RR:IT:VA 548257 er
Category: Valuation
Alex Martino
Operations Management
Heineken USA, Inc.
360 Hamilton Avenue, Suite 1103
White Plains, NY 10601-1103
RE: Request for a Ruling regarding Reusable Barrels and Pallets; Instruments of International Traffic; Packing Costs; Appraisement.
Dear Mr. Martino:
This is in response to your letter dated December 18, 2002, in which you request a ruling, on behalf of your client, Heineken USA, regarding the importation of beer in reusable barrels and reusable pallets.
FACTS:
On August 5, 2002, you submitted a ruling request regarding the same issues and the same merchandise as that involved in the subject request. In response, this office issued to you an information letter dated November 12, 2002 (548189), which was responsive to some of your questions and in which we described the additional information needed in order for this office to issue a ruling. Accordingly, you resubmitted the subject ruling request along with the additional information previously identified by us as missing.
The facts remain identical. Specifically, Heineken USA imports beer into the United States in reusable barrels on reusable pallets. In addition, cans and bottles are imported on non-reusable pallets. You state that you treat the non-reusable pallets as packing materials, and as such the value of the non-reusable packing is included in the price actually paid or payable for the beer.
Your inquiry concerns the reusable items. You state that a deposit for the reusable pallets and barrels is separately identified from the price of the imported beer on the invoice presented to Customs at entry. The buyer remits the total invoice amount, including the deposit, to the seller, Heineken Brouwerijen B.V. in the Netherlands. When Heineken Brouwerijen B.V. receives the reusable barrels and pallets, the deposit amount is credited to Heineken USA.
You submitted for our review copies of invoices between Heineken USA and Heineken Brouwerijen B.V. These invoices reflect the value of the imported beer and separately identify the returnable deposit. In addition, each invoice bears a statement explaining that a deposit is
paid to the supplier to guarantee return of the reusable barrels and pallets and that the deposit is credited to Heineken USA when the items are returned. This statement appears on each invoice whether or not reusable items are involved. However, each invoice also includes a handwritten statement specifically stating either (1) that the shipment contains reusable items, and the number of reusable items; or (2) that the shipment does not contain any reusable items.
ISSUE:
Whether the reusable barrels and reusable pallets should be considered instruments of international traffic (“IIT”) and entered under subheading 9803.00.50 of the Harmonized Tariff Schedule of the United States (“ HTSUS”)?
If so, as neither the reusable barrels and reusable pallets are numbered, would a general report showing the total number of returnables be sufficient to allow the reusable barrels and pallets to be treated as IIT?
When the reusable barrels and pallets are returned to Europe and a credit is given to Heineken USA for their return, how should the credit be treated in relation to the appraisement of the imported beer?
4. Is the wording of the deposit statement on the invoices appropriate?
LAW AND ANALYSIS:
In response to your August 2002 request for a ruling we forwarded to you a memorandum dated August 23, 2002, from the Entry Procedures and Carriers Branch to the Value branch which responded to your questions regarding whether the reusable barrels and reusable pallets are IIT and, if so, whether a general report showing the total number of these items would be sufficient to allow the items to be treated as IIT.
The following is language in the memorandum is responsive to these first two issues:
Title 19, United States Code, § 1322(a) (19 U.S.C. § 1322(a)), provides that "[v]ehicles and other instruments of international traffic, of any class specified by the Secretary of the Treasury, shall be excepted from the application of the customs laws to such extent and subject to such terms and conditions as may be prescribed in regulations or instructions of the Secretary of the Treasury."
The relevant Customs Regulation issued under the authority of § 1322(a) is contained in § 10.41a (19 CFR § 10.41a). At the outset we note that § 10.41a(a)(1) specifically designates pallets, among other articles, as instruments of international traffic. Section 10.41a(a)(1) also authorizes such a designation by Customs of other items. In this regard we note that Customs has long-held beer barrels to be instruments of international traffic. (See Treasury Decisions (T.D.s) 56411, 66-15, and 68-81)
Accordingly, the pallets and barrels in question are deemed to be instruments of international traffic classifiable under subheading 9803.00.50, HTSUSA, and may be released without entry or the payment of duty pursuant to the provisions of § 10.41a.
In regard to the second question listed above, there is no provision in the Customs Regulations requiring the submission of a “general report”. It should be noted, however, that it is Customs long-held position that instruments of international traffic, whether empty or containing cargo, must be listed on a vessel’s cargo manifest. (Customs memorandum 102960, dated September 30, 1977, citing T.D. 55624(4))
As regards the appraisement issue, we note that 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 (19 U.S.C. 1401a(b); 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. 19 U.S.C. 1401a(b)(1)(A).
As explained in our previous correspondence with you dated November 12, 2002, in the past, this office has ruled that 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 HRL 547353, dated July 8, 1999, and other rulings cited therein, Customs ruled 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. Specifically, this office found that 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 established in HRL 544667, dated July 30, 1991. There Customs 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…
In the situation you describe, unlike the packing materials in HRL 544667, the pallets and barrels are not of American origin; nonetheless, the principle applies that because the reusable pallets and barrels are instruments of international traffic separately classifiable under subheading 9803.00.50, HTSUS, the value of the pallets and barrels should not be included in the appraised value of the imported beer.
As regards the final issue, we believe the wording of the deposit statement and hand written clarification to be acceptable. Specifically, the deposit statement appears on all invoices whether containing reusable pallets and reusable barrels, or not. In addition you include a handwritten statement on each invoice which definitively identifies whether or not the shipment contains reusable pallets and barrels, and if so, you also identify the number of reusable items in the shipment.
HOLDING:
The reusable pallets and reusable barrels are IIT classifiable under subheading 9803.00.50, HTSUSA, and may be released without entry or the payment of duty pursuant to the provisions of 19 CFR 10.41(a).
There is no provision in the Customs Regulations requiring the submission of a “general report”. However, it is Customs long-held position that IIT, whether empty or containing cargo, must be listed on a vessel’s cargo manifest.
Because the reusable pallets and barrels are IIT, separately classifiable under subheading 9803.00.50, HTSUSA, the value of the pallets and barrels is not included in the appraised value of the imported beer.
The deposit statement and handwritten clarification appearing on each invoice is satisfactory for purposes of identifying the amount of the deposit for the reusable items as separate from the price of the imported beer.
Sincerely,
Virginia L. Brown, Chief
Value Branch