CON 9-05; CON 9-07; DRA 4
OT:RR:CTF:ER
H251771 ECG
Gail Cumins
Sharretts, Paley, Carter & Blauvelt, P.C.
75 Broad Street
New York, NY 10004
Re: Request for a Ruling as to Whether Certain Garments Qualify Either for Unused Merchandise Drawback or for Temporary Importation in the United States Under Bond or Carnet
Dear Ms. Cumins:
This is in response to your ruling request dated March 14, 2014, on behalf of Christian Dior Couture, regarding whether certain garments qualify either for unused merchandise drawback or for the temporary importation into the United States under bond or carnet.
FACTS:
You state that Christian Dior Couture imports haute couture garments so that they may be furnished to celebrities at no cost to wear at high-profile events, such as the Academy Awards ceremony. The garments serve an important form of advertising for the company because they allow the company to increase its brand awareness and showcase the latest fashions and increase sales. Once entered into the United States, each piece is fitted to the particular person wearing the haute couture piece so that it may properly display the intended design. Such fittings include hemming, shortening, and/or otherwise altering for the measurements of the person displaying the piece. Only one of each piece will be imported. After exhibition at the event for which the piece was imported, the piece is returned to the company’s U.S. office, and shipped back to the company’s office in Paris, France. During this time, the company does not sell the garments, but retains ownership. The haute couture pieces generally spend no more than a week in the United States. You inquire whether the haute couture garments are eligible for entry into the United States under an A.T.A. carnet or a temporary importation under bond (“TIB”), or are eligible for unused merchandise drawback.
ISSUES:
I. Whether the haute couture pieces may enter under an A.T.A. carnet as samples.
II. Whether the haute couture pieces may enter under a TIB as articles not for sale or sale on approval to be repaired, altered or processed.
III. Whether the haute couture pieces may qualify for unused merchandise drawback.
LAW AND ANALYSIS:
I. Whether the haute couture pieces may enter under an A.T.A. carnet as samples.
Christian Dior would like to enter the pieces of haute couture using an A.T.A. carnet. In pertinent part, CBP Regulations provide that goods may be temporarily entered under an A.T.A. carnet under the International Convention to Facilitate the Importation of Commercial Samples and Advertising Material. See 19 C.F.R. § 114.22(a)(2). Article III of the Convention to Facilitate the Importation of Commercial Samples and Advertising Material allows the temporary duty-free admission of samples. Paragraph 1 of Article III allows the importation of “samples,” meaning:
articles which are representative of a particular category of goods already produced or are examples of goods the production of which is contemplated provided that they:
are owned abroad and are imported solely for the purpose of being shown or demonstrated in the territory of importation for the soliciting of orders for goods to be supplied from abroad; and
are not sold or put to normal use except for purposes of demonstration or used in any way for hire or reward while in the territory of importation; and
are intended to be re-exported in due course; and
are capable of identification on re-exportation;
but does not include identical articles brought in by the same individual, or sent to a single consignee, in such quantity that, taken as a whole, they no longer constitute samples under ordinary commercial usage.
Therefore, to qualify for free entry under an A.T.A carnet, the haute couture pieces must satisfy each of these criteria to come in as a sample under a carnet.
CBP regulation, 19 C.F.R. § 114.23(a), sets the maximum time for the validity of an A.T.A. carnet as one year from the date of issue. The ruling request indicated that after importation into the United States, the garments will be re-exported shortly after importation. As such, this meets the requirements that each piece be re-exported before the carnet expires. Furthermore, the ruling request indicated that only one of each piece will be imported and will be identifiable on re-exportation. Therefore, this criterion will also be satisfied.
The issues remain as to whether the pieces are “imported solely for the purposes of being shown or demonstrated in the territory of importation” and whether furnishing the pieces to celebrities to wear is “normal use except for purposes of demonstration.” Paragraph 1, Article III, (a), (b). The ruling request indicated that the haute couture pieces will be altered after importation for the purpose of fitting the pieces to celebrities who will wear them. Christian Dior does this for free in the hopes that this will generate advertising and subsequent orders of the brand’s goods. The celebrities who receive the pieces of haute couture not only display these pieces for the benefit of the brand, but also receive the benefit of wearing the piece. However, wearing these pieces to an event goes beyond the requirements of Paragraph 1, Article III (a) and (b) that the articles are imported “solely for purposes of being shown or demonstrated” and are not put to their “normal use.”
When celebrities wear the pieces of haute couture, it goes beyond mere demonstration of the imported articles to solicit orders. Paragraph 1, Article (a) requires that articles are imported “solely for purpose of being shown or demonstrated . . . for the soliciting of orders for goods . . . .” “Solely” means that the particular activity is the primary purpose of importation, but does not mean exclusively and can include other activities that are necessary for the importation’s required primary purpose. Cf. HQ 228619 (September 12, 2001) (finding that subheading 9813.00.30 of the Harmonized Tariff Schedule of the United States (“HTSUS”) that allows temporary duty-free entry for articles imported solely for testing could not apply to engines that were tested in races because the primary purpose of importation was not testing, but racing); HQ H230497 (June 26, 2014) (noting that articles imported pursuant to subheading 9813.00.30 of the HTSUS may be subject to other uses that are necessary for testing because “solely” does not mean exclusively). In this case, the primary purpose for importation must be demonstration of the pieces of haute couture for the purpose of soliciting orders. However, wearing a piece of haute couture to an event also serves the purpose of providing a celebrity with a garment to use. This employs the article in a manner beyond that of mere demonstration. This is very different than simply showing the merchandise to potential buyers. The celebrity who receives the piece of haute couture not only displays this piece for the benefit of the brand, but also wears the piece for the duration of the event without any intention of soliciting orders for the item. In fact, there is no indication that there will be the solicitation of orders for this haute couture beyond possible brand recognition. Thus, the purpose for the importation is so that the celebrity may wear the haute couture at the event whether or not orders are solicited for it. For these reasons, wearing a piece of haute couture to an event does not meet the requirement that it be imported “solely” for the purpose of being shown for soliciting orders.
Furthermore, when celebrities wear the pieces of haute couture to an event, it is the normal use of the merchandise. Paragraph 1, Article (b) requires that articles are not put to their “normal use.” The garments at issue here are designed and tailored for wearing. Moreover, in our call on December 12, 2014, you described them as one-of-a-kind garments to wear at high profile events. They would not be worn in a typical everyday use, such as to the store. As such, normal use would be wearing the garment at a high-profile event. Taking the item and wearing it puts the article to its “normal use.” The celebrities wear the articles in the environment they are meant to be worn and in the manner intended, constituting normal use of the garments. The pieces furnished to celebrities serve their intended purpose beyond that of mere demonstration and are “put to normal use.” Therefore, this haute couture does not qualify for entry under an A.T.A. carnet.
II. Whether the haute couture pieces may enter under a TIB as articles not for sale or sale on approval to be repaired, altered or processed.
You inquire whether the pieces of haute couture may enter under a TIB. Pursuant to General Note 1, HTSUS, all merchandise imported into the United States is subject to duty unless specifically exempted. Under subheading 9813.00.05, HTSUS, articles to be repaired, altered or processed (including processes that result in articles manufactured or produced in the United States), may be entered temporarily free of duty, under a TIB for exportation within one year from the date of importation. This period may be extended for additional periods, which when added to the initial period do not exceed three years. See U.S. Note 1(a) of Subchapter XIII, Chapter 98, HTSUS. To satisfy the requirements for the TIB, the imported article must be timely exported. Id. Additionally, to qualify under this provision, the merchandise imported may not be imported for the purpose of sale or sale on approval. Id. However, the activities you describe go beyond simply repairing, altering or processing the haute couture.
Multiple TIB provisions may be used to cover the various activities. For example, in HQ 221835, dated August 27, 1990, Legacy Customs found that subheadings 9813.00.05, HTSUS, and 9813.00.30, HTSUS applied to the processing and testing of pecans. Noting that an article may be entered under multiple provisions to cover different uses of the article while in the United States, the pecans could be entered for purposes of a shelling process pursuant to 9813.00.05, HTSUS, and visual inspections, weighing, grading, and moisture determinations for purposes of testing pursuant to 9813.00.30, HTSUS. See also, HQ 214437 (January 11, 1983) (finding the predecessor to subheading 9183.00.30 of the HTSUS, 864.30 of the TSUS, to be applicable to a staging process in which a company inspected and tested a computer system’s components, but that there was no objection to the entry of components under more than one applicable TIB provision). Additionally in HQ 223589, dated March 20, 1992, Legacy Customs determined for the chemical compound entered in bulk form, subheading 9813.00.05, HTSUS, applied to the processing to put the chemical into dosage form and subheading 9813.00.30, HTSUS, applied to the testing that occurred after the chemical was processed into the new form. Thus, different TIB provisions can cover a product’s multiple uses.
Applied to the instant case, subheading 9813.00.05, HTSUS, would cover the alteration of the haute couture. However, it would not cover the lending of the merchandise to clients and their wearing at events. As explained in CD 516.5 I, dated June 23, 1965, item 864.05 of the Tariff Schedules of the United States (TSUS), predecessor to subheading 9813.00.05, HTSUS, is inapplicable to items where the main purpose for importation is something other than alteration, repair or processing. In that case, an importer wished to enter empty cans to be painted and filled with chemicals in the United States under item 864.05, TSUS. Legacy Customs noted that the main purpose for importation was to fill the containers with chemicals, which was not an alteration or processing of the can. Furthermore, Legacy Customs determined that the containers could be imported under item 864.05, TSUS, to be painted, which qualified as a processing, but could not to be filled with chemicals as that was outside the scope of the TIB. See also, 214437 (finding that certain actions were not permitted under subheading 864.30, TSUS). Much like CD 516.5 I, in this case, the alteration is only an ancillary reason for the pieces of haute couture’s importation. As stated in your ruling request, the main reason for importation of the haute couture is not to alter it but to use it “as an important form of advertising for [your] client because it enables the company to showcase its latest fashion and increase its brand awareness in some of the most likely settings where it will be seen by potential clientele, all with a view towards soliciting subsequent orders for its goods.” Ruling Request, at 2. As such, subheading 9813.00.05, HTSUS applies to the alterations performed on the pieces of haute couture, but not to the lending of the merchandise to clients to wear at various events for advertising.
There is a specific TIB provision that covers activity similar to that proposed by Christian Dior; subheading 9813.00.10, HTSUS. That provision concerns: “[m]odels of women’s wearing apparel imported by manufacturers for use solely as models in their own establishments.” CBP’s regulation, 19 C.F.R. § 10.35(a), explains that:
[m]odels of women’s wearing apparel admitted under subheading 9813.00.10, Harmonized Tariff Schedule of the United States (HTSUS), shall not be removed from the importer’s establishment for reproducing, copying, painting, sketching, or for any other use by others, nor be used in the importer’s establishment for such purposes except by the importer or his employees.
Thus, if Christian Dior Couture wishes to import haute couture to solicit orders, it may do so under this subheading, however, it is restricted to these limitations. Thus, under this HSTUS subheading, the dresses may not be worn at events by prospective clients, but may be demonstrated on the importer’s premises.
This TIB provision concerning women’s wearing apparel was established in the Tariff Act of 1913 and remains substantially the same as the original language. Compare Chapter 98, subchapter XIII, HTSUS (2014) (Rev. 1) with An Act: To reduce tariff duties and to provide revenue for the Government, and for other purposes (Tariff Act of 1913), ch. 16, § IV(J)(4), 38 Stat. 114, 196 (1913). In the Senate proceedings discussing amendments to the proposed Tariff Act of 1913, Senator Warren noted certain hesitations to allowing the duty-free importation of models of women’s wearing apparel. See 50 Cong. Rec. 3957, 4383 (1913). He asked whether it was “the idea to bring them in free while other articles of dresses are made dutiable,” to which Senator Williams replied, “[w]hen they come here in this way they ‘are imported by manufacturers and are used as models in their own establishments and not for sale.’” Id. Senator Williams further explained that “…if the models go out of their own establishments they would be subject to the tax.’” Id. Thus, the statute and accompanying regulation clarify that models of wearing apparel, such as that discussed in the ruling request, may be imported under subheading 9813.00.10 to solicit orders and 9813.00.05, HTSUS, to perform alterations, but they may neither leave the premises of the importer nor may they be used by others than the importer or his employees. Thus, the haute couture can be imported under subheadings 9813.00.05 and 9813.00.10, HTSUS, and may be altered and used at the importer’s premises as models to solicit orders. However, these TIB provisions would not cover lending the haute couture to clients for them to wear at events. We note that at our conference you also inquired as to the validity of other TIB provisions. We will address these in any other subsequent ruling requests you may file.
III. Whether the haute couture pieces may qualify for unused merchandise drawback.
You inquire whether the pieces of haute couture qualify for unused merchandise drawback. Section 313(j), of the Tariff Act of 1930, as amended (19 U.S.C. 1313(j)) provides for a refund of duty if a duty-paid article is exported in the same condition as when imported, within three years from date of importation, and was not used in the United States. Therefore, merchandise that was used prior to exportation is ineligible for drawback under 19 U.S.C. § 1313(j)(1).
Prior CBP rulings address an article’s use and the impact on eligibility for drawback under 19 U.S.C. § 1313(j)(1). In HQ 223076, dated May 27, 1991, we held that a short duration demonstration cruise contained within the Honolulu Harbor for a prospective buyer and a subsequent short duration cruise in the Honolulu Harbor during which a short documentary was filmed in connection to the sale of a yacht was not a use because the activities constituted advertising. However, in HQ 230037, dated November 4, 2003, we held that a yacht, the Eclipse, was ineligible from drawback under 19 U.S.C. § 1313(j)(1) because it was sailed under its own power within the United States. In that case, the yacht was imported to be sold and the protestant argued that it was unused because sailing the yacht under its own power was incidental to the intended reason for importation. We disagreed, stating that the “sailing of the Eclipse from Ft. Lauderdale, Florida to Nantucket, Massachusetts was a prohibited use within the meaning of 1313(j)(1) . . . the Eclipse, manned by the crew, was put to the exact use for which a yacht is built.” Additionally, in HQ H240038, dated June 16, 2014, we held that a truck with equipment driven under its own power from Canada to Massachusetts and back was ineligible from drawback under 19 U.S.C. § 1313(j)(1) because driving the truck for transportation was employed for the purpose for which it was built. Thus, CBP has held that an article is used when it is employed for the purpose for which it was built.
Here, the haute couture pieces will be furnished to celebrities, fitted to each individual wearing a piece, and then worn to high-profile events. Christian Dior argues that the display of haute couture pieces by a celebrity at a high-profile event will not constitute use of the merchandise for direct identification of unused merchandise drawback because the pieces are furnished for exhibition at events to generate orders of the goods. You argue that this is not the reason that these articles are manufactured and intended to be used. However, the pieces of haute couture are intended to be worn by individuals, and by furnishing these pieces to celebrities for use at events, this constitutes use. This case is unlike HQ 223076 in which the yacht in Hawaii was sailed for a short duration demonstration cruise contained within the Honolulu Harbor and filmed for a prospective buyer were considered advertising and not use of the yacht. Such scenario is more akin to models wearing and displaying garments to potential buyers, with the main purpose of advertising, which is not the case here. On the contrary, you propose to use these garments in the manner for which they were designed, at high-profile events. This would be comparable to chartering the yacht for a cruise, not merely circling the harbor. Thus, furnishing haute couture pieces for celebrities to wear and exhibit at high-profile events is a “use” prior to exportation and is therefore ineligible for drawback under 19 U.S.C. § 1313(j)(1).
Christian Dior Couture also claims that the operations performed on the haute couture will not amount to a manufacture or production performed on them, and should therefore be eligible for drawback under 19 U.S.C. § 1313(j)(1). A manufacture or production would only be one type of “use,” however. As explained above, CBP has held that an article is “used” when it is employed for the purpose for which it was built, which in this case, includes celebrities wearing and exhibiting the haute couture pieces at events. See, e.g., HQ H240038 (June 16, 2014). As such, focusing on the term “use” in terms of a possible manufacture or production is inappropriate.
HOLDING:
Based on the above, haute couture pieces are ineligible for an A.T.A. carnet as a sample pursuant to 19 C.F.R. § 114.22(a). They are similarly ineligible for importation under subheading 9813.00.05, HTSUS. Finally, the furnishing of haute couture pieces to celebrities for exhibition at events is a “use” of the merchandise. Therefore, the pieces of haute couture are ineligible for unused merchandise drawback pursuant to 19 U.S.C. § 1313(j)(1).
Please note that 19 C.F.R. §177.9(b) provides that”[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service filed office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
Sincerely,
Carrie L. Owens, Chief
Entry Process and Duty Refunds Branch