OT:RR:BSTC:CCR H339291 AM
Eduardo Garcia De La Cadena
K Line Logistics
4345 International Parkway
Atlanta, Georgia 30354
RE: Instruments of International Traffic; 19 U.S.C. 1332(a); 10.41a(a)(1), 10a(a)(2); Sakuma International Inc.; Returnable Pallets, Totes, and Trays.
Dear Mr. Garcia De La Cadena:
This is in response to your April 11, 2024, ruling request on behalf of Sakuma International America, Inc. ("Sakuma"). In your request you inquire whether pallets, totes, and trays qualify as "instruments of international traffic" (IIT) within the meaning of 19 U.S.C. 1332(a). Our decision follows.
FACTS:
The following facts are from your ruling request and supplements thereto. There are three subject items: pallets totes, and trays. You clarified in an email response to our request for further information that the top caps in the ruling request should be disregarding as they are not shipped from Japan and sourced domestically in the United States.[1] These subject items are designed to be responsive to the production needs of Sakuma. Sakuma plans to pack automative parts in the subject items and deliver them to its Sakuma International subsidiary in the U.S.A.
With respect to the subject totes, the items are made plastic. The subject totes are 21.65"x13.98"x6.5". There are a total of approximately 5,000 to 8,000 subject totes to be used. The subject totes are depicted below:
With respect to the subject pallets, the items are made plastic. The subject pallets are 48"x45"x8.26". There are a total of 200 to 400 pallets to be used during the year. The subject pallets are depicted below:
With respect to the subject trays, the items are made from polyethylene terephthalate ("PET"). The subject trays are 12.91"x9.33"x0.49". There are a total of approximately 20,000 trays with their respective lids to be used. The subject trays are depicted below:
Each tote will contain eight trays that will secure multiple individual parts. Approximately 36 totes will be placed and strapped on each pallet before shipping. Once the pallets and totes are broken down and empty, Sakuma International USA will deliver the automotive parts to its US customers, and they will export the pallets, totes, and trays back to Japan to be re-used for the same process. Sakuma anticipates a rotating inventory of approximately 200 to 400 pallets, 5,000 to 8,000 tote boxes, 20,000 trays, and 20,000 lids will be in circulation. The average lifespan of the subject items is five to seven years. In our request for additional information, you stated that your client anticipated importing three to five monthly shipments per year comprising an average of 10 to 25 pallets.
ISSUE:
1. Whether the subject pallets qualify for consideration as IIT within the meaning of 19 U.S.C. 1322(a) and 19 C.F.R. 10.41a(a)(1).
2. Whether the subject totes qualify for consideration as IIT within the meaning of 19 U.S.C. 1322(a) and 19 C.F.R. 10.41a(a)(1).
3. Whether the subject trays qualify for consideration as IIT within the meaning of 19 U.S.C. 1322(a) and 19 C.F.R. 10.41a(a)(1).
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 ("IIT"). See 19 C.F.R. 141.4(b)(3).
Subheading 9803.00.0, 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[2] 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).[3]
Pallets
Pursuant to 19 C.F.R. 10.41a(a)(1), pallets are per se IITs. In HQ H119060 (Nov. 9, 2020), CBP held that "pallets have already been designated as an instrument of international traffic by regulation. See 19 C.F.R. 10.41a(a)." HQ H119060 (Nov. 9, 2010); see also HQ H252710 (May 19, 2014) (CBP held "the subject plastic pallets are IITs Pallets have already been designated as an instrument of international traffic by regulation. See 19 C.F.R. 10.41a(a). Accordingly, the pallets in the present case may be released without the payment of duty or entry.
Totes
U.S. Customs and Border Protection ("CBP") has previously determined that containers made of plastic, known as totes, that were used to ship various small automobile replacement parts from Japan to the United States met the requirements necessary for designation as IITs. See HQ 114506 (October 29, 1998). Furthermore, CBP found that plastic boxes capable for repeated use designed to transport automotive strut components qualified as IITs. See HQ 112534 (January 25, 1993).
Based upon review of the submission and information provided, the subject totes are containers that are substantial, suitable for and capable of repeated use, and used in significant numbers in international traffic. They are substantial in that they are made of plastic and the component parts have an average lifespan of five to seven years. They are used in significant numbers in international commerce, and suitable for and capable of reuse in that three to five shipments are anticipated per month, each compromising of 10 to 25 pallets, and approximately 5,000 to 8,000 subject totes are to be used in international traffic. Based on the foregoing, the subject totes are designated as IITs; therefore, they qualify for entry-free and duty-free treatment as IITs pursuant to 19 C.F.R. 10.41a(a)(1).
Trays
CBP has previously determined empty plastic trays used to ship razors, parts of razors, and manual toothbrushes qualified for treatment as IITs. See HQ 116663 (Aug. 9, 2006). The containers were typically made of plastic, suitable for many years of repeated use, and were designed to carry particular components. Id. Furthermore, CBP found that plastic shipping trays constructed of rigid plastic used to ship certain razor blades qualified as IITs because they were engineered and designed to be used numerous times. See HQ 060897 (June 29, 2009); see also HQ 116526 (Aug. 29, 2005) (CBP designated plastic trays as instruments of international traffic).
Based upon review of the submission and information provided, the subject trays are containers that are substantial, suitable for and capable of repeated use, and used in significant numbers in international traffic. They are substantial in that they are made of PET and the component parts have an average lifespan of five to seven years. They are used in significant numbers in international commerce, and suitable for and capable of reuse in that three to five shipments are anticipated per month, each compromising of 10 to 25 pallets, and approximately 20,000 of the subject trays are to be used in international traffic. Based on the foregoing, the subject totes are designated as IITs; therefore, and qualify for entry-free and duty-free treatment as IITs pursuant to 19 C.F.R. 10.41a(a)(1).
HOLDING:
The subject pallets, totes, and trays qualify for treatment as instruments of international trade within the meaning of 19 U.S.C. 1322(a) and 10.41a(a)(1).
Sincerely,
W. Richmond Beevers
Chief, Cargo Security, Carriers, and Restricted Merchandise
Office of International Trade, Regulations & Rulings
U.S. Customs and Border Protection
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[1] Re: Request for Additional Information - N339492 (dated June 27, 2024).
[2] Customs revenue functions have been delegated to the Secretary of Homeland Security by the Secretary of Treasury, with exceptions herein not applicable, under the authority of the Homeland Security Act of 2002, Pub. L. 107-296. See Treas. Dep't Order 100-16 (May 15, 2003).
[3] The requirement that an article be "substantial" is not only a threshold requirement under 9803.00.50, but also a requirement for an article to be an instrument of international traffic pursuant to CBP decisions. The origin for the criterion found in CBP decisions that an article be "substantial" is found in Schedule 8, Item 808.00 of the Tariff Schedule of the United States (1963)(TSUS), the predecessor provision to 9803.00.50, HTSUS. Likewise, the criterion that an article be "suitable for and capable of repeated use" is found in Schedule 8, Item 808.00, TSUS, Headnote 6(b)(ii)(stating that the article must be capable of "reuse"). Although the requirement that an article be capable of reuse is no longer under subheading 9803.00.50, HTSUS (the successor provision to Item 808.00, TSUS), to receive duty-free treatment thereunder nevertheless, "reuse" is still required, pursuant to CBP decisions, for an article to be considered an instrument of international traffic.