RR:IT:VA 547352 MMC
Mr. John Pellegrini
Ross & Hardies
Pak Avenue, Tower
65 East 55th Street
New York, New York 10022
RE: Transaction value; U.S. origin packing; packing costs; §402(b)(1)(A) and (h); HRLs 560802, 546287, 546043, 544294, 544458 and 544667
Dear Mr. Pellegrini:
This is in response to your March 30, 1999, letter requesting a ruling concerning the addition of United States origin “packing costs” to the price actually paid or payable for apparel accessories 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 Chief, Special Products Branch, National Commodity Specialist Division, New York Seaport, dated April 1, 1999, was taken into consideration in rendering this decision. Pictures of the merchandise were provided.
Your request has also been forwarded to the Special Classification Branch for a determination concerning the applicability of subheading 9801.0010, of the Harmonized Tariff Schedule of the United States (HTSUS) to the subject display boxes and will be answered under separate cover. Our response presumes that the display boxes qualify for such treatment. Should that not be the case, this ruling is not applicable.
FACTS:
The imported merchandise is described as a display box and shipping carton. Both consist of corrugated paperboard which is manufactured in the United States of America (U.S.). The components of the display box consist of an oblong box which in use will be placed on a paperboard stand. The back of the box has holes to accommodate plastic hooks. The displays will be exported to various countries in the Far East, principally Hong Kong and the People’s Republic of China.
The displays will be assembled in Hong Kong and the People’s Republic of China, by folding along predetermined lines and fastening with self tabs. The displays will then be filled with various apparel articles and accessories (mittens, gloves, knit hats, scarves, etc.) which will be suspended from plastic hooks. The apparel and accessories are protected during shipment by a support which covers and holds them in place. The cover is secured by washers which are placed on the hooks.
The filled display will be paced in a shipping carton and returned to the U.S.. After importation, the display boxes will be distributed to retailers who will place them directly on the selling floor.
ISSUE:
Is the value of the U.S. origin packing included in the appraised value of the imported apparel accessories?
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, in HRLs 546287 dated April 25, 1996, HRL 544294 dated July 7, 1989, and HRL 544458 dated February 23, 1990, Customs 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 U.S. origin packing as part of the appraised value of the imported merchandise. No legal authority exists because, the packaging and the merchandise are separately classified. 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, and 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 HRLS 544667 and 546043, U.S. packing materials or packing containers are separately classified from the imported merchandise contained therein. In this case, the imported merchandise, i.e., apparel accessories will be classifiable somewhere in a heading between Chapters 1-97, and the U.S. packing materials, i.e., paperboard display boxes will be classifiable in 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 paperboard display boxes, is not included in the appraised value of the imported merchandise, i.e., apparel accessories. Our response presumes that the display boxes qualify for subheading 9801.00.10, treatment. Should that not be the case, this ruling is not applicable.
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.
Sincerely,
Thomas L. Lobred
Chief, Valuation Branch