OT:RR:BSTC:CCR H300964 AMW
Ms. Marcy B. Stras, Esq.
Caplan & Earnest
1800 Broadway, Suite 200
Boulder, CO 80302
RE: Instruments of International Traffic; 19 U.S.C. § 1322(a); 19 C.F.R. § 10.41a(a)(1); HTSUS subheading 9803.00.50; Polymer Logistics, Inc.; Reusable Plastic Containers.
Dear Ms. Stras:
This is in response to your September 5, 2018 ruling request submitted on behalf of Polymer Logistics, Inc. (“Polymer Logistics”). In your submission, you requested a ruling concerning whether certain reusable plastic containers (“RPCs”), 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 facts contained in this decision are from your ruling request and supporting information submitted to this office on October 15, 2018, October 25, 2018, and October 31, 2018. The subject article, marketed as the RPC Active Lock (“RPC AL”) box, is a reusable plastic container used primarily to transport produce, meat, egg, and other fresh food products. The RPC AL is a foldable container comprised of a base and four sides that interlock to create a box shape; the panels are held in place by an “active lock feature” that secures the panels when the box is erected. RPC AL units are stackable and available in a variety of colors. The RPC AL is available in nine distinct models, with varying sizes, volumes, and load capacities.
Below is an image you provided showing the RPC AL and depicting the various sizes in which it is available.
According to your submission, each RPC AL is capable of multiple reuses throughout its useful life, which is approximately ten years in length. The vast majority of the subject RPCs will remain in the United States for their entire useful life, but a small percentage of the total RPC pool will be shipped to Canada or Mexico and return loaded with merchandise. You state that approximately 1.5 to 2 million RPCs per year will be shipped through Mexico and Canada in this manner.
You state that Polymer Logistics manufactures the vast majority of the subject RPCs in Israel. After arriving in the United States, the RPCs are entered into a “pool” through which they are are rented to Polymer Logistics’ customers for use in the customers’ supply chains. Your submission presents two distinct scenarios for how the subject RPCs will be used:
New RPCs will arrive in the United States empty of merchandise and will be rented to retailers for use in their domestic supply chains. Specifically, you state that Polymer Logistics will ship the RPCs to domestic produce, egg, and meat growing or packing sites where they will be packed and used to transport merchandise to a retail location within the United States. The new RPCs will be imported through the ports of Elizabeth, New Jersey and Savannah, Georgia.
A small portion of RPCs will be used to transport merchandise from Canada and Mexico. In this scenario, you state that Polymer Logistics’ customers will send empty or underloaded RPCs to Mexico or Canada where they will be packed with merchandise and returned to the United States. These RPCs will be predominantly imported through the ports of Laredo, Texas, Yuma, Arizona, and Detroit, Michigan. In response to our follow-up communication, you stated that approximately “10% to 15%...[of] Polymer RPCs are shipped in/out of Mexico and Canada each year.”
The RPCs in Polymer Logistics’ pool are not marked with a unique identifying number. Instead, you state that Polymer Logistics tracks its RPC units as follows:
[T]he company keeps a track of them by the type of RPC and the RPC’s location. The company has an online reporting system that each company uses. The customers must report the number of containers used so the company can maintain an accurate count on the entire fleet in North America. In addition, the company has a team [of] employees maintaining the reporting program and whointeract [sic] with customers to ensure accurate reporting. All records are kept in the company’s office in Tampa, Florida.
In your follow-up communication, you stated that Polymer Logistics’ RPC pool commingles those RPCs used to transport merchandise from abroad with those used to transport merchandise exclusively within the United States. Although customers are “contractually required to report…the loaded container movements,” the RPCs are subsequently returned to the same pool and “rented to many customers for their products’ use/shipments” throughout their lifecycle. When asked how your client tracks or distinguishes between RPCs that travel to Canada/Mexico and those that stay within the United States, you stated that, “if the crates leave the country or are sent to other locations in between the customer and retailer, [Polymer Logistics] has limited visibility.”
ISSUES
Whether the subject RPCs 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 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 for 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).
Such instruments may be released without entry or the payment of duty, subject to the provisions of this section.
Historically, CBP has held in its published decisions that in order to qualify as an IIT within the meaning of 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a(a)(1), the article must be a used as a container or holder in international traffic. The container or holder must also be substantial, suitable for and capable of repeated use, and 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 concept of reuse 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). We have, furthermore, held that “repeated use” means “more than twice.” See, e.g., HQ 108658 (Nov. 21, 1986).
We begin our analysis by finding that the physical properties of the RPCs are sufficient to satisfy the relevant IIT criteria. As required in the factors outlined above, the subject containers are substantial inasmuch as they are made of sufficiently durable plastic that allows them to be used repeatedly to transport merchandise in international traffic. The containers are suitable for and capable of repeated use insofar as they can be reused for approximately ten years. And the subject containers are used in significant numbers inasmuch as more than 1.5 million to 2 million units are used each year.
We also find, however, that the first subset of RPCs discussed in your request (i.e., those imported empty for use in domestic supply chains) are not IITs because they will not be used in international traffic. Your submission states that these RPCs will be imported empty into the United States for the purpose of being “shipped empty to various produce, egg and meat growing or packing sites and used as a means of packaging when shipping their products to retailers.” Furthermore, your supplemental information elaborates that the subject RPCs, “remain, mainly in the US, for their entire useful life.” This scenario represents a clear use of the RPCs in domestic traffic (i.e., “point-to-point local traffic” as referenced in 19 C.F.R. § 10.41a(d)). As such, RPCs that are transported empty to the United States for use in domestic traffic are not IITs.
Finally, we also find there is insufficient evidence to grant IIT designation to the remaining RPCs (i.e., the small subset reportedly exported to Mexico or Canada and returned fully loaded for distribution to U.S. retailers). Despite the bald statement that a portion of the subject RPCs will be used to transport merchandise from Mexico and Canada, the ruling request and supplemental information fail to provide information regarding how such RPCs will be tracked or segregated from those used within domestic traffic. Specifically, you noted in response to a follow-up question that Polymer Logistics tracks the subject RPCs based on reports from its customers regarding “the number of containers used so the company can maintain an accurate count on the entire fleet.” However, there is no indication that Polymer Logistics specifically segregates and tracks those RPCs used to transport merchandise in international traffic. Instead, you state that your client has “limited visibility” when its RPCs “leave the country or are sent to other locations between the customer and retailer.” In contrast, CBP has previously granted IIT status to containers used in international traffic when the containers are serialized or otherwise individually tracked to prevent commingling with containers used in domestic traffic. See, e.g., HQ H277751 (Sept. 28, 2016) (containers were “tracked by scanning a unique RFID barcode, which helps distinguish between articles used in domestic traffic and articles used in domestic traffic”); HQ H254052 (Sept. 8, 2014) (collapsible plastic crates tracked with linear barcodes and an alpha-numeric serial number system”). In the present case, however, because there is no process in place to distinguish the small amount of subject RPCs reportedly used to transport merchandise from Mexico and Canada from those used in domestic traffic, we decline to find that such RPCs satisfy the requirement that they are used in international traffic.
HOLDING
Based on the foregoing, the subject RPCs described above do not 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.
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