BOR-07-OT:RR:BSTC:CCR H318031 TNA
James Pai, Senior Manager
BDO USA, LLP
600 Anton Boulevard, Suite 500
Costa Mesa, CA 92626
RE: Instruments of International Traffic; 19 U.S.C. § 1322(a); 19 C.F.R. §§ 10.41a(a)(1); HTSUS subheading 9803.00.50; LG Energy Solution Michigan, Inc.; trays and boxes
Dear Mr. Pai:
This is in response to your March 30, 2021 ruling request on behalf of LG Energy Solution Michigan, Inc. (“LGESMI”). In your submission, you request a ruling concerning whether certain trays and boxes qualify as substantial containers and therefore, may be classified 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 March 30, 2021 ruling request and your April 22, 2021 email. The subject items are trays and boxes used to hold and protect lithium-ion battery cells during international transport. These trays and boxes are manufactured in China and Korea. They are made of high-density polyethylene (“HDPE”), aluminum, and polypropylene and are injection-molded with acrylonitrile butadiene styrene (“ABS”). Each tray holds multiple lithium-ion battery cells. Each box contains either 16 of the Korean-origin trays or 19 of the Chinese-origin trays and is secured to a pallet for transport. The box also contains a plastic cover that is held down by zip ties.
The typical life cycle of the subject trays and boxes is three years. The Chinese trays and boxes can be reused 27 to 48 times before they are taken out of circulation, and the Korean items can be reused 18 to 30 times. The Chinese boxes and trays are reused nine to 16 times per year, and the Korean trays and boxes are reused six to ten times per year. Since the end of December, the number of Chinese trays in circulation have varied between 19,152 and 34,314, and the number of Chinese boxes in circulation has varied between 1,008 and 1,806. In the same time frame, the number of Korean boxes in circulation has varied between 334 and 2,335, and the number of Korean trays in circulation has varied between 6,346 and 44,365.
The following are images of the subject trays and boxes, taken from your March 30, 2021 ruling request. The first is an image of the boxes and trays that originate in China; the second and third images are of the items that originate in Korea.
ISSUE
Whether the subject trays and boxes are IITs 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. 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).
IITs 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 trays and boxes are substantial inasmuch they are made of HDPE, aluminum, and polypropylene and are injection-molded with ABS. They also have a life expectancy of three years. In addition, these items are suitable for and capable of reuse, in that the Chinese boxes and trays are reused nine to 16 times per year, and the Korean trays and boxes are reused six to ten times per 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, the number of Chinese trays in circulation have varied between 19,152 and 34,314 and the number of Chinese boxes in circulation have varied between 1,008 and 1,806 since December. In the same time frame, the number of Korean boxes in circulation have varied between 334 and 2,335, and the number of Korean trays in circulation have varied between 6,346 and 44,365.
Prior CBP rulings have determined that similar plastic boxes and trays are IITs. In HQ H303878 (July 11, 2019), for example, CBP classified hard plastic totes, lids, partitions, and pallets that were used for international shipping of automobile parts as IITs because they held and contained the merchandise they shipped, were reused 36 times a year, had a lifespan of seven years, and had sufficient numbers in circulation in that there were 750 of them in circulation. In addition, in HQ H285811 (Aug. 14, 2017), CBP classified various plastic boxes, bins, and a shipping system composed of trays, sleeves, and plastic pallets used to ship automotive components, steering systems, and bearings as IITs. In that case, the items at issue held and contained the merchandise they shipped, and CBP specifically found that they were made of sufficiently durable plastic to be considered substantial. In addition, there were suitable for and capable of repeated use, as well as used in significant numbers in international traffic.
Similarly, the subject boxes and trays are used to hold and transport lithium-ion battery cells. In addition, these items are substantial in that they are made of HDPE, aluminum, and polypropylene, are injection-molded with ABS and have a life expectancy of three years. They are capable and suitable of reuse in that they are reused six to sixteen times a year. Lastly, there are sufficient numbers of them in circulation in that there have been between 334 and 44,365 of them in circulation in the last several months. As such, we find that the subject boxes and trays are IITs.
In both your March 30, 2021 ruling request and your April 22, 2021 email, you argue that the subject boxes and trays should be classified as substantial containers of subheading 9305.00.50, HTSUS, and not as IITs. In response, we note that CBP has always interpreted the language of subheading 9305.00.50, HTSUS, such that being a substantial container or holder is a requirement of being an IIT, rather than such containers being a separate class of merchandise. The language of 19 USC 1322(a) states that:
Vehicles 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…
19 U.S.C. 1322(a).
As such, the statute makes no mention of substantial containers. In one of its earliest decisions on the matter, CBP (then the Customs Service) promulgated the standard cited above, that “to qualify as instrument of international traffic within meaning of 19 USCS § 1322(a), article must be used as container or holder, must be substantial, suitable for repeated use, and used in significant numbers in international traffic.” See CSD 80-79 (1979). Since then, CBP has consistently held that items are IITs when they hold and contain merchandise. A wide variety of items, from shipping containers to trays and boxes like the subject merchandise have been found to be substantial containers and have therefore been classified as IITs under 19 U.S.C. §1322 and 19 C.F.R. § 10.41a(a)(1). 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 116684 (Aug. 17, 2006) and HQ W116719 (Nov. 30, 2006) (holding that intermodal containers are IITs); see also HQ H303878 (July 11, 2019) and HQ H285811 (Aug. 14, 2017). This classification is consistent with the Customs Convention on Containers, an international convention that defines what constitutes a container. As a result, we conclude that under subheading 9803.00.50, HTSUS, the term “instruments of international traffic” encompasses the term “substantial container.”
HOLDING
The subject boxes and trays are IITs within the meaning of 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a(a)(1).
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