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HQ 557013


March 19, 1993

CLA-2 CO:R:C:S 557013 MLR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9811.00.60

Jamie R. Schloss
10100 Santa Monica Boulevard
Century City North, Suite 750
Los Angeles, California 90067

RE: Applicability of duty exemption to mutilated clothing samples sold by the importer to its salespeople.

Dear Mr. Schloss:

This is in response to your letter of November 13, 1992, requesting a ruling on behalf of Hawaii Pacific Group, Inc. (hereinafter HPG), concerning the free entry of mutilated clothing articles.

FACTS:

HPG intends to import mutilated clothing articles into the U.S. HPG then proposes to charge its salespeople the cost of these articles for using them as samples. You state that similar transactions are practiced at Bugle Boy Industries, Inc.

ISSUE:

Whether mutilated clothing articles sold by the importer to its salespeople, are entitled to duty-free treatment under subheading 9811.00.60, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), as samples.

LAW AND ANALYSIS:

Subheading 9811.00.60, HTSUSA, provides for the free entry of any sample valued not over $1.00 each, or marked, torn, perforated, or otherwise treated so that it is unsuitable for sale or for use otherwise than as a sample, to be used in the U.S. only for soliciting orders for products of foreign countries. The controlling factor is whether the importer uses the samples for the purpose of soliciting purchase orders for foreign merchandise and the creation of demand for future orders.

In Carson M. Simon & Co. v. United States, 46 Cust. Ct. 118, C.D. 2243 (1961), sample wallpaper books, imported from France, were distributed, unsolicited, to decorators throughout the U.S. for the purpose of obtaining orders for the wallpapers of the French manufacturer. Some of the recipients remitted payment for the books. The U.S. Government contended that the language of paragraph 1821(a) of the Tariff Act of 1930, as added by Public Law 85-211 (the predecessor provision of subheading 9811.00.60, HTSUSA), was confined to samples directly related to the solicitation of orders from foreign manufacturers, for the purpose of expanding international trade; therefore, where an American concern purchased samples from abroad for distribution to its potential U.S. customers, paragraph 1821 would not apply.

The United States Customs Court, in considering the legislative history of this provision, stated that:

...with respect to samples of nominal value, or so treated as to have no other use than in the solicitation of orders for merchandise, the conditions of...[the statute] are met if the samples represent the goods to be ordered, and the goods have been produced in a foreign country.

It was held that there is no statutory requirement of foreign ownership of the samples, nor did the legislative background of the provision reveal a congressional intent to so limit the terms of the pertinent provisions.

Similarly, in Headquarters Ruling Letter (HRL) 553290 dated November 5, 1984, a foreign manufacturer sold wallpaper sample books to an importer who sold them to dealers. The manufacturer paid the importer a commission on the sale of wallcoverings and books sold to dealers. It was held that so long as the purpose of the books was to solicit orders for foreign goods, the commission paid to the importer did not amount to a commercial enterprise in the sample books; accordingly, the wallpaper books were entitled to free entry under item 860.30, Tariff Schedules of the United States (TSUS) (now 9811.00.60, HTSUSA). In HRL 556219 dated December 23, 1991, lens cleaning cloths, that in some instances were sold to a distributor who sold them to retailers to give to customers as free samples for the sole purpose of soliciting orders for foreign-made standard size cloths, were not disqualified from free entry under subheading 9811.00.60, HTSUSA, as samples.

These decisions are contrasted with Cosmos Shipping Company, Inc. v. United States, C.D. 4285 (1971), where a French manufacturer sold commercial size toothpaste tubes to a U.S. distributor who sold them to a retailer at a minute profit, who, in turn, packaged the tubes with other cosmetics and sold them to its customers at a price substantially less than the aggregate retail price of the cosmetics contained in the kit. The U.S. Customs Court held that the toothpaste tubes were not "samples" within the meaning of item 860.30, TSUS, stating that the common meaning of the word "sample" precludes the notion of a sale. Although, the plaintiff argued that the "real" sales would be realized upon the reorders and the sales made by the distributor to the retailer, the court found that the transaction at issue "constitut[ed] nothing other than the introductory sale of an ordinary commercial article...." Id. at 283-284.

Guidelines regarding the manner in which textile samples should be marked or otherwise treated to render them eligible for duty-free treatment under subheading 9811.00.60, HTSUSA, are set forth in the Interim Update to Customs Directive 3500-07, dated January 4, 1989. The guidelines provide that wearing apparel samples must either be (1) mutilated by cutting or tearing a section from, or punching a hole into the garment, or (2) indelibly marked with the word "SAMPLE" in a prominent and visible area. If the garment is mutilated by means of cutting, the cut must be: (1) visible; (2) appear on the outside of the main body of the garment, but not on a seam or border; and (3) of a size which is a minimum of 2 inches in length. The Customs Directive also provides that the invoice must contain the statement "Mutilated Samples - 9811.00.60" prior to importation of the article into the U.S.

Subheading 9811.00.60, HTSUSA, and the predecessor tariff provisions, specifically state that one of the requirements for duty-free treatment is that the sample be "unsuitable for sale". However, the cases cited above did not preclude duty-free treatment in every instance where the article at issue was sold at one point after importation. If HPG mutilates the samples according to the guidelines, they can hardly be deemed "ordinary commercial articles" as in Cosmos, whether or not sold for their use as samples. It is therefore our opinion that HPG's sale of the clothing articles to its salespeople as a cost for using them as samples will not preclude duty-free treatment under subheading 9811.00.60, HTSUSA, unless HPG's motivation in importing and selling the articles is something other than only for soliciting purchase orders for the foreign clothing articles.

HOLDING:

Based on the information submitted, the clothing articles will not be precluded from being entered as samples under subheading 9811.00.60, HTSUSA, by the fact that the importer charges its employees the full cost of the articles for using them, provided all of the requirements of this tariff provision are met, in that the articles are marked, torn, perforated, or otherwise treated (if they are valued over $1.00 each) so that they are unsuitable for sale or for use otherwise than as samples, and are used in the U.S. only for soliciting orders for such articles from foreign countries.

Sincerely,

John Durant, Director

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