Instruments of International Traffic; 19 U.S.C. 1322; 19 CFR § 10.41a; Insulated Bulkheads

HQ H115988 August 10, 2010 BOR-4-07-RR-BSTC:CCI H115988 GOB CATEGORY: Carriers Amy Morgan Customs Compliance Supervisor Costco Wholesale Corporation 999 Lake Drive Issaquah, WA 98027 RE: Instruments of International Traffic; 19 U.S.C. 1322; 19 CFR § 10.41a; Insulated Bulkheads Dear Ms. Morgan: This is in response to your letter of July 12, 2010, in which you request a ruling that certain insulated bulkheads be designated as instruments of international traffic within the meaning of 19 U.S.C. § 1322(a) and 19 CFR § 10.41a. Our ruling is set forth below. FACTS: Costco Wholesale Corporation (the “requester”) ships refrigerated products from the United States to Mexico by truck in order to provision its Mexico warehouse stores. It proposes to use certain insulated bulkheads to act as walls in order to divide a trailer into multi-temperature compartments so as to accommodate a variety of different refrigerated products. After the goods are delivered to the requester’s locations in Mexico, the insulated bulkheads will be transported back to the United States in the empty trailers for reuse. There will be approximately 50 to 100 insulated bulkheads in circulation. The insulated bulkheads will have an estimated useful life of two to three years. They will be in continuous use and will be used in approximately 52 trips per year. The insulated bulkheads will have approximate dimensions of 110 inches by 99 inches by three inches. They will be constructed of an 18 ounce vinyl exterior with a foam core. The trailers within which the insulated bulkheads will be used are standard tractor trailers in lengths of 40 and 45 feet. The trailers are enclosed, temperature-controlled, and have attached wheels. ISSUE: Whether the subject items may be designated as instruments of international traffic within the meaning of 19 U.S.C. § 1322(a) and 19 CFR § 10.41a. LAW AND ANALYSIS: Title 19, United States Code, section 1322(a) (19 U.S.C. § 1322(a)) provides in pertinent part, that “[v]ehicles and other instruments of international traffic … 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 …” The Customs and Border Protection (“CBP”) Regulations issued under the authority of 19 U.S.C. § 1322(a) are contained in 19 CFR § 10.41 et seq. Section 10.41a(a)(1), CBP Regulations (19 CFR § 10.41a(a)(1)) designates lift vans, cargo vans, shipping tanks, skids, pallets, caul boards, and cores for textile fabrics as instruments for international traffic. Section 10.41a(a)(1), CBP Regulations (19 CFR § 10.41a(a)(1)) also authorizes the Commissioner of CBP to designate as instruments of international traffic such additional articles or classes of articles as he shall find should be so designated. Instruments so designated may be released without entry or the payment of duty, subject to the provisions of 19 CFR § 10.41a. Accessories and equipment for containers which are instruments of international traffic containers are addressed in 19 CFR § 10.41a(a)(3) which provides: As used in this section, ‘instruments of international traffic’ includes the normal accessories and equipment imported with any such instrument which is a ‘container’ as defined in Article 1 of the Customs Convention on Containers. [Emphasis supplied.] To qualify as an instrument of international traffic within the meaning of 19 U.S.C. § 1322(a) and 19 CFR § 10.41a, an article must be used as a container or holder or be an accessory or equipment within the meaning of 19 CFR § 10.41a(a)(3). Further, the article must be substantial, suitable for and capable of repeated use, and used in significant numbers in international traffic. See, e.g., Headquarters Rulings (“HQ”) 108084, 108658, 109665, and 109702. In Holly Stores, Inc. v. U.S., 697 F.2d 1387, 1388 (Fed. Cir. 1982), aff’g 534 F. Supp. 818 (Ct. Int’l Trade 1981), the court stated with respect to former General Headnote 6(b): “Reuse” in this context has been consistently interpreted to mean practical, commercial reuse, not incidental reuse. Fontana Hollywood Corp. v. United States, 64 Cust. Ct. 204, C.D. 3981 (1970), relying on Tariff Classification Study, Seventh Supplemental Report (Aug 14, 1963) at 99. The court in Holly Stores rejected the concept of reuse with respect to the hangers at issue there based upon the lower court’s finding that only about one percent of the hangers were reused in any manner at all, and that those uses were noncommercial. The court did accept the facts that the hangers were of fairly durable construction and that it would be physically possible to reuse them.  Within the context of 19 CFR § 10.41a and instruments of international traffic, we have held that “repeated use” means “more than twice.” See, e.g., HQ 108658, dated November 21, 1986. The Customs Convention on Containers defines the term “container” as an: …..article of transport equipment (lift-van, movable tank or other similar structure): (i) fully or partially enclosed to constitute a compartment intended for containing goods; (ii) of a permanent character and accordingly strong enough to be suitable for repeated use; (iii) specially designed to facilitate the carriage of goods, by one or more modes of transport, without intermediate reloading; (iv) designed for ready handling, particularly when being transferred from one mode of transport to another; (v) designed to be easy to fill and to empty; and (vi) having an internal volume of one cubic metre or more; the term “container” shall include the accessories and equipment of the container, appropriate for the type concerned, provided that such accessories and equipment are carried with the container. The term “container” shall not include vehicles, accessories or spare parts of vehicles, or packaging. Demountable bodies, are to be treated as containers… [Emphasis supplied.] Customs Convention on Containers, 1972, Ch. 1, Art. 1(c). In determining whether the insulated bulkheads are accessories or equipment for an instrument of international traffic pursuant to 19 CFR § 10.41a(a)(3) and therefore entitled to treatment under 19 CFR § 10.41a(a)(1), the following requirements must be satisfied: the product must be substantial; suitable for and capable of repeated use with containers that are instruments of international traffic; used in significant numbers in international traffic; and imported with containers that qualify as instruments of international traffic. See e.g., HQ H004789, dated January 12, 2007; HQ W116719, dated November 30, 2006; and HQ 116288, dated August 12, 2004.       The insulated bulkheads are substantial and of very durable construction. We therefore conclude that they are physically capable of, and suitable for, reuse or repetitive use. They are of a type such that they will be used numerous times in significant numbers in international traffic. The reuse which the requester describes and proposes is a “commercial reuse,” i.e., the insulated bulkheads will continue to be used in the commercial transportation of the requester’s products. The final requirement which must be satisfied is that the insulated bulkheads must be imported with containers that qualify as instruments of international traffic. Pursuant to 19 CFR § 10.41a(a)(3), excerpted above, an instrument of international traffic includes the normal accessories and equipment imported with any such instrument which is a “container” as defined in Article 1 of the Customs Convention on Containers. However, pursuant to the Customs Convention on Containers, excerpted above, the term ‘container’ shall not include vehicles, accessories or spare parts of vehicles, or packaging. In the present case, the requester has stated that the insulated bulkheads will be used in wheeled trailers. “Trailer” is defined as follows: “2. a large van or wagon drawn by an automobile, truck, or tractor, used esp. in hauling freight by road. 3. a vehicle attached to an automobile and used as a mobile home or place of business, usually equipped with furniture, kitchen facilities, etc.” The Random House Dictionary of the English Language (unabridged ed. 1973); “4. a vehicle or one in a succession of vehicles hauled usu. by some other vehicle … c. a nonautomotive highway or industrial plant vehicle designed to be hauled …” Webster’s Third New International Dictionary (unabridged 1986); and “3. a nonautomotive vehicle designed to be hauled by road.” Merriam-Webster’s Collegiate Dictionary (tenth ed. 1998). Based upon these definitions, we conclude that the wheeled trailer under consideration herein is properly characterized as a “vehicle.” As noted above, within the meaning of the Customs Convention on Containers, the term “container” shall not include “vehicles.” Because such a trailer can not be considered to be a container, and because 19 CFR § 10.41a(a)(3) provides that the term “instruments of international traffic” includes the normal accessories and equipment imported with any such instrument which is a “container” as defined in Article 1 of the Customs Convention on Containers, we conclude that the subject insulated bulkheads can not qualify as accessories or equipment of instruments of international traffic. HOLDING: The subject insulated bulkheads are not eligible to be designated as accessories or equipment of instruments of international traffic within the meaning of 19 U.S.C. 1322(a) and 19 CFR § 10.41a(a)(3). Sincerely, George Frederick McCray Chief Cargo Security, Carriers and Immigration Branch