BOR-4-07-OT:RR:BSTC:CCI H131666 LLB
Ms. Laurie Peach
American Honda Motor Co., Inc.
1919 Torrance Boulevard
Torrance, California 90501-2746
RE: Instruments of International Traffic; 19 U.S.C. § 1322(a); 19 C.F.R. §§ 10.41a(a)(1)-(2) and 10.41a(d); Steel Shipping Crates; Motorcycles; subheading 9803.00.50 , Harmonized Tariff Schedule of the United States Annotated (2011); Repair parts; diversion.
Dear Ms. Peach:
This is in response to your November 3, 2010, letter, and the January 14, 2011, supplement submitted by your counsel, Donald Harrison. In your letter, you request a ruling concerning whether steel shipping crates, as described below, qualify as instruments of international traffic (IIT) under 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a(a)(1), and whether the shipping crates qualify for duty-free treatment under subheading 9803.00.50 of the Harmonized Tariff Schedule of the United States (HTSUS)(2011). In addition, you inquire whether the repair parts for the steel crates, when imported separately, may also qualify for duty-free treatment under 19 C.F.R. § 10.41a(a). You also inquire whether the use of the crates once the crates are imported into the United States, as described below, constitutes a diversion of the merchandise pursuant to 19 C.F.R. § 10.41a(d). Our decision follows.
FACTS
The following facts are from your November 3, 2010, letter and the January 14, 2011, supplement and the documents attached thereto. The subject steel crates will be used to hold Honda motorcycles. Honda imported the empty steel crates from China between 2002 and 2009 and paid duty thereon. In 2009, Honda relocated its motorcycle production
from the United States to Japan. Honda will now use the crates to import motorcycles to the United States. Each crate is specifically identified by a fixed asset tag and a bar code label which corresponds with the vehicle identification number (VIN) on the motorcycle it holds. The motorcycles remain in their corresponding crates from the time they are exported from Japan until they are sold at one of Honda’s U.S. dealerships. From the time they are imported the motorcycles are sent to one of six Honda distribution centers and subsequently to Honda’s U.S. dealerships. On occasion, the motorcycles and their corresponding crates may be transported between U.S. dealerships. A crate will only be separated from its corresponding motorcycle when the crate needs to be repaired or as stated above, when the motorcycle is sold. If a crate needs repair it will be returned to Japan.
The steel crates are made of heavy gauge steel, have four collapsible posts, and a steel lattice top. The crates also have pockets on the bottom to facilitate movement by a fork lift truck. You have included a picture of loaded crates. The anticipated life cycle of the crates is 10 uses and approximately 11,000 crates will be used each year. Honda may also import spare parts to permit the repair of the crates that are damaged during transportation.
ISSUES
1. Whether the steel crates may be released without entry or the payment of duty under subheading 9803.50.00, HTSUS.
2. Whether the steel crates may receive treatment as instruments of international traffic under 19 U.S.C. § 1322(a)(1999) and 19 C.F.R. § 10.41a(a)(1)(2010).
3. Whether the repair parts described herein may be entered duty-free pursuant to 19 C.F.R. § 10.41a(a)(2)(2008).
4. Whether the movement of the crates contemplated in the FACTS section above constitute a diversion pursuant to 19 C.F.R. § 10.41a(d)(2010).
LAW AND ANALYSIS
Issue 1
Subheading 9803.50.00, 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.
You assert that the subject steel crates would be eligible for duty-free treatment under 9803.50.00, HTSUS. You assert that the subject steel crates were imported from China and duty paid. The crates would also be considered “substantial” inasmuch as they are made with heavy gauge steel. As such, the crates would be eligible for treatment under subheading 9803.50.00, HTSUS, if they are imported holding the motorcycles and are not sold or entered separately from the motorcycles as required by U.S. Note 1, Chapter 98, HTSUS.
Issue 2
You assert that the shipping crates should be designated by Customs and Border Protection (CBP) 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 CBP regulations promulgated under the authority of 19 U.S.C. § 1322(a) 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. Such instruments may be released without entry or the payment of duty, subject to the provisions of this section.
19 C.F.R. § 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 C.F.R. § 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 C.F.R. § 10.41a(a)(1), an article 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).
CBP has consistently ruled that certain collapsible steel racks meet the qualifications of being instruments of international traffic. See HQ H022952 (Apr. 3, 2008) (stackable steel racks used to transport work trucks); HQ H007166 (May 10, 2007) (steel racks used to import automobile transmissions); HQ H002927 (Nov. 22, 2006) (steel crates racks to import doors); HQ 116047 (Dec. 1, 2003) citing HQ 113687 (Feb. 27, 1997) (steel racks used to import automobile parts) HQ 112303 (Aug. 14, 1992) and HQ 115959 (July 7, 2003) (collapsible steel racks).
Upon reviewing your request and supporting documentation, we find that the steel crates, as described above, meet the requirements of an instrument of international traffic. The crates are substantial in that they are made with heavy-gauge steel; the crates are suitable and capable of repeated use insofar as they can be used 10 times; and the crates will be used in significant numbers in international traffic inasmuch as 11,000 of the crates will be used each year to transport work trucks from Japan to the United States. Based on the foregoing, the subject steel crates are instruments of international traffic; therefore, will qualify for entry-free and duty-free treatment as instruments of international traffic pursuant to 19 C.F.R. § 10.41a(a)(1).
Issue 3
You assert that the repair parts, which consist of steel posts, for the steel crates are subject to duty-free entry pursuant to 19 C.F.R. § 10.41a(a)(2), which provides in pertinent part:
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 port director must be satisfied that the importer of
the repair component, accessory, or equipment had the declared intention at the time of importation.
Consistent with the foregoing regulation, CBP has held that repair parts for foreign-produced instruments of international traffic would receive duty-free treatment if the remaining conditions of the regulation were met. See HQ H022952 (Apr. 3, 2008) (holding that steel upright posts used as repair components for steel racks may be entered duty-free); HQ 116622 (Mar. 13, 2006) (holding that repair components for tank containers may be entered duty-free); see also, HQ 113339 (Mar. 10, 1995) and HQ 113135 (June 21, 1994) (holding that repair components for refridgerated containers may be entered duty-free). The subject steel crates are made in China, e.g. of foreign production, and as stated in Issue 2 above, these crates would be considered instruments of international traffic. As such, upon entry of the upright supports, if Honda files a declaration that the upright supports are to be used in the repair of the subject steel crates and the port director where the upright supports are entered is satisfied that they were intended to be imported as repair components for the steel crates at the time of importation, the upright supports may be entered without the deposit of duty.
Issue 4
You assert that keeping the motorcycles with the crates from the time they are imported into in the U.S. from Japan until the U.S. dealership sells the motorcycles does not constitute diversion of the crates under 19 U.S.C. § 10.41a(d), which provides in pertinent part:
If an instrument of foreign origin, . . . is released under this section and is subsequently diverted to point-to-point local traffic within the United States, or is otherwise withdrawn in the United States from its use as an instrument of international traffic, it becomes subject to entry and the payment of any applicable duties.
In HQ 112705 (May 21, 1993), merchandise was shipped from a foreign port on a pallet to the U.S., taken to one of two warehouses in the U.S., and then shipped on the same pallet to a retail store in the U.S. CBP held that the foregoing transportation did not constiture a diversion. CBP reasoned that the liability to enter and pay duty on the pallets under 19 C.F.R. § 10.41a(d) would only arise when a pallet that is not the identical pallet on which the merchandise transported entered the U.S. is used to move merchandise in local traffic from a U.S. point to another U.S. point. Similarly, the motorcycles Honda imports remain in the steel crates in which they are imported until they are sold. To ensure that their motorcycles are not separated from the crates in which they are shipped, Honda uses bar code and fixed asset labels that correspond with the VIN numbers on the motorcycles. Accordingly, we find that Honda’s use of the steel crates to transport the motorcycles from
the time the motorcycles are exported to the time they are sold in the U.S. does not constitute diversion of the crates as long as the motorcycles remain with crates in which they are imported.
HOLDING
1. The steel crates may be released without entry and the payment of duty under subheading 9803.50.00, HTSUS.
2. The steel crates, as described above, are hereby designated as instruments of international traffic within the meaning of 19 U.S.C. § 1322(a) and pursuant to 19 C.F.R. § 10.41a(a)(1); therefore, they may be released without entry or the payment of duty.
3. The upright supports for the steel crates, as described herein, may be entered duty-free as repair components pursuant to 19 C.F.R. § 10.41a(a)(2) if Honda files the appropriate declaration with the port director at the time of importation and the port director is satisfied that the upright supports were intended to be imported as repair components for the steel crates at the time of importation.
4. The movement of the crates contemplated in the FACTS section above does not constitute a diversion pursuant to 19 C.F.R. § 10.41a(d).
Sincerely,
George Frederick McCray
Supervisory Attorney-Advisor/Chief
Cargo Security, Carriers and Immigration Branch
Office of International Trade, Regulations & Rulings