallets, intermodal containers, or cases used to transport the cargo. As a result, the locking fixtures were found not to be IITs because they did not hold or contain the cargo. Similarly, in HQ H303169 (April 26, 2019), CBP examined rail car coats, large swaths of heavy-duty waterproof cloth that covered the entire body of rail car shells to protect them during transportation and loading/unloading operations. There, CBP concluded that these coats were not containers because they did not hold the rail shells. See also HQ H286142 (July 6, 2017) (engine hooks that attached to the engines which secured them to the IIT during transport, but did not hold or contain those engines were not IITs because they were not substantial holders or containers; instead, the hooks were essentially tools necessary to lift and move the automobile engines).
In the present case, the subject steel racks do not hold or contain merchandise independent of the shipping containers in which they are transported. Instead of holding or containing cargo, the subject steel racks are used to secure the vehicles within a container by keeping them off the floor, increasing storage space, and preventing the vehicles from moving around. As a result, we find that the subject steel racks are not substantial holders or containers. As such, they cannot be classified as IITs.
In your ruling request, you cite a number of rulings in which CBP has found steel racks for transporting merchandise, especially car parts, to qualify as instruments of international traffic. See HQ H113687 (Feb. 27, 1997) (collapsible metal racks used to import automobile parts); HQ 116240 (July 23, 2004) (steel film frames and plastic cases); HQ H022952 (November 22, 2006) (steel racks used to transport Honda work trucks); HQ H002927 (Nov. 22, 2006) (steel racks used to import doors); HQ H007166 (May 10, 2007) (steel racks used to transport automobile transmissions); HQ H286143 (June 20, 2017) (steel racks used to transport automobile parts); HQ H303170 (April 9, 2019) (collapsible steel racks consisting of a raised metal base with metal vertical supports in each corner). Each of these items were holders or containers that could hold or contain the merchandise, independently of the steel shipping containers or trucks in which they were transported. By contrast, and more akin to HQ H282408, the subject steel racks are used to secure merchandise within a shipping container. As such, they do not qualify as IITs.
ISSUE 2
Insofar as the subject steel racks are used with and specifically designed for use with shipping containers, we consider whether they may be classified as accessories to IITs under 19 C.F.R. §10.41a(a)(2) or (a)(3). CBP has consistently held that shipping containers are “containers” and IITs. See, e.g., HQ H251366 (June 4, 2014) (finding that reefer shipping containers are IITs); HQ H044900 (Dec. 18, 2008) (holding that “it is well settled that intermodal cargo containers qualify as ‘instruments of international traffic.’”); HQ 113003 (Jan. 27, 1994)(holding that intermodal cargo containers qualify for treatment as IITs); HQ 116684 (Aug. 17, 2006) and HQ W116719 (Nov. 30, 2006) (holding that intermodal containers are IITs).
Pursuant to 19 C.F.R. § 10.41a(a)(3), an IIT “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). (emphasis added) Although shipping containers fall within the definition of containers under the Convention, because the subject racks are not imported in the containers for which they will be used and are only used with the containers for export, they cannot qualify as accessories to IITs under 19 C.F.R. § 10.41a(a)(3).
Pursuant to 19 C.F.R. § 10.41a(a)(2),
(2) Repair components, accessories, and equipment for any container of foreign production which is an instrument of international traffic may be entered or withdrawn from warehouse for consumption without the deposit of duty if the person making the entry or withdrawal from warehouse files a declaration that the repair component was imported to be used in the repair of a container of foreign production which is an instrument of international traffic, or that the accessory or equipment is for a container of foreign production which is an instrument of international traffic. The Center director must be satisfied that the importer of the repair component, accessory, or equipment had the declared intention at the time of importation.
As discussed above, CBP has previously designated shipping containers as being IITs. In the present case, the subject steel racks are used to secure vehicles to these shipping containers. CBP has designated items with similar functions as accessories of IITs. See, e.g., HQ H162376 (July 20, 2011) (holding that straps with ratchet closures used for the packing of truck parts in shipping containers were accessories under 19 C.F.R. § 10.41a(a)(2)); HQ H272023 (Mar. 7, 2016) (holding that ratchet straps used to secure Flexible Intermediate Bulk Containers to shipping containers were accessories under 19 C.F.R. § 10.41a(a)(2)). Accordingly, we find that the subject steel racks are accessories for IITs under 19 C.F.R. § 10.41a(a)(2).
Please also note that, should the racks enter domestic commerce, they will be subject to formal entry and payment duty. In addition, the racks may be subject to antidumping duties and countervailing duties (“AD/CVD”) for stainless steel racks from the People’s Republic of China. A list of current AD/CVD cases at the United States International Trade Commission website at http://www.usitc.gov.
HOLDING
The subject steel racks are not IITs within the meaning of 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a(a)(1).
The subject steel racks are not accessories to IITs within the meaning of 19 C.F.R. § 10.41a(a)(3) because they are not imported with the steel container for which they are used; however, the racks qualify as accessories to IITs under 19 C.F.R. § 10.41a(a)(2).
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