RR:IT:VA 546043 KCC
District Director
U.S. Customs Service
P.O. Box 9516
El Paso, Texas 79985
RE: HRL 545224 modified; U.S. origin packing; appraised value;
packing costs; 402(b)(1)(A) and (h) of the TAA; 19 U.S.C.
1401a(b)(1(A) and (h)(3); HRL 544230; HRL 544294; HRL
544458; HRL 544667
Dear District Director
This decision concerns Headquarters Ruling Letter (HRL)
545224, issued September 19, 1994, as Internal Advice 86/92 filed
by Rudolph Miles & Sons on behalf of L.M. Becker & Co. In
pertinent part, HRL 545224 determined that the value of U.S.
origin containers classified under subheading 9801.00.10,
Harmonized Tariff Schedule of the United States (HTSUS), was part
of the appraised value of the imported merchandise.
Pursuant to 625(c)(1), Tariff Act of 1930 (19 U.S.C.
1625(c)(1)), as amended by 623 of Title VI (Customs
Modernization) of the North American Free Trade Agreement
Implementation Act (Pub. L. 103-182, 107 Stat. 2057), notice of
the proposed modification of HRL 545224 was published on October
25, 1995, in the Customs Bulletin, Volume 29, Number 43. Two
comments, which agreed with Customs proposed modification, were
received in response to this notice.
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.
HRL 545224 determined that the toys and their plastic
containers were classifiable in the appropriate headings for
toys, jewelry, etc., under General Rule of Interpretation (GRI)
1, HTSUS. Therefore, the U.S. origin packing, i.e., the plastic
containers, and the imported merchandise, i.e., the toys, were
not separately classifiable. HRL 545224 stated that the
containers were used in placing the imported toys "in condition,
packed ready for shipment to the United States. Accordingly, the
cost of the containers was considered an addition to the price
actually paid or payable in accordance with 402(b)(1)(A) of the
Tariff Act of 1930, as amended by the Trade Agreements Act of
1979 (TAA) (19 U.S.C. 1401a(b)(1)(A)).
ISSUE:
Is the value of the U.S. origin packing included in the
appraised value of the imported toys?
LAW AND ANALYSIS:
Merchandise imported into the United States is appraised in
accordance with 402 of the TAA (19 U.S.C. 1401a). 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, 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.
HRL 544294 dated July 7, 1989, and HRL 544458 dated February
23, 1990, held that, if packing material of U.S. origin is
classifiable under subheading 9801.00.10, HTSUS, there is no
legal authority to treat the packing as part of the appraised
value of the imported merchandise because items which are
separately classified must be separately appraised. This
position was affirmed in HRL 544667 dated July 30, 1991. There
we stated, in pertinent part, that:
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, HTSUS, 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....
HRL 545224 stated that the imported articles and their
plastic containers were classifiable in the appropriate headings
for toys, jewelry, etc., under GRI 1, HTSUS. Thus, the U.S.
origin packing, i.e., the plastic containers, and the imported
merchandise, i.e., toys, were not separately classifiable. The
containers were 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 was
determined to be an addition to the price actually paid or
payable in accordance with 402(b)(1)(A) of the TAA. 19 U.S.C.
1401a(b)(1)(A).
However, upon reviewing HRL 545224, we are of the opinion
that the statement that "the imported articles and their plastic
containers were classifiable in the appropriate headings for
toys, jewelry, etc., under GRI 1, HTSUS" is incorrect. The
National Import Specialist's memorandum further states it was
suggested that the packaging material be viewed as a toy.
However, the National Import Specialist stated:
This office is not in agreement with that concept.
Separately imported, the egg shaped packaging would not be
considered a toy. Further, the egg shaped packaging is of a
kind normally used for packaging vending machine goods.
Generally, foreign packing material is classified with imported
merchandise pursuant to GRI 5(b), HTSUS (provided it meets the
qualifications set out in GRI 5(b), HTSUS). Thus, the foreign
packing materials value is included in the appraised value of the
imported merchandise. It appears that HRL 545224 treated the
plastic containers as foreign packing material.
However, in this situation, the packing material is not of
foreign origin, but of U.S. origin. Pursuant to HRL 544294, HRL
544458, and HRL 544667, U.S. packing materials or packing
containers are separately classified from the imported
merchandise contained therein. The invoice will describe the
imported merchandise, i.e., toy - heading 9503, and U.S. packing,
i.e., plastic container - subheading 9801.00.10. Since the items
are separately classified, they are separately appraised.
Therefore, the value of the U.S. packing materials or packing
containers, i.e., the plastic containers, is not included in the
appraised value of the imported merchandise, i.e., the toys.
HOLDING:
The value of the U.S. origin containers classified under
subheading 9801.00.10, HTSUS, is not part of the appraised value
of the imported merchandise.
EFFECT ON OTHER RULINGS:
HRL 545224 issued September 19, 1994, is modified as set
forth above. In accordance with 19 U.S.C. 1625(c)(1), this
ruling will become effective 60 days after publication in the
Customs Bulletin. Publication of rulings or decisions pursuant
to 19 U.S.C. 1625(c)(1) does not constitute a change of practice
or position in accordance with 177.10(c)(1), Customs Regulations
(19 CFR 177.10(c)(1)).
Sincerely,
Acting Director
International Trade Compliance
Division