Tuesday, September 02, 2014

Ruling of the Week 6: Instruments of International Traffic

I'm enjoying the Ruling of the Week feature. One important benefit of this task is that I get to blog about some aspect of customs law that might not otherwise make it into the Court of International Trade or a Federal Register Notice. This week (really last week, but who's complaining?), the topic is Instruments of International Traffic, which is the subject of  HQ H255763 (Aug. 15, 2014). You should look at the Ruling because Customs and Border Protection included pictures, which are usually helpful.

The law allows importers to designate reusable containers, racks, skids, and similar fixtures as Instruments of International Traffic. The relevant regulation is 19 C.F.R. § 10.41a. The value of making this designation is that IIT's are not subject to duty and exempt from other aspects of the normal entry process. That can be a valuable cost-savings mechanism for frequent and repeated imports. Think about a car company in Detroit that gets the same parts from Windsor, Ontario multiple times a day using the same pallets, racks, and bins. The importer can avoid the cost and compliance effort of entering the pallets, racks, and bins if they are recognized as instruments of international transport and treated accordingly.

The way CBP looks at this, an IIT is something that is "a substantial container or holder." The article must also be capable of repeated use and used in significant numbers in international traffic. This rolls up into HTSUS item 9803.50.00, which provides for duty-free entry for products "of a class specified by the Secretary of the Treasury as instruments of international traffic." IIT's may be imported empty or containing the articles they are intended to transport.

In this ruling, CBP found that the containers were substantial (with a five to seven year service life)and reusable (about 1,500 times per year). Given those facts, the subject containers were found to be IIT's.

The ruling does not go into the details, which are always important. First of all, to do this, the importer has to have a corresponding bond to ensure that customs duties will be paid if the IIT's turn out to be dutiable for some reason. One reason that happens is that the container gets diverted from international traffic to domestic ("point-to-point") use or stays in the U.S. for a year or more. When that happens, the former IIT is subject to entry and duty if applicable. That means a compliant importer will have a process for tracking IIT's and reporting those that go astray. Also, there are specific rules regarding the serializing of containers and exceptions for traffic between the U.S. and Canada and Mexico. So, check the regs.

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