Case Law Details

Case Name : In re GDPK Returnable Solutions (CAAR Mumbai)
Appeal Number : Advance Ruling No. CAAR/Mum/ARC/19/2021
Date of Judgement/Order : 12/07/2021
Related Assessment Year :

In re GDPK Returnable Solutions (CAAR Mumbai)

M/s. GDPK Returnable Solutions India Private Limited has filed all application seeking an advance ruling on the classification of intermediate bulk containers or IBCs. The Goodpack group is engaged in the business of leasing out these reusable metal containers to customers/packers, who in turn, use the said IBCs for safe and secure transportation of merchandise to their consignees, through one or more modes of transportation. The applicant has stated that IBCs are reusable metal containers, made of galvanized steel specially designed and equipped for carriage by one or more modes of transport. IBCs are designed for easy handling, loading and unloading. IBCs are used as a returnable packaging material for import/export of goods. The IBCs can transport a range of products similar to marine shipping containers.

2. The applicant, in their application, indicated their preference for importing IBCs through the Jawaharlal Nehru Port. Accordingly, a copy of the application was sent to the Principal Commissioner of Customs, NS – III, Jawaharlal Nehru Custom House, seeking his comments on the application for advance ruling. The learned Principal Commissioner, in the comments has opined that IBCs merit classification under headings 73.09 or 73.10 of the first schedule to the Customs Tariff Act, 1975 and not under heading 86.09, which finds favour with the applicant. In the said communication, it is reported that IBCs imported through JNPT between 22.04.2015 to 06.01.2021 have been classified under headings 73.09, or 73.10, or 73.26 depending on constituent material, size etc.

3. The matter was listed for hearing on 24.06.2021. The applicant was represented by Shri imarishu Tiwari and others. Apart from emphasising the design characteristics of the product, e.g., fully collapsible nature, flip pins for holding the loaded IBCs in place while in transit, stack pins for stacking them when empty etc., pictures and video clips were also displayed showing the use of the IBCs when empty and when loaded. These illustrations also brought out the fact that the IBCs are designed for transportation by vessels, barges, tractor trailers etc. It was also stated that 16 loaded IBCs can fit in to a 20 ft. marine container, while 32 of them can be accommodated in 40 ft. containers. Emphasis was also laid on the relevant Chapter/Supplementary Notes. The applicant also highlighted rulings from various customs organisations across the globe where IBCs have been classified under heading 86.09. It was also informed during the course of the hearing that during the COVID 19 pandemic, due to shortage of marine containers as well as their exorbitant cost, IBCs acted as a direct alternative.

4. I have considered all the materials placed before me, both written and oral. IBCs are stated to be an environmentally sustainable alternative to wooden boxes/metal drums in the international supply chain, as use of IBCs significantly reduces disposable packaging in comparison with other packaging options, create efficient onsite storage by eliminating the need for additional intermediate packaging and waste, increase shipping efficiencies and cut down product wastage due to minimal damage in transit, resulting in reduced carbon footprints. IBCs are specially designed for ‘door-to-door- transport of goods and are equipped for carriage by one or more modes of transport and has various accessories (packing trays, corner hooks) for handling and secure mounting on vehicles, airplanes, or ships. IBCs are built and intended for repetitive use. In the video presentation made during the hearing it was shown that the IBCs have a base and all the four sides are fully collapsible. When an IBC is required for packing a consignment, all the four sides can be quickly erected and are held in position with the help of flip pins. In the collapsed state, the IBCs can be stacked one above the other for ease of transportation. When erected for use, 16 IBCs can fit into a 20 ft. marine container, while a 40 ft. container can accommodate double that number. When asked specifically about the lid during the hearing, it was stated that IBCs are designed as top open containers, but on specific order by the user, a top lid can also be provided.

5. Both the applicant as well as the Principal Commissioner of Customs have indicated that the most common classification currently being adopted in various global ports of export as well as in India is the heading 7309 which refer to reservoirs, tanks, vats and similar containers for any material (other than compressed or liquefied gas), of iron or steel, of a capacity exceeding 300 L, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment; or the heading 7310 which include tanks, casks, drums, cans, boxes, and similar containers, for any material (other than compressed or liquefied gas), of iron or steel, of a capacity not exceeding 300 L, whether or not lined or heat insulated, but not fitted with mechanical or thermal equipment. Apart from the above, the other heading which finds favour is the residuary 7326 which is for other articles of iron or steel. It is the applicant’s contention that heading 8609 for containers (including containers for the transport of fluids) specially designed and equipped for carriage by one or more modes of transport is the most appropriate heading for IBCs.

6. Rule 1 of the General Rules for the Interpretation of Import Tariff prescribes that, the titles of Sections, Chapters and sub-chapters are provided for ease of reference only and for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes provided such headings or Notes do not require otherwise. Rule 3 of the GIR provides that, when by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected, in the heading which provides the most specific description. The said rule also provides that when goods cannot be classified by reference to various provisions of this rule, they then shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. General Note to Chapter 86 of the WCO’s Explanatory Notes provide that the chapter, among others, also covers containers specially designed and equipped for carriage by one or more modes of transport. The Explanatory Note to heading 86.09 states, in relation to containers that are classifiable thereunder, that these containers (including lift vans) are packing receptacles specially designed and equipped for carriage by one or more modes of transport (e.g., road, rail, water or air). They are equipped with fittings (hooks, rings, castors, supports, etc.) to facilitate handling and securing on the transporting vehicle, aircraft or vessel. They are thus suitable for the “door-to-door” transport of goods without intermediate repacking and, being of robust construction, are intended to be used repeatedly. The more usual type, which may be of wood or metal, consists of a large box equipped with doors, or with removable sides. All of the above discussion clearly indicate that where the contending entries for classification of IBCs is concerned, the heading 86.09 is more appropriate compared to the heading 73.09, even though they are made of galvanised steel, because the former is a more specific heading, and therefore, preferable to a general heading.

7. The applicant has also cited the rulings of customs organisations of Australia, South Korea, European Union, Malaysia, Indonesia, and Mexico wherein heading 86.09 has found favour as the correct classification of IBCs. As recent as 07.06.2021, the Australian customs have revised their earlier ruling and have held that the merchandise, Intermediate Bulk container (IBC), is a reusable galvanized steel box with 4 collapsible sidewalls, designed for packing and transporting bulk cargo. The IBC is a self-standing and has a built-in pallet. It features a 4-way forklift access and 2-way rotating fork access. The item is designed to stack 2 high and 2 across in both domestic trailers and ocean containers and 4-5 high in storage. The review decision is that the goods are classified to 8609.00.00.

8. Even when one considers the competing entries for classification, IBCs, having a capacity of 1600 litres clearly are out of purview of heading 73.10. One has to summarily reject the entry 73.26, a residuary heading, when more specific headings in the form of 73.09 and 86.09 are available. It is important not to lose sight of the fact that IBCs are fully collapsible when they are not intended to carry cargo. In that state, it is difficult to imagine how the entry 73.09 can be considered a suitable classification entry. Besides, when the fact that IBCs are specially designed and equipped for carriage by one or more modes of transport, and that they can constitute a viable alternative to regular marine containers is considered, the heading 86.09 appears as a much more suitable alternative to the heading 73.09. The HSN Explanatory Notes to heading 73.09 says that these containers are normally installed as fixtures for storage or manufacturing use, e.g., in factories, chemical works, dye works, gasworks, breweries, distilleries and refineries, and to a smaller extent in houses, shops, etc. The Explanatory Notes to heading 73.09 also says that the heading excludes containers specially designed and equipped for carriage by one or more modes of transport (heading 86.09).

9. After analysing the product characteristics, specification, description of relevant headings/sub-headings, relevant Chapter Notes/Explanatory Note, and also having taken note of the decisions of the customs authorities of various countries as cited by the applicant, it is my considered opinion that Intermediate Bulk Containers do not merit classification under heading 73.09, and that the heading 86.09 is more appropriate choice in so far as the said heading does not appear to cover primary packaging materials, but to specialised containers. It is clear that cargo is generally packed in suitable packaging materials, and only thereafter, loaded onto the IBCs only for transportation. IBCs are also not intended for use as items of storage in a factory, warehouse or godown, but are meant for use as a means for bulk, safe and secure transportation. This appears to match the mandate of the heading 86.09 which covers within its ambit containers for the purpose of transporting bulk goods, through various modes of transport.

In view of the foregoing discussions, I rule that Intermediate Bulk Containers or IBCS, in short merit classification under heading 86.09, and more specifically, sub-heading 86090000 of the first schedule to the Customs Tariff Act, 1975.

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