MAR-2 RR:CR:SM 561469 KSG
CLASSIFICATION: 9801.00.10
Carol A. Little
Nicolet, Mattson and Cahn Instruments
5225 Verona Road- Building 1
Madison, WI 53711
RE: Eligibility of plastic film for a duty exemption under subheading 9801.00.1010; valuation of plastic card and certificate; assist
Dear Ms. Little:
Your June 30, 1999, request for clarification of NY D88309, dated March 19, 1999, was forwarded to this office from the National Commodity Specialist Division in New York for a response. NY D88309 concerned the tariff classification of a U.S.-origin polystyrene card used to calibrate spectrometers and a certificate illustrating the results of analyzing the film. You ask that we also address certain other issues, including the eligibility of the plastic film for duty free entry under subheading 9801.00.10, HTSUS, whether the value of the card constitutes an assist for purposes of appraising the certificate, the tariff classification of the certificate, and the proper country of the origin of the returned film.
FACTS:
Nicolet exports to the National Physical Laboratory (“Laboratory”) in the United Kingdom (“UK”) a U.S.-made piece of polystyrene plastic film mounted on cardboard material. The film contains recorded data regarding the calibration status of certain U.S. spectrometers. In the UK, the data on the plastic card is analyzed and the results of the analysis are embodied in a 4-page report entitled “Certificate of Calibration.” The card and the certificate are then exported together from the UK to the U.S. We are informed that the card is not physically changed or enhanced by the analysis process performed in the UK. It is our understanding that the value of the items and fee are as follows: $5 for the card, $9 for the certificate, and $420 constituting the service fee for performing the analysis. However, the card is provided by to the Laboratory free of charge.
In NY D88309, Customs determined that the returned polystyrene card is classifiable in subheading 9027.90.5430, Harmonized Tariff Schedule of the United States (HTSUS). However, the eligibility of the card for duty-free treatment under subheading 9801.00.10, HTSUS, was not considered in NY D88309.
ISSUES:
1. Is the polystyrene card eligible for duty free status under subheading 9801.00.10, HTSUS, upon importation into the U.S.?
2. What is the proper appraisement of the product?
What is the tariff classification of the “Certificate of Calibration”?
4. What is the country of origin of the returned polystyrene card?
LAW AND ANALYSIS:
1. Subheading 9801.00.10
Subheading 9801.00.10, HTSUS, provides that products of the United States when returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad can be entered duty free provided the documentary requirements of 19 CFR 10.1 are satisfied.
The court held in Border Brokerage Company, Inc. v. United States, 314 F. Supp. 788 (1970), that tomatoes of American origin were entitled to duty free entry under item 800.00, Tariff Schedules of the United States (TSUS) (the predecessor to subheading 9801.00.10, HTSUS). The tomatoes were shipped to Canada where they were unloaded, unpacked, sorted, graded by color and size, and repacked. The court stated that the test to be applied in item 800.00 cases is whether the merchandise of American origin has itself (apart from its container) been the object of advancement in value or improvement in condition while abroad.
Customs held in Headquarters Ruling Letter 556131, dated October 28, 1991, that U.S. chip capacitors sent abroad to be tested and inspected did not advance in value or improve in condition the product. Testing/inspecting merely as part of the manufacturer’s quality control does not advance the value of the product. Similarly, in the instant case, the analysis of the polystyrene card performed in England does not improve the condition or advance the value of the product. Therefore, we find that the U.S.-origin card is entitled to classification under subheading 9801.00.10, HTSUS, upon importation into the U.S., provided the applicable documentary requirements are satisfied.
2. Appraisement
The value issue in this case is whether the transaction value of the imported merchandise is the price actually paid or payable for the certificate, constituting the value of the certificate and the analysis service fee, plus the value of the card as an addition.
The preferred method of appraising merchandise imported into the U.S. 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. We will assume that transaction value is the proper basis of appraisement. It also does not appear, based upon a review of the information, that the parties are related within the meaning of section 402(g)(1) of the TAA.
The "price actually paid or payable" is defined in section 402(b)(4)(A) of the TAA as the "total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise...) made, or to be made, for the imported merchandise by the buyer to, or for the benefit of, the seller."
Two court cases have addressed the meaning of the term "price actually paid or payable." In Generra Sportswear Co. v. U.S., 8 CAFC 132, 905 F.2d 377 (1990), the court considered whether quota charges paid to the seller on behalf of the buyer were part of the price actually paid or payable for the imported goods. In reversing the decision of the lower court, the appellate court held that the term "total payment" is all inclusive and that "as long as the quota payment was made to the seller in exchange for merchandise sold for export to the United States, the payment properly may be included in transaction value, even if the payment represents something other than the per se value of the goods." The court also explained that it did not intend that Customs engage in extensive fact finding to determine whether separate charges, all resulting in payments to the seller in connection with the purchase of imported merchandise, were for the merchandise or something else.
In Chrysler Corporation v. U.S., Slip Op. 93 186 (Ct. Int'l Trade, decided September 22, 1993), the Court of International Trade applied the Generra standard and determined that although tooling expenses incurred for the production of the merchandise were part of the price actually paid or payable for the imported merchandise, certain shortfall and special application fees which the buyer paid to the seller were not a component of the price actually paid or payable. With regard to the latter fees, the court found that the evidence established that the fees were independent and unrelated costs assessed because the buyer failed to purchase other products from the seller and not a component of the price of the imported engines.
Accordingly, it has been our position that, based on Generra, there is a presumption that all payments made by a buyer to a seller, or a party related to the seller, are part of the price actually paid or payable for the imported merchandise. However, this presumption may be rebutted by evidence which clearly establishes that the payments, like those in Chrysler, are completely unrelated to the imported merchandise. See HQ 545663, dated July 14, 1995.
In this instance, Nicolet, the buyer, pays the Laboratory, the seller, a fee to perform analysis on the card provided by Nicolet. In return for this payment, the Laboratory provides Nicolet with the certificate evidencing the analysis. The value of the service by the Laboratory and the resulting certificate totals $429. The payment of the service fee is related to the certificate, which is the imported merchandise, in that the analysis of the card must be performed prior to the preparation of the certificate. Therefore, we find that the value of the service and the certificate constitute the price actually paid or payable for the imported certificate as it is the total payment made for the certificate by Nicolet to the Laboratory.
You ask whether the value of the card constitutes an assist such that it is an addition to the price actually paid or payable for the certificate. In this regard, we have determined above that the U.S.-origin card is entitled to classification under subheading 9801.00.10, HTSUS. Therefore, there is no legal authority to treat the value of the card as part of the appraised value of the certificate because items which are separately classified must be separately appraised. HRLs 544667 dated July 30, 1991, and 546043 dated November 30, 1995, are noted.
Consequently, we find that the transaction value of the imported certificate is the price actually paid or payable for the certificate, constituting the value of the certificate and the analysis service fee. The U.S.-origin card is separately classified and appraised.
Classification of the Certificate
The “Certificate of Calibration” is properly classified in subheading 4901.99.0091, HTSUS, which provides for: “Printed books, brochures, leaflets, and similar printed matter, whether or not in single sheets: Other: Other: Other: Other: Containing not more than 4 pages each (excluding covers). The rate of duty is free.
Country of Origin of the Polystyrene Card
The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article.
Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations {19 CFR 134.1(b)}, defines "country of origin" as the country of manufacture, production or growth of any article of foreign origin entering the U.S. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the "country of origin" within the meaning of the marking laws and regulations. For country of origin marking purposes, a substantial transformation of article occurs when it is used in manufacture which results in an article having a name, character, or use differing from that of the article prior to the processing.
In this case, the analysis performed in the UK on the U.S.-origin polystyrene card clearly does not result in a substantial transformation of the card. Therefore, the country of origin of the card when it is returned to the U.S. remains the U.S., and, as a result, it is excepted from country of origin marking under 19 U.S.C. 1304. The country of origin of the certificate is the UK.
HOLDING:
The plastic card is eligible for duty free entry under subheading 9801.00.10, HTSUS, upon importation into the U.S. provided the documentary requirements of 19 CFR 10.1 are satisfied.
The transaction value of the imported “Certificate of Calibration” consists of the value of the certificate and the analysis service fee. The plastic card is separately appraised.
The certificate is classifiable in subheading 4901.99.0091, HTSUS.
The country of origin of the returned plastic card is the U.S. and, therefore, it is excepted from country of origin marking under 19 U.S.C. 1304. The country of origin of the certificate is the UK.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division