United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1990 HQ Rulings > HQ 0220042 - HQ 0544048 > HQ 0543985

Previous Ruling Next Ruling

---

HQ 543985

February 1, 1988

CLA-2 CO:R:CV:V 543985 EK

CATEGORY: VALUATION

District Director of Customs
New Orleans, Louisiana

RE: Internal Advice No. 25/87; Dutiability of Packing Costs

Dear Sir:

This is in response to an internal advice request initiated by the importer, through counsel, regarding the valuation of merchandise imported from China, through Hong Kong. The merchandise is subject to appraisement pursuant to transaction value, section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. 1401a(b)).

FACTS:

The importations in question involve footwear imported from the PRC through Hong Kong, whereby the importer utilizes the services of a Hong Kong buying agent. For purposes of this internal advice request, we are assuming that the agent is in fact a bona fide buying agent of the importer and that the commissions paid to the agent are non-dutiable charges. The merchandise is purchased ex-factory from China.

The importer states that the agent in Hong Kong facilitated the process of the goods arriving from China by providing, among other things, inspection of the packages and, when necessary, rearranging and repacking the merchandise. The importer alleges that in each instance, the factory's original packing sufficed for export; however, due to the factory's inexperience, many shipments were sloppy by American standards. The importer further states that it is not that the merchandise would not otherwise have been seaworthy packed or not survived the voyage but rather, the merchandise was not segregated properly.

It is alleged that any repacking done by the Hong Kong agent was done solely for cosmetic purposes, i.e., rearranging and segregating. The merchandise was not destined to be shipped to the importer directly but rather, to the importer's customers
in the United States. The importer states that these ultimate United States purchasers wanted shipments which could be sent immediately to their retail outlets and could be segregated by style, size and color.

ISSUE:

Whether the repacking charges incurred by the importer are to be added to the "price actually paid or payable" for the imported merchandise.

LAW AND ANALYSIS:

Transaction value is defined as the "price actually paid or payable for the merchandise" and includes costs incurred for packing incurred by the buyer with respect to the imported merchandise. See, section 402(b)(1)(A) of the TAA. The term 'packing costs' is defined in section 402(h)(3) as "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." (emphasis added).

In Headquarters Ruling No. 542834 dated July 20, 1982 (TAA #49), we noted that the phrase "packed ready for shipment to the United States" was analogous to the merchandise being "in seaworthy condition." Therefore, in that case services performed which were incident to placing the merchandise in condition packed, ready for shipment to the United States were held to be dutiable as "packing costs." The costs incurred subsequent to the merchandise attaining that status were held to be not dutiable.

In Headquarters Ruling No. 543026 dated March 17, 1983, certain expenses incurred for vacuum packing were held to be not part of the dutiable value of the imported merchandise because such took place subsequent to the merchandise being placed in condition, packed ready for shipment to the United States.

HOLDING:

In view of the foregoing, it is our conclusion that the expenses incurred by the importer are not "packing" costs within
the meaning of section 402(h)(3) of the TAA. The merchandise, when it was exported from the PRC, was packed ready for shipment to the United States. The charges incurred subsequent to this condition are not added to the "price actually paid or payable" to determine the transaction value of the imported merchandise.

Sincerely,

John Durant

Previous Ruling Next Ruling