CLA-2 CO:R:CV:V 543985 EK
District Director of Customs
New Orleans, Louisiana
RE: Internal Advice No. 25/87; Dutiability of Packing Costs
Dear Sir:
This is in response to an internal advice request initiated
by the importer, through counsel, regarding the valuation of
merchandise imported from China, through Hong Kong. The
merchandise is subject to appraisement pursuant to transaction
value, section 402(b) of the Tariff Act of 1930, as amended by
the Trade Agreements Act of 1979 (TAA; 19 U.S.C. 1401a(b)).
FACTS:
The importations in question involve footwear imported from
the PRC through Hong Kong, whereby the importer utilizes the
services of a Hong Kong buying agent. For purposes of this
internal advice request, we are assuming that the agent is in
fact a bona fide buying agent of the importer and that the
commissions paid to the agent are non-dutiable charges. The
merchandise is purchased ex-factory from China.
The importer states that the agent in Hong Kong facilitated
the process of the goods arriving from China by providing, among
other things, inspection of the packages and, when necessary,
rearranging and repacking the merchandise. The importer alleges
that in each instance, the factory's original packing sufficed
for export; however, due to the factory's inexperience, many
shipments were sloppy by American standards. The importer
further states that it is not that the merchandise would not
otherwise have been seaworthy packed or not survived the voyage
but rather, the merchandise was not segregated properly.
It is alleged that any repacking done by the Hong Kong
agent was done solely for cosmetic purposes, i.e., rearranging
and segregating. The merchandise was not destined to be shipped
to the importer directly but rather, to the importer's customers
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in the United States. The importer states that these ultimate
United States purchasers wanted shipments which could be sent
immediately to their retail outlets and could be segregated by
style, size and color.
ISSUE:
Whether the repacking charges incurred by the importer are
to be added to the "price actually paid or payable" for the
imported merchandise.
LAW AND ANALYSIS:
Transaction value is defined as the "price actually paid or
payable for the merchandise" and includes costs incurred for
packing incurred by the buyer with respect to the imported
merchandise. See, section 402(b)(1)(A) of the TAA. The term
'packing costs' is defined in section 402(h)(3) as "the cost of
all containers and coverings of whatever nature and of packing,
whether for labor or materials, used in placing merchandise in
condition, packed ready for shipment to the United States."
(emphasis added).
In Headquarters Ruling No. 542834 dated July 20, 1982 (TAA
#49), we noted that the phrase "packed ready for shipment to the
United States" was analogous to the merchandise being "in
seaworthy condition." Therefore, in that case services performed
which were incident to placing the merchandise in condition
packed, ready for shipment to the United States were held to be
dutiable as "packing costs." The costs incurred subsequent to
the merchandise attaining that status were held to be not
dutiable.
In Headquarters Ruling No. 543026 dated March 17, 1983,
certain expenses incurred for vacuum packing were held to be not
part of the dutiable value of the imported merchandise because
such took place subsequent to the merchandise being placed in
condition, packed ready for shipment to the United States.
HOLDING:
In view of the foregoing, it is our conclusion that the
expenses incurred by the importer are not "packing" costs within
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the meaning of section 402(h)(3) of the TAA. The merchandise,
when it was exported from the PRC, was packed ready for shipment
to the United States. The charges incurred subsequent to this
condition are not added to the "price actually paid or payable"
to determine the transaction value of the imported merchandise.
Sincerely,
John Durant
Acting Director, Commercial
Rulings Division