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HQ 555806


January 14, 1991

CLA-2 CO:R:C:S 555806 KCC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.10

Mr. Marty Langtry
Castelazo & Associates
5420 West 104th Street
Los Angeles, California 90045

RE: Inflatable plastic bags used to give shape to handbags in retail displays.GRI 5(b); packing material; 731806; advanced in value; improved in condition

Dear Mr. Langtry:

This is in response to your letter dated November 2, 1990, to the Area Director, New York Seaport, on behalf of Sirco International Corporation, requesting a ruling concerning the applicability of subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), to U.S. manufactured plastic bags used to give shape to handbags in retail displays. Your letter and a sample were forwarded to this office for a response.

FACTS:

Sirco purchases inflatable thin gauge plastic bags manufactured in the U.S. by Experience Design, Inc. Sirco exports the plastic bags to overseas vendors of handbags, sportsbags and other types of bags where the vendors insert the uninflated plastic bags into handbags and ship the handbags back to the U.S. In the U.S., the plastic bags will be inflated to give shape to the handbags for display in retail stores. After the handbags are purchased, the plastic bag is deflated and disposed of by the retailer.

ISSUE:

Whether the inflatable plastic bags will be eligible for the duty exemption available under subheading 9801.00.10, HTSUS, when returned to the U.S.

LAW AND ANALYSIS:

With respect to packing materials, General Rule of Interpretation 5(b), HTSUS, provides that:

[p]acking materials and packing containers entered with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision does not apply when such packing materials or packing containers are clearly suitable for repetitive use.

Therefore, the value of a non-reusable packing materials or containers normally used for packing such goods is considered a part of the value of its contents and is dutiable at the rate of its contents. However, we have held that upon submission of satisfactory proof that a container is of U.S. origin and that it is returned without having been advanced in value or improved in condition while abroad, it is entitled to duty-free treatment under subheading 9801.00.10, HTSUS. See, Headquarters Ruling Letter (HRL) 731806 dated November 18, 1988.

Subheading 9801.00.10, HTSUS, provides for duty-free entry of U.S. products that are exported and returned without having been advanced in value or improved in condition by any means while abroad. Articles satisfying the above conditions of the statute will be afforded duty free treatment, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met.

The packaging abroad of U.S.-made products will not preclude classification under this tariff provision when there is no improvement in condition or advancement in value of the products themselves (apart from the containers). See, United States v. John V. Carr & Sons, Inc., 69 Cust.Ct. 78, C.D. 4377 (1972), aff'd, 61 CCPA 52, C.A.D. 1118 (1974), in which the court stated that absent some alteration or change in the item itself, the mere repackaging of the item even for the purpose of resale to the ultimate consumer, is not sufficient to preclude the merchandise from being classified under item 800.00, Tariff Schedules of the United States (TSUS) (the precursor provision to subheading 9801.00.10, HTSUS).

We are of the opinion that the thin gauge plastic bags are properly considered non-reuseable packaging material. Although the plastic bags are not the typical packing material associated with shipment of articles, they are an alternative to paper stuffing often used in imported sport and handbags. Furthermore, the plastic bags are the kind of packing material often associated with the display of articles offered for retail sale. The plastic bags will be exported abroad in a finished condition to be packaged with handbags, and will not be subjected to any other operations prior to their return to the U.S. The plastic bags will not be advanced in value or improved in condition while abroad. They are also not designed for repetitious use. Accordingly, the plastic bags will qualify for duty-free treatment under subheading 9801.00.10, HTSUS.

HOLDING:

On the basis of the information and samples submitted, as the plastic inflatable bags will not be advanced in value or improved in condition abroad as a result of the packaging operation, the plastic bags will qualify for the duty exemption available under subheading 9801.00.10, HTSUS, upon compliance with the documentary requirements of 19 CFR 10.1.

Sincerely,

John Durant, Director
Commercial Rulings Division

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