VAL R:C:V 545970 LPF
Mr. Edward L. Hart, Jr.
Import Manager
V. Alexander & Co., Inc.
P.O. Box 30250
Memphis, TN 38130-0250
RE: Dutiability of U.S.-origin labels and hang tags; Assists under 19 U.S.C. 1401a(b)(1)(C); Subheadings 9801.00.10 and 9802.00.80, HTSUS; HRLs 543086, 544667, 557685
Dear Mr. Hart:
This is in response to your letter dated April 14, 1995,
requesting a ruling concerning the valuation and classification
of U.S.-origin vinyl labels and paper hang tags. You submitted
samples of the labels and tags for our examination.
FACTS:
Labels and hang tags manufactured in the U.S., which contain
a company's marketing logos, are shipped to various countries
where they are affixed to the imported merchandise. The labels
are made of vinyl with a self-stick backing, while the hang tags
are made of paper which is attached to the items with a string.
The importer bears all expenses for the transportation of the
labels and hang tags to the foreign countries. It is our
understanding that in its condition as imported the labels are
stuck, and tags hung, onto the merchandise.
ISSUE:
Whether the value of U.S.-origin labels and tags exported to
foreign countries where they are affixed to non-originating
merchandise are included in the appraised value of the imported
merchandise and whether the labels and tags are entitled to duty-free treatment under subheading 9801.00.10, HTSUS, or to the
partial duty exemption under subheading 9802.00.80, HTSUS, when
returned to the U.S.
LAW AND ANALYSIS:
The preferred method of appraising merchandise imported into
the United States is transaction value pursuant to section 402(b)
of the Tariff Act of 1930, as amended by the Trade Agreements Act
of 1979 (TAA), codified at 19 U.S.C. 1401a. Section 402(b)(1) 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 enumerated statutory additions, including the value
of any assist (section 402(b)(1)(C)). For purposes of this
decision we will assume that transaction value is the appropriate
method of appraisement.
1. Labels
Section 402(h)(1)(A) of the TAA provides, in pertinent part,
that:
The term "assist" means any of the following if
supplied directly or indirectly, and free of
charge or at reduced cost, by the buyer of
imported merchandise for use in connection with
the production or the sale for export to the
United States of the merchandise:
(i) Materials, components, parts, and
similar items incorporated in the
imported merchandise.
In the present matter, it is apparent that the buyer of the
imported merchandise supplies the labels in connection with the
production of the instant merchandise. Furthermore, because
these labels, when stuck onto the goods, may be considered
components incorporated in the imported merchandise, we find the
labels to constitute assists pursuant to section 402(h)(1)(A).
Consequently, the value of the labels would be included as part
of the transaction value of the imported merchandise, in
accordance with section 402(b)(1)(C). See Headquarters Ruling
Letter (HRL) 543086, issued October 19, 1983, where fabric labels
were found to constitute assists since they were permanently
incorporated into the imported merchandise.
However, subheading 9802.00.80, Harmonized Tariff Schedule
of the United States (HTSUS), provides a partial duty exemption
for:
[a]rticles . . . assembled abroad in whole or in part
of fabricated components, the product of the United
States, which (a) were exported in condition ready
for assembly without further fabrication, (b) have
not lost their physical identity in such articles
by change in form, shape or otherwise, and (c) have
not been advanced in value or improved in condition
abroad except by being assembled and except by
operations incidental to the assembly process, such
as cleaning, lubricating and painting.
All three requirements of subheading 9802.00.80, HTSUS, must be
satisfied before a component may receive a duty allowance. An
article entered under this tariff provision is subject to duty
upon the full cost or value of the imported assembled article,
less the cost or value of the U.S. components assembled therein,
upon compliance with the documentary requirements of section
10.24, Customs Regulations (19 CFR 10.24). See also sections
10.14(a) and 10.16(a), Customs Regulations (19 CFR 10.14(a) and
10.16(a)) explaining that components must be ready for assembly
at the time of exportation and distinguishing between acceptable,
minor or incidental operations, as opposed to significant
operations or treatments which will preclude entitlement to the
9802.00.80, HTSUS, duty exemption.
In this case, in accordance with HRLs 557685, issued March
28, 1994, and HRL 543086, supra, affixing the U.S.-origin labels
to the imported merchandise is considered an acceptable assembly
operation. Consequently, the labels, while part of the appraised
value of the imported merchandise, will be entitled to the
9802.00.80, HTSUS, partial duty exemption. See Note 2 to Chapter
98, Subchapter II.
2.Hang Tags
Subheading 9801.00.10, HTSUS, provides for the free entry of
products of the United States that have been exported and
returned without having been advanced in value or improved in
condition by any process of manufacture or other means while
abroad, provided the documentary requirements of section 10.1,
Customs Regulations (19 CFR 10.1), are met. Some change in the
condition of the product while it is abroad is permissible.
However, operations which either advance the value or improve the
condition of the exported product render it ineligible for duty-free entry upon return to the United States. Border Brokerage
Company, Inc. v. United States, 314 F.Supp. 788 (1970), appeal
dismissed, 58 CCPA 165 (1970).
In prior decisions, Customs has considered hang tags as
packing material which, since returned to the U.S. without having
been advanced in value or improved in condition while abroad, was
classifiable under subheading 9801.00.10. HRL 543086, supra.
Specifically, it has been Customs position that:
[w]ith 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 . . . .
HRL 544667, issued July 30, 1991. Accordingly, the instant hang
tags are not part of the appraised value of the imported
merchandise and, furthermore, are eligible for duty-free
treatment under subheading 9801.00.10.
HOLDING:
Based on the information and samples submitted, the U.S.-origin labels, while included as part of the appraised value of
the imported merchandise, are eligible for the partial duty
exemption under subheading 9802.00.80, HTSUS, and the U.S.-origin
hang tags are eligible for duty-free treatment under subheading
9801.00.10, HTSUS, when returned to the U.S. provided the
documentary requirements of 19 CFR 10.24 and 19 CFR 10.1,
respectively, are satisfied.
In addition, insofar as this binding ruling request was made
in accordance with section 177.1, Customs Regulations (19 CFR
177.1) concerning a prospective transaction, the incoming request
shall not be treated as a prior disclosure pursuant to section
162.74, Customs Regulations (19 CFR 162.74).
Sincerely,
John Durant, Director
Commercial Rulings Division