RR:IT:VA 546287 KCC

Director, South Texas CMC
U.S. Customs Service
P.O. Box 3130
Lincoln-Juarez Bridge
Laredo, Texas 78044-3130

RE: IA 1/96; transaction value; U.S. origin packing; packing costs; 402(b)(1)(A) and (h); HRLs 546043, 544294, 544458 and 544667

Dear CMC Director:

This is in regard to a memorandum from Duty Assessment Branch 2, Harlingen Texas, dated December 14, 1995, requesting internal advice (IA 1/96) concerning the addition of United States origin "packing costs" to the price actually paid or payable for imported frozen vegetables in determining transaction value pursuant to 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. A memorandum from the Acting Chief, Food and Chemicals Branch, National Commodity Specialist Division, New York Seaport, dated February 23, 1996, was taken into consideration in rendering this decision.

FACTS:

The imported merchandise consists of frozen zucchini, cauliflower, brussel sprouts and broccoli which were exported from Mexico. All of the frozen vegetables were entered under the appropriate heading for frozen vegetables, heading 0710, Harmonized Tariff Schedule of the United State (HTSUS). Additionally, the invoice listed separate items, quantities and values for U.S. origin containers classified under subheading 9801.00.10, HTSUS. We note that the inquiry into this transaction revealed a "double invoicing violation." The actual cost paid for the frozen vegetables and the U.S. origin containers was stated on a second invoice, containing the same invoice number and date as the first invoice, which was not presented with Customs entry documents.

ISSUE:

Is the value of the U.S. origin packing included in the appraised value of the imported frozen vegetables?

LAW AND ANALYSIS:

The preferred method of appraising merchandise imported into the United States is transaction value pursuant to 402(b) of the TAA. 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. 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).

The cost of packing materials and containers incurred 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. 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....

See also, HRL 546043 dated November 30, 1995, which modified HRL 545224 dated September 19, 1994, found that U.S. origin packing materials/containers are classified under subheading 9801.00.10, HTSUS, separately from the imported toys. Thus, the value of the U.S. packing materials/containers was not included in the appraised value of the imported toys.

Pursuant to HRL 544294, HRL 544458, HRL 544667 and HRL 546034, U.S. packing materials or packing containers are separately classified from the imported merchandise contained therein. In this case, the invoice describes the imported merchandise, i.e., frozen vegetables - heading 0710, and U.S. packing materials, i.e., plastic containers - 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., frozen vegetables.

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.

The Office of Regulations and Rulings will take steps to make this decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels 60 days from the date of this decision.

Sincerely,

Acting Director
International Trade Compliance
Division