HQ 112393

August 14, 1992

BOR-7-07-CO:R:IT:C 112393/112273 MLR

CATEGORY: Carriers

Bruce N. Shulman, Esq.

Stein, Shostak, Shostak & O\'Hara

1620 L Street, N.W., Suite 807

Washington, D.C. 20036-5605

RE: Instruments of International Traffic; Pallet Set;

19 U.S.C. 1322

Dear Mr. Shulman:

This is in response to your letter dated July 30, 1992, on

behalf of Tokico (USA), Inc., requesting a ruling that certain

pallet sets be designated as instruments of international traffic

(IIT). Our ruling is set forth below.

FACTS:

Tokico (USA) Inc. of Berea, Kentucky, uses re-usable pallet

sets when importing automotive struts from Japan. The pallet

sets are made of molded plastic and manufactured in Japan. The

sets are constructed to enable secure stacking of multiple trays

onto a base pallet, with a cap protecting the top. Each set is

approximately 47 1/4\" in length and 44 3/4\" in width. The record

contains photographs of the pallet sets in question.

The sets will arrive at Los Angeles, Seattle, Louisville,

and Detroit. The pallet sets may be delivered to a shock

absorber manufacturing facility in Kentucky, where Tokico will

further assemble and manufacture the imported struts for delivery

to various automobile manufacturers. After Tokico has removed

the struts, the empty pallet sets will be shipped back to Japan

and used to transport automotive struts to the United States. It

is anticipated that Tokico will ship the empty pallet sets back

to Japan approximately every two to four weeks.

The pallet sets may also be delivered to Tokico in Detroit,

where it maintains a two-week inventory of struts for use in

supplying a joint venture between an American and Japanese

manufacturer of automobiles. Tokico will deliver the filled

pallet sets to the joint venture every day. It is anticipated

that the empty pallet sets will be returned to Tokico by the

joint venture on a daily basis, and that Tokico will send the

empty pallet sets back to Japan for eventual reimportation of

automotive struts.

ISSUE:

Whether re-usable, plastic pallet sets used to import

certain automotive struts from Japan may be designated as

instruments of international traffic within the meaning of 19

U.S.C. 1322(a) and section 10.41a, Customs Regulations (19 CFR

10.41a).

LAW AND ANALYSIS:

Title 19, United States Code, section 1322(a) {19 U.S.C.

1322(a)}, provides that \"\[v\]ehicles and other instruments of

international traffic, of any class specified by the Secretary of

the Treasury, 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 or instructions of

the Secretary of the Treasury.\"

The Customs Regulations issued under the authority of

section 322(a) are contained in section 10.41a (19 CFR 10.41a).

Section 10.41a(a)(1) specifically designates lift vans, cargo

vans, shipping tanks, skids, pallets, caul boards, and cores for

textile fabrics as instruments of international traffic.

Section 10.41a(a)(1) also authorizes the Commissioner of

Customs to designate other items as instruments of international

traffic in decisions to be published in the weekly Customs

Bulletin. Once designated as instruments of international

traffic, these items may be released without entry or the payment

of duty, subject to the provisions of section 10.41a.

To qualify as an \"instrument of international traffic\"

within the meaning of 19 U.S.C. 1322(a) and the regulation

promulgated pursuant thereto (19 CFR 10.41a 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 subheading

9803.00.50, Harmonized Tariff Schedule of the United States

Annotated (HTSUS), and former Headnote 6(b)(ii), Tariff Schedules

of the United States (TSUS), as well as Headquarters Decisions

104766; 108084; 108658; 109665; and 109702.)

The concept of reuse contemplated above is for commercial

shipping or transportation purposes, and not incidental or

fugitive uses. Tariff Classification Study, Sixth Supplemental

Report (May 23, 1963) at 99. See Holly Stores, Inc. v. United

States, 697 F.2d 1387 (Federal Circuit, 1982).

In Holly Stores, supra, the court determined that \"reuse\" in

the context of former General Headnote 6(b)(ii) \"has been

consistently interpreted to mean practical, commercial reuse, not

incidental reuse.\" (Emphasis added). In that case, articles of

clothing were shipped into this country on wire or plastic coat

hangers. Evidence showed that the hangers were designed to be,

and were of fairly durable construction and that it would be

physically possible to reuse them. However, the court found that

only about one percent of the hangers were reused in any way at

all, and that those uses were of a noncommercial nature. The

court held that the uses of these hangers beyond shipping them

once from overseas to the United States were purely incidental,

and concluded that the hangers were \"not designed for, or capable

of, reuse\". Subsequent Customs rulings on this matter have held

that single use is not sufficient; reuse means more than twice

(Headquarter rulings 105567 and 108658). Furthermore, it is our

position that the burden of proof to establish reuse is on the

applicant, even though the applicant may not be the party reusing

the instrument.

Upon reviewing the information provided, we are of the

opinion the above requirements have been met. In addition,

Customs has previously ruled that pallets of a similar use as

those under consideration qualify as instruments of international

traffic pursuant to 19 U.S.C. 1322(a) and section 10.41a, Customs

Regulations (see T.D. 76-203, T.D. 68-56, and Customs Ruling

109378 and 111979).

The designation of a container or holder as an IIT becomes

effective only when used as such upon its arrival in this country

in foreign trade, either empty or with merchandise. If the

holder or container is brought into the country by a party other

than the one who is using it as an IIT, it is subject to entry as

imported merchandise. The principal on the IIT bond is the party

who is using the holder or container as an IIT.

Since we have designated the pallets as instruments of

international traffic, they are classifiable under the third

proviso of 9803.00.50 of the Harmonized Tariff Schedule of the

United States. However, contrary to the markings required by 19

CFR 10.41b for holders or containers of United States manufacture

for which free clearance under subheading 9801.00.10, HTSUS, is

claimed; or for holders or containers of foreign manufacture for

which free clearance under subheading 9803.00.50, HTSUS, is

claimed; section 10.41a does not provide that designated

instruments of international traffic be marked in any particular

manner. The applicant is required to properly identify the

instruments to the satisfaction of Customs officers as those

covered by the required bond. Please check with the district

director of the planned port of entry to determine what method of

identification is satisfactory. Customs Ruling 101901.

For purposes of this ruling, we will assume that there is no

diversion of the pallet sets from a use in international traffic.

More particularly, we will assume that the pallet sets will not

be used for storing the struts, and that the use of the pallet

sets in the manufacturing facilities where the struts are needed

and unloaded, is not an incidental use.

HOLDING:

Reusable, plastic pallet sets used to import certain

automotive struts from Japan are designated as instruments of

international traffic within the meaning of 19 U.S.C. 1322(a) and

section 10.41a, Customs Regulations (19 CFR 10.41a).

Sincerely,

B. James Fritz

Chief

Carrier Rulings Branch