VAL CO:R:C:V 545224 CRS
District Director
U.S. Customs Service
P.O. Box 9516
El Paso, TX 79985
RE: Internal Advice 86/92; U.S. origin packing; appraised value;
dutiable value; C.S.D. 89-26; HRL 544294; HRL 544667
Dear Sir:
This is in reply to your memorandum to the Director, Customs
Information Exchange, dated November 25, 1992, under cover of which
you forwarded internal advice request 86/92, submitted by Rudolph
Miles & Sons on behalf of L.M. Becker & Co. A submission was also
made by the concerned National Import Specialist in a memorandum
dated February 1, 1993. We regret the delay in responding.
FACTS:
L.M. Becker (the "importer") imports small toys, imitation
jewelry and other items (the "toys") from Hong Kong, Taiwan and
China. The toys are duty-paid at the U.S. port of importation and
then consigned to unrelated contractors in Mexico. There the toys
are placed one each in small, plastic, oval- or elliptically-shaped
containers of U.S. origin, which the buyer also consigns to the
Mexican contractors. The containers are designed to be sold with
their contents through vending machines. The containers and their
contents are re-imported into the U.S. through the port of El Paso.
The importer contends that the appraised value of the imported
merchandise (the toys and containers) should not include the value
of the U.S. origin packing, i.e., the egg-shaped, plastic
containers. In support of this contention the importer cites
Headquarters Ruling Letter (HRL) 731806 of November 18, 1988 (also
published as C.S.D. 89-26), which held that U.S. packaging
materials are eligible for duty-free treatment under subheading
9801.00.10, Harmonized Tariff Schedule of the United States
Annotated (HTSUSA), so long as they satisfy the criteria for
classification in that subheading. The importer also cites HRL
544294 dated July 7, 1989, and HRL 544723 dated October 23, 1991,
in support of its position.
In your memorandum of November 25th you state that the
imported merchandise should be appraised as a unit, with the
appraised value subsequently adjusted in respect of the value of
the U.S. containers in order to arrive at the dutiable value of the
merchandise. This position is also advocated by the National
Import Specialist in her memorandum of February 1st. The
eligibility of the imported merchandise for the reduction in duty
provided for in subheading 9902.71.13, HTSUSA, depends on whether
the U.S. packing containers are included in the appraised value of
the imported merchandise.
ISSUES:
The issues presented are: (1) whether the value of U.S.
packing is included in the appraised value of the imported toys;
and (2) whether the term "value" as used in subheading 9902.71.13,
HTSUSA, refers to appraised value or dutiable value.
LAW AND ANALYSIS:
Merchandise imported into the United States is appraised in
accordance with section 402 of the Tariff Act of 1930, as amended
by the Trade Agreements Act of 1979 (19 U.S.C. 1401a; TAA). The
preferred method of appraisement is transaction value, defined as
"the price actually paid or payable for the [imported] merchandise
when sold for exportation to the United States," plus certain
enumerated additions, including the packing costs incurred by the
buyer with respect to the imported merchandise. 19 U.S.C.
1401a(b)(1)(A).
Assuming transaction value is the appropriate basis of
appraisement, packing costs constitute an addition to the price
actually paid or payable. 19 U.S.C. 1401a(b)(1)(A). In this
regard, section 402(h) of the TAA provides:
(3) The term "packing costs" means 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.
19 U.S.C. 1401a(h)(3). Retail packing is included in the
statutory definition of packing costs and must be added to the
price actually paid or payable. HRL 544230 dated December 22,
1988.
In support of its position the importer cites HRL 544294 dated
July 7, 1989, which held that if packaging material of U.S. origin
is classifiable in subheading 9801.00.10, HTSUSA, there is no legal
authority to treat the packaging as part of the appraised value of
the imported merchandise, and that items separately classified must
be separately appraised.
This position was affirmed in HRL 544667 dated July 30, 1991.
There we stated in pertinent part:
With regard to determining appraised value, the
principle that imported merchandise be appraised in
accordance with its classification applies. Thus, where
American packaging is classified under subheading
9801.00.10, HTSUSA, and the merchandise packed in the
American packaging is classified in a subheading within
the nomenclature between Chapters 1 and 97, no authority
exists to combine the respective appraised values.
Because the packaging and merchandise are treated as
separately classifiable entities, their appraised values
are separate....
However, this is not the case with regard to the merchandise that
is the subject of the instant internal advice request. The
National Import Specialist states in her memorandum that the
imported articles and their plastic containers are classifiable in
the appropriate headings for toys, jewelry, etc., under General
Rule of Interpretation 1. Thus in this instance, the U.S. origin
packing, i.e., the plastic containers, and the imported merchandise
are not separately classifiable.
Instead, the U.S. origin containers are classifiable with the
toys. The containers are used in placing the imported toys "in
condition, packed ready for shipment to the United States." 19
U.S.C. 1401a(h)(3). Accordingly, the cost of the containers is an
addition to the price actually paid or payable in accordance with
section 402(b)(1)(A) of the TAA. 19 U.S.C. 1401a(b)(1)(A).
The importer contends that term "value" as used in subheading
9902.71.13, HTSUSA, refers to the dutiable value rather than
appraised value of imported merchandise. Section 500 of the Tariff
Act of 1930, as amended (19 U.S.C. 1500), is the general
authority for Customs to appraise imported merchandise. It
provides that Customs shall appraise merchandise by ascertaining
its value under section 402 of the TAA. In addition, section 503
of the Tariff Act of 1930, as amended, provides:
Except as [otherwise] provided...the basis for the
assessment of duties on imported merchandise subject to
ad valorem rates of duty or rates based upon or regulated
in any manner by the value of the merchandise, shall be
the appraised value determined upon liquidation, in
accordance with section 1500 of this title....
19 U.S.C. 1503. Thus to restate, where a rate of duty is
regulated by the value of imported merchandise, the term "value"
refers to the appraised value of the merchandise determined in
accordance with section 402 of the TAA. Accordingly, the term
"value" in subheading 9902.71.13, HTSUSA, refers to the appraised
value of the imported merchandise. See also C.S.D. 81-36; HRL
543319 dated January 17, 1985. Finally, we have not addressed the
question of the proper dutiable value of the imported merchandise
since this issue was not raised by the internal advice request.
HOLDING:
The value of the U.S. origin containers classified in
subheading 9801.00.10, HTSUSA, is part of the appraised value of
imported merchandise. The term "value" in subheading 9902.71.13,
HTSUSA, refers to appraised value of imported merchandise.
This decision should be mailed by your office to the internal
advice requester no later than sixty days from the date of this
letter. On that date the Office of Regulations and Rulings will
take steps to make the decision available to Customs personnel vis
the Customs Rulings Module in ACS, and to the public via the
Diskette Subscription Service, Freedom of Information Act and other
public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division