MAR-2 RR:CR:SM 560802 KSG
Catherine L. Holmes
The A.W. Fenton Company Inc.
P.O. Box 360614
Columbus, Ohio 43236-0614
RE: 19 U.S.C. 1304; 19 CFR 134.46; U.S. flag;
Dear Ms. Holmes:
This is in reference to your letter of December 17,
1997, on behalf of your client Rocky Shoes & Boots Co.,
Inc., requesting a binding ruling on the marking of
corrugated boxes used to pack shoes and boots. A sample box
was sent with your letter.
FACTS:
You state that corrugated boxes are manufactured in the
U.S. and shipped to a manufacturer of shoes and boots in
China. The boxes are shipped flat and will be assembled by
folding and packed with shoes or boots in China. A hang tag
is affixed to each pair of shoes or boots and a label will
be sewn into the footwear bearing the country of origin of
the footwear. The shoes are sold to the ultimate purchaser
in the box.
The sample box, which is black, contains the company
logo and on the front of the box, in the right hand corner,
there is an American flag and the phrase "MADE IN THE USA"
in large white lettering. On one side of the box, there is
the phrase "MADE IN THE USA" and a U.S. address in white
lettering.
The importer and the foreign manufacturer are not
related.
You ask if the boxes are entitled to duty free entry
under subheading 9801 or 9802 of the Harmonized Tariff
Schedule of the United States ("HTSUS"). You also ask if
the value of the boxes should be included in the appraised
value of the imported merchandise. Lastly, you ask if the
boxes should be marked to show either the country of origin
of the box or the origin of the footwear.
ISSUES:
Whether the value of the U.S. origin boxes should be
included in the appraised value of the imported footwear.
Whether the boxes will be entitled to a duty exemption
under subheading 9801.00.00, HTSUS, or subheading
9802.00.80, HTSUS.
Whether the boxes should be marked to show the country
of origin of the shoes and/or the country of origin of the
box.
LAW AND ANALYSIS:
1. Value question
The preferred method of appraising merchandise imported
into the United States is transaction value pursuant to
section 402(b) of the Trade Agreements Act of 1979 (TAA).
Section 402(b) of the TAA provides, in pertinent part, that
the transaction value of imported merchandise is "the price
actually paid or payable for the 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. See 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. In this regard, section
402(h) of the TAA, 19 U.S.C. 1401a(h)(3) 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.
The cost of packing materials and containers provided
by the buyer is included in the statutory definition of
packing costs and normally must be added to the price
actually paid or payable. However, HRL 544294, dated July
7, 1989, and HRL 544458, dated February 23, 1990, held that,
if packing material of U.S. origin is classified 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. In HRL 544667,
dated July 30, 1991, Customs stated 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...
This Customs position was recently affirmed in HRL
546287, dated April 25, 1996, which dealt with imported
frozen vegetables packaged in U.S. origin containers.
Accordingly, if the boxes are entitled to duty free
treatment under subheading 9801.00.10, HTSUS, their
appraised value would not be included in the transaction
value of the footwear.
2. Entitlement to a duty exemption
Subheading 9801.00.10, HTSUS, provides that products of
the U.S. when returned after having been exported. without
having been advanced in value or improved in condition by
any process of manufacture or other means while abroad may
be entered duty free provided the documentary requirements
of section 10.1, Customs Regulations (19 CFR 10.1) are
satisfied.
The question in the instant case is whether the
corrugated boxes, which are packed flat and undergo minor
assembly by folding in China, are advanced in value or
improved in condition.
The court held in Border Brokerage Company, Inc. v.
United States, 314 F. Supp. 788 (1970), that tomatoes of
American origin were entitled to duty free entry under item
800.00, Tariff Schedules of the United States ("TSUS") (the
predecessor to subheading 9801.00.10, HTSUS). The tomatoes
were shipped to Canada where they were unloaded, unpacked,
sorted, graded by color and size, and repacked. The court
stated that the test to be applied in item 800 cases is
whether the merchandise of American origin has itself (apart
from its container) been the object of advancement in value
or improvement in condition while abroad. The court noted
that there was no cleaning, wiping or individual wrapping of
any of the involved tomatoes in Canada. Further, in
Superscope, Inc. v. United States, 727 F. Supp. 629 (CIT
1989), the court held that American glass panels that were
repackaged in New Zealand as part of unassembled cabinets
were entitled to duty free status under item 800.00, TSUS.
In both Border Brokerage Company and Superscope, the
only processing occurring was sorting and repackaging.
Customs held in HRL 560635, dated December 15, 1997, that
U.S. origin corrugated boxes shipped to other countries for
packaging finished products were eligible for duty free
treatment under subheading 9801.00.010, HTSUS. The ruling
letter noted that Customs has previously held that the act
of being filled with their contents is not considered to be
an advancement in the condition of the container or packing
materials. See HRL 731806, dated November 18, 1988. Forming
the box by folding is a change in the condition of the box
but it is not an advancement in value or improvement in
condition. See HRL 555664, dated August 8, 1990.
Accordingly, we find that the American boxes, which are
finished when they are shipped abroad, are not advanced in
value and improved in condition and therefore, are eligible
for duty free treatment under subheading 9801.00.10, HTSUS,
upon compliance with the documentary requirements of 19 CFR
10.1.
Since we find that the boxes are entitled to duty free
treatment under subheading 9801.00.10, HTSUS, we need not
discuss the entitlement to preferential duty treatment under
subheading 9802.00.80, HTSUS.
3. Country of origin marking
Section 304 of the Tariff Act of 1930 (19 U.S.C. 1304),
provides that unless excepted, every article of foreign
origin imported into the U.S. shall be marked in a
conspicuous place as legibly, indelibly, and permanently as
the nature of the article (or its container) will permit, in
such a manner as to indicate to the ultimate purchaser in
the U.S. the English name of the country of origin of the
article.
Part 134, Customs Regulations (19 CFR Part 134),
implements the country of origin marking requirements of 19
U.S.C. 1304. Your proposed marking would not be
acceptable under 19 U.S.C. 1304 because the ultimate
purchaser could believe that the phrase "Made in U.S.A."
appearing on the box means that the footwear was made in the
U.S. Since the U.S. is not the country of origin of the
footwear, the sample box would violate 19 U.S.C. 1304.
With regard to the second part of your question, the
box is not required to be marked with its country of origin.
See 19 CFR 134.24(d). The box also does not have to be
marked with the country of origin of the footwear if the
shoes are properly marked unless the special marking
requirements of 19 CFR 134.46 are triggered. See 19 CFR
134.24(d)(3). Section 134.46, Customs Regulations (19 CFR
134.46) provides:
In any case in which the words "United States," or
"American," the letters "U.S.A.," any variation of
such words or letters, or the name of any city or
location in the United States, or the name of any
foreign country or locality other than the country
or locality in which the article was manufactured
or produced appear on an imported article or its
container, and those words, letters or names may
mislead or deceive the ultimate purchase as to the
actual country of origin of the article, there
shall appear legibly and permanently in close
proximity to such words, letters or name, and in
at least a comparable size, the name of the
country of origin preceded by "Made in," "Product
of," or other words of similar meaning.
The above special marking requirements would not be
triggered in this case if there is no reference to the U.S.
on the box. However, if a U.S. address appears on the box,
in a manner which may mislead or deceive the ultimate
purchaser as to the actual country of origin of the imported
footwear, the country of origin of the footwear must appear
on the box in conformity with the requirements of 19 CFR
134.46. With regard to the sample, the U.S. address which
appears on the side of the box with no other information may
mislead or deceive the ultimate purchaser as to the country
of origin of the imported footwear and, therefore, the
special marking requirements of 19 CFR 134.46 are triggered.
If you wish to mark the box with its country of origin,
it should be marked "box made in U.S.A." We note that if
the only U.S. reference on the box is the phrase "box made
in U.S.A.," the special marking requirements of 19 CFR
134.46 would not be triggered.
HOLDING:
The U.S. origin boxes are not advanced in value and
improved in condition and therefore, are eligible for duty
free treatment under subheading 9801.00.10, HTSUS, upon
compliance with the documentary requirements of 19 CFR 10.1.
Since the boxes are entitled to duty free treatment
under subheading 9801.00.10, HTSUS, their appraised value
would not be included in the transaction value of the
footwear.
The marking on the sample box violates 19 U.S.C. 1304
because the ultimate purchase may believe that the country
of origin of the imported footwear is the U.S. There is no
requirement that the box be marked with its country of
origin. However, if the box is to be marked with its
country of origin, it should be marked "box made in U.S.A."
A copy of this ruling letter should be attached to the
entry documents filed at the time this merchandise is
entered. If the documents have been filed without a copy,
this ruling should be brought to the attention of the
Customs officer handling the transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division