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HQ 965950





February 6, 2003

CLA-2 RR:CR:TE 965950 ttd

CATEGORY: CLASSIFICATION

TARIFF NO.: 4407.10.0015; 4421.90.9840

Port Director
U.S. Customs
9901 Pacific Highway
Blaine, WA 98230

RE: Application for Further Review of Protest Number 3004-02-100101; Pallet Components; Heading 4407; Heading 4415

Dear Sir:

This is a decision on the application for further review (AFR) of protest number 3004-02-100101, timely filed by Sharretts, Paley, Carter & Blauvelt, P.C., on behalf of Jackpine Forest Products, Ltd. (Protestant), regarding the tariff classification of unassembled pallet components. The AFR challenges the liquidation of 66 entries of wood boards used to manufacture pallets, entered between February 26 and April 16, 2000, which were classified under subheading 4407.10.0015 and subheading 4421.90.9840 of the Harmonized Tariff Schedule of the United States Annotated (HTSUSA). The Protestant contends that the wood boards are classified in subheading 4415.20.8000 as unassembled pallets.

FACTS:

The products under consideration are wood boards used to construct pallets after importation. The products consist of square cut boards measuring, 1 x 4 inches or 1 x 6 inches, nominal, and notched boards measuring 2 x 4 inches, nominal. The protestant claims that the imported articles were “unassembled pallets” consisting of the exact number and combination of precision-cut pieces required to assemble a given number of “pallets.” Based on the shipping invoice, each “unassembled pallet” subject to this protest consists of two 2 x 4 wood boards and twelve 1x 6 wood boards. Each board measures 48 inches in length.

Customs issued a Notice of Action (Customs Form 29) to the Protestant on March 23, 2001, advising the Protestant of a change in classification. The Explanation on the notice reads, in pertinent part:

All the pallet stock, other than notched stringers, entered on these entries are to be classified 4407.10. Failure to furnish corrected entries with valid permit numbers within 20 days will result in the initation of liquidated damage claims. The reasons for the reclassification are in part as follows.

The spreadsheets furnished by you as a result of your review show a large number of discrepancies between the quantities declared to Customs at release and entry summary and the quantities that were actually imported.

Contacts with pallet manufacturers who purchased your shipments indicate that a large percentage of the stock was purchased for inventory and not as a result of a specifc purchase order to them.

We note that at the time of importation of the subject merchandise, articles classifiable under subheading 4407.10.00, HTSUSA, which are products of Canada, were subject to entry requirements based on the U.S.-Canadian Softwood Lumber Agreement of 1996. All invoices of such articles must be annotated with the Canadian province of manufacture. If manufactured in Ontario, Quebec, British Columbia or Alberta, a permit is required.

ISSUE:

Whether the merchandise in question classifiable under heading 4407, HTSUSA, as general sawn lumber and heading 4421, HTSUSA, as other articles of wood; or under heading 4415, HTSUSA, as unassembled pallets?

LAW AND ANALYSIS:

Classification under the HTSUSA is made in accordance with the General Rules of Interpretation (GRI). GRI 1 provides, in part, that classification decisions are to be “determined according to the terms of the headings and any relative section or chapter notes.” In the event that goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI may then be applied.

The Harmonized Commodity Description and Coding System Explanatory Notes (EN) constitute the official interpretation of the Harmonized System at the international level (for the 4 digit headings and the 6 digit subheadings) and facilitate classification under the HTSUSA by offering guidance in understanding the scope of the headings and GRI. While neither legally binding nor dispositive of classification issues, the EN provide commentary on the scope of each heading of the HTSUSA and are generally indicative of the proper interpretation of the headings. See T.D. 89-80, 54 Fed. Reg. 35127-28 (Aug. 23, 1989).

Chapter 44, HTSUSA, provides for, among other things, wood and articles of wood. This chapter is structured so that less processed wood appears at the beginning of the chapter followed by more advanced wood in later headings within the same chapter. For example, heading 4403, HTSUS, is a general provision for wood in the rough, whether or not stripped of bark or sapwood or roughly squared, and heading 4421, HTSUS, is a basket provision for more advanced articles of wood that cannot be classified elsewhere in the chapter. Therefore, as heading 4407 resides near the beginning of chapter 44, it reflects coverage of a relatively basic category of lumber products in relation to either heading 4415 or 4421, which residing closer to the end of the chapter, reflect coverage of a relatively more advanced category of products.

Heading 4415 provides for “Packing cases, boxes, crates, drums and similar packings, of wood; cable-drums, of wood; pallets, box-pallets and other load boards, of wood; pallet collars of wood.” The Protestant argues that the subject merchandise is classifiable in heading 4415, HTSUSA, as unassembled pallets.

GRI 2(a) reads:

Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), presented unassembled or disassembled.

While the term “essential character” is not defined in the HTSUSA, the EN offer guidance on the meaning of the term under GRI 3(b), stating, in part that:

It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods. See, EN’s to GRI 3(b), VIII.

The EN to heading 4415 also provide in relevant part:

This part of the heading [covering packing cases, boxes, crates, drums and similar packings] includes:

(1) Packing cases and boxes with solid sides, lids and bottoms, used for general packing and transport purposes.

(2) Crates, fruit or vegetable boxes, egg trays and other containers with slatted sides and open tops (including those of a kind used for the transport of glassware, ceramic products, machinery, etc.).

(3) Boxes made of sliced or peeled wood (but not those of plaited wood) of the kind used for packing cheese, pharmaceutical products, etc.; match-boxes (including those with a striking surface) and conical open containers for marketing butter, fruit, etc.

(4) Drums and barrel-shaped containers, not of the kind made by coopers, such as are used for the transport of dry colours, chemicals, etc.

These containers may be presented without a lid (“open” containers such as cases, crates, etc.). They may be unassembled or partly assembled, provided the wood is in sets of the parts necessary to make a complete container or an incomplete container having the essential character of a complete container. Where the wood is not in such sets, it is to be classified as sawn or planed wood, plywood, etc., as the case may be.

A pallet is generally defined as a “load board consisting of two decks separated by bearers or a single deck supported by feet and designed essentially for handling by means of fork-lift trucks or pallet trucks.” See NY C85642, dated June 26, 2000. In Headquarters Ruling Letter (HQ) 965460, dated September 5, 2002, we noted that pallets commonly consist, at a minimum, of two types of components, i.e., runners (generally notched to accommodate forklift blades) and deckboards (thin boards of 1” or less in thickness).

In New York Ruling Letter (NY) D83315, dated July 16, 1999, Customs found that unassembled pallets, which “have the exact number of pieces necessary to make a specific number of pallets” were classifiable in heading 4415, HTSUSA. Likewise, in NY C89984, dated December 16, 1999, we classified unassembled pallets consisting of stringers and deckboards under heading 4415, HTSUSA. In that ruling, we found that “[u]nassembled specified pallets (Emphasis added) imported in exact numbers of pieces required to make a specific number of pallets were classifiable in heading 4415.” We considered information regarding the range of sizes for the pieces of the pallets, a diagram of an actual pallet, and photographs. We noted that “[w]e cannot give rulings on ranges of sizes for unspecified pallets.” Instead, we only classified the one identifiable unassembled pallet described by the client under heading 4415, HTSUSA.

In NY C85642, Customs determined that certain pallet stringers, in their condition as imported, were dedicated for use as integral and functional components of pallets. The pallet stringers considered were wood boards with notches that had been sized and placed specifically to accommodate fork-lift blades. Accordingly, we found that the stringers, as imported, were dedicated for use as integral and functional components of pallets. We further found that while the stringers belonged to the class or kind of goods used as wood pallet components, the pallets needed to be assembled with numerous other parts to form a complete pallet and that they did not have the essential character of a complete pallet. As heading 4415, HTSUSA, does not cover merely the parts of the enumerated products, we classified the boards measuring 1 x 4 inches and 1 x 6 inches and 40 to 48 inches in subheading 4407.10.00. Similarly, in NY B80465, dated January 10, 1997, wood pieces with square edges and ends, measuring 1-1/4 inches by 1-3/4 inches by 67 or 70 inches in length to be used as components for pallets, were classified in subheading 4407.10.0015, HTSUSA. See also NY C85642.

The rulings cited by counsel for the Protestant fail to support the claim that the imported merchandise is an unassembled pallet, as the merchandise in those rulings is different than the instant merchandise. Here, the Protestant failed to provide an identifiable design plan, detailing the specifications for the particular type of pallet to be constructed (e.g., reusable pallet, two-way pallet, size, load bearing capacity, deck construction, fork lift access, wood species, etc.). While the components are shipped together, they are packed separately without an intention of selling an identified type of pallet, either assembled or unassembled. Moroever, based on discussions with U.S. customers and review of purchase orders, we have determined that the subject products were purchased as pallet stock or pallet components, and not as an identifiable pallet type or kind. The components are essentially used by U.S. buyers to manufacture various types of pallets.

Review of the sales invoice associated with this AFR (identified as GST #896731247), indicates that each pallet to be constructed merely consists of the following: 2 pieces 2 x 4 by 48” and 12 pieces 1 x 6 by 48”. The number of boards in the dimensions provided are not recognizable as an unassembled pallet. Moreover, the Protestant has not submitted any design specifications for the specific type of pallet that was ordered and shipped. At the time of importation, the subject boards were not identifiable as a specific type of pallet but rather, they were components to be used to construct pallets based on the buyer’s discretion. Thus, when imported, they were not unassembled pallet kits, but rather, pallet components or stock which would be designed into pallets after importation. The subject items are not classifiable in heading 4415, HTSUSA, as unassembled pallets. Accordingly, we find that the square cut boards were correctly liquidated as general sawn lumber under heading 4407, HTSUSA.

Concerning the notched boards (stringers), based on the length of each board and the notches which appear to be sized and located specifically to accommodate fork-lift blades, the pallet stringers, in their condition as imported, appear to be dedicated for use as integral and functional components of pallets. However, as the stringers do not have the essential character of a complete pallet, they are not classifiable in heading 4415, HTSUSA. Heading 4421, HTSUSA, provides for “other articles of wood.” According to the EN, the heading covers among other things, “wooden parts of the articles specified or included in the preceding headings, other than those of heading 4416.” Thus, the “notched” stringers are classifed under subheading 4421, HTSUSA, which provides for “other articles of wood.”

HOLDING:

The protest should be DENIED in full. The subject square cut boards are classified under subheading 4407.10.0015, which provides for “Wood sawn or chpped lengthwise, sliced or peeled, whether or not planed, sanded or end-jointed, of a thickness exceeding 6 mm: Coniferous: Other: Not treated: Mixtures of spruce, pine, and fir (“S-P-F”). The general column one rate of duty is “free.”

The subject notched boards (stringers) are classified under subheading 4421.90.9840, HTSUSA, which provides for “Other articles of wood: Other: Other: Other.” The general column one rate of duty will be 3.3 percent. (Products classifiable in this subheading were not subject to the U.S.-Canadian Softwood Lumber Agreement at the time of importation).

In accordance with Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, section 3 A. (11) (b), you are to mail this decision and the Protest (Customs Form 19) to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with this decision must be accomplished prior to mailing the decision.

The Office of Regulations & Rulings will make this decision available to Customs personnel and to the public on the Customs Service Home Page on the World Wide Web, www.customs.gov, by means of the Freedom of Information Act and by other methods of public distribution sixty days from the date of this decision.

Sincerely,

Myles B. Harmon, Director

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