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HQ 545154





June 3, 1994

VAL CO:R:C:V 545154 CRS

CATEGORY: VALUATION

Alan G. Lebowitz, Esq.
Harold I. Loring, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman 12 East 49th Street
New York, NY 10017

RE: Request for reconsideration of HRL 544708; packing; assists; hang tags; price tickets

Dear Messrs. Lebowitz and Loring:

This is in reply to your letter dated November 16, 1992, on behalf of your client, The Limited, Inc. (the buyer), in which you requested reconsideration of Headquarters Ruling Letter (HRL) 544708 of February 13, 1992. Following a meeting on April 7, 1994, an additional submission was made in a letter dated April 13, 1994. We regret the delay in responding.

FACTS:

HRL 544708 concerned the dutiability of price tickets and hang tags purchased by the buyer (in the U.S. and Hong Kong) and provided free of charge to sellers of merchandise (garments) imported by the buyer. The sellers attached the price tickets and hang tags to the merchandise prior to its being exported to the U.S. The ruling held that the hang tags and price tickets were properly part of the transaction value of the imported merchandise.

However, you state that the price tickets and hang tags are placed on the imported garments solely for the convenience of the buyer's U.S. retail customers. The price tickets indicate the price and size of a garment, and provides a scannable bar code containing information on style, size, color, manufacturer and sales department. The hang tags serve to advertise and promote brand names, and describe the garment. Furthermore, you note that payment for these articles is not made to the sellers of the garments, but directly to the printers who produce them.

It is your position that the cost of price tickets and hang tags can only be included in transaction value if payments in respect of these items are part of the price actually paid or payable for the merchandise, or constitute one of the enumerated additions thereto. You maintain that the payments are neither direct nor indirect payments to the seller, and thus are not part of the price of the imported merchandise. Furthermore, you state that the price tickets and hang tags are not additions to the price actually paid or payable under the provision for assists or packing costs, and therefore cannot be included in transaction value. Instead, you maintain that the price tickets and hang tags are selling expenses of the buyer relating to U.S. marketing activities. Accordingly, you have requested that we reconsider HRL 544708.

ISSUE:

The issue presented is whether the instant price tickets and hang tags constitute an addition to the price actually paid or payable of imported merchandise.

LAW AND ANALYSIS:

Merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. ? 1401a). The preferred method of appraisement under the TAA is transaction value, defined as "the price actually paid or payable for the merchandise when sold for exportation to the United States," plus five statutorily enumerated additions. 19 U.S.C. ? 1401a(b)(1).

Of the five additions to the price actually paid or payable, only two can be considered relevant for purposes of this ruling. They are: packing costs incurred by the buyer with respect to the imported merchandise; and the value, apportioned as appropriate, of any assist. The term "packing costs" is defined by section 402(h) of the TAA which provides in pertinent part:

(3) The term "packing costs" means 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.

19 U.S.C. ? 1401a(h)(3).

The term "assist" is defined as that which is supplied directly or indirectly by the buyer of imported merchandise, and free of charge or at reduced cost, for use in connection with the sale of the merchandise for export to the U.S. 19 U.S.C. ? 1401a(h)(1)(A). There are four categories of assist; but only the first, encompassing "materials, components, parts and similar items incorporated in the imported merchandise," is potentially relevant to the instant situation.

However, the price tickets and hangs tags are not incorporated in the imported merchandise and, consequently, do not meet the definition of assists. On the other hand, Customs has consistently held that hang tags and price tickets constitute packing costs within the meaning of section 402(h)(3). In HRL 543086, dated October 19, 1983, the issue was whether fabric labels, hang tags, plastic bags, hangers and "OCR tickets," provided free of charge, were an addition to the price actually paid or payable under section 402(b)(1)(A) of the TAA. The labels were permanently incorporated into the imported merchandise and thus were deemed to be assists. However, in regard to the other items we stated:

The plastic bags are "coverings of whatever nature" under the above definition. While we agree...that the other items are not containers or coverings, we believe they are "materials used in placing the merchandise in condition packed ready for shipment....Accordingly, for appraisement purposes, all of these items are "packing costs (sic) and, since they are evidently not included in the price, their costs must be added to the price [actually] paid or payable.

HRL 543086 at 2. Similarly, in HRL 067369 dated July 31, 1981 (also cited as IA 77/81), price tags were held to come within the definition of packing costs, notwithstanding the fact that the tags served to identify the price and the stock number of the goods to which they were attached.

The instant hang tags and price tickets convey similar information. However, they are also items which the buyer has seen fit to have attached to imported garments in order to pack the merchandise in a certain condition for its use in the U.S, e.g., ready for retail display, or ready to convey information for inventory or other purposes. It is in this sense that the price tickets and hangs tags are materials used to place merchandise "in condition, packed ready for shipment," within the meaning of section 402(h)(3) of the TAA. Customs therefore continues to adhere to the position expressed in the above rulings. Accordingly, the cost of these items should be added to the price actually paid or payable.

HOLDING:

Pursuant to the foregoing, HRL 544708 dated February 13, 1992, is affirmed.

The price tickets and hang tags supplied by the buyer to the seller are materials used in placing merchandise in condition, packed ready for shipment. As such, the cost of these items is an addition to the price actually paid or payable for imported merchandise within the meaning of section 402(b)(1)(A) of the TAA.

Sincerely,


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