VAL CO:R:C:V 544993 ILK
District Director
Seattle District
RE: Dutiability of garment-on-hanger stuffing charges and
consolidation charges
Dear Sir:
This is in response to your submission of June 16, 1992, and
a ruling request (hereinafter referred to as the "request") dated
April 24, 1992, submitted by xxxxxxxxx Inc. (hereinafter referred
to as the "importer") regarding the dutiability of consolidation
charges.
FACTS:
The importer is an importer of wearing apparel. With
respect to the importations at issue, the importer's overseas
vendors pack the merchandise by placing the garments on hangers,
with plastic coverings, ready for hanging in the container. The
vendors deliver the garments on hangers (GOH) to a consolidator's
warehouse. The consolidator is unrelated to the vendors. The
consolidator hangs the garments in the container, which is
referred to as "stuffing." According to the request, and the
documentation attached thereto, the charge for stuffing the GOH
into the container is billed to the vendors, and paid for by the
vendors. The consolidator's receipt for payment from the vendors
for the "stuffing" services describes the services as "stuffing"
and "handling and documentation." The request states that this
GOH stuffing charge is then included in the F.O.B. invoice price
to the importer from the vendors. The request does not dispute
that the GOH stuffing charge paid by the vendors is dutiable.
According to the request the consolidator also provides
"consolidation" services for the importer which consist of
quality check, verification of destination tags, quantity,
purchase order numbers and style numbers and making sure all
merchandise is accounted for prior to shipping to the U.S. The
charges for these consolidation services are billed to the
importer and are claimed to be separate and distinct from the GOH
stuffing charges billed to the vendor. The request states that
these consolidation charges billed to the importer are described
on the consolidator's invoices as "stuffing" or "GOH handling."
Copies of these invoices were referred to in the request but were
not included with the request.
The importer was audited in 1986 by the Regulatory Audit
Division. According to the audit report dated September 29,
1986, it was determined that container stuffing charges had not
been declared to Customs. As a result of the audit, the
"stuffing" or "GOH handling" charge was included in the FOB value
of the imported merchandise. At the time of the audit the
importer believed the "stuffing" and "GOH handling" charges
billed to the importer were in fact for packing of the
merchandise, and that the packing charges were not included in
the FOB invoice price from the vendors.
The importer requests a ruling that the charges incurred by
the consolidator for the "consolidation" services described as
"stuffing" or "GOH handling," as shown on the consolidator's
invoices to the importer, not be included in transaction value.
ISSUE:
Whether the charges for the "consolidation" services
performed by the consolidator and billed to the importer are
included in the transaction value of the imported merchandise.
LAW AND ANALYSIS:
The preferred method of appraisement is transaction value
which is defined by 402(b)(1) of the Tariff Act of 1930, as
amended by the Trade Agreements Act of 1979 (TAA, 19 U.S.C.
1401a(b)) as "the price actually paid or payable for the
merchandise when sold for exportation to the United States..."
plus certain additions specified in 402(b)(1) (A) through (E).
The term "price actually paid or payable" is defined in TAA
402(b)(4)(A) as:
...the total payment (whether direct or indirect...)
made, or to be made, for imported merchandise by the
buyer to, or for the benefit of, the seller.
The charges for the consolidation services which are
incurred by the consolidator, and billed directly to the importer
are not included within the definition of price actually paid or
payable or any of the additions specified in 402(b)(1) (A)
through (E). Charges paid to the consolidator for the
consolidation services described above are not part of the price
actually paid or payable because they are not paid to or for the
benefit of the seller of the imported merchandise.
However, the description of consolidation charges as
"stuffing" or "GOH handling" charges, is misleading. TAA section
402(b)(1)(A) provides that "the packing costs incurred by the
buyer with respect to the imported merchandise" are to be
included in the transaction value of the imported merchandise.
In TAA #49 we ruled that the cost of packing necessary to place
the goods in seaworthy condition packed ready for shipment to the
United States is dutiable. The "stuffing" services in this case
consisting of hanging the garments in the container, are
necessary to place the goods in seaworthy condition packed ready
for shipment to the United States. Prior to placement of the
garments in the container, the garments are not in seaworthy
condition packed ready for shipment to the United States. The
"stuffing " charges are therefore properly included in the
transaction value of the imported merchandise.
The invoice description of the consolidation services, as
"stuffing" or "GOH handling" is very similar to the description
on the receipt for the packing services. When consolidation
services are described in a manner nearly identical to packing
services, we have no alternative but to treat them as packing
services.
This ruling is prospective only and is not applicable to
prior entries for which liquidation has become final.
HOLDING:
Charges for these particular services are included in
transaction value as packing costs.
Sincerely,
John Durant, Director
Commercial Rulings Division