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HQ 546043




November 30, 1995
RR:IT:VA 546043 KCC

CATEGORY: VALUATION

District Director
U.S. Customs Service
P.O. Box 9516
El Paso, Texas 79985

RE: HRL 545224 modified; U.S. origin packing; appraised value; packing costs; ?402(b)(1)(A) and (h) of the TAA; 19 U.S.C. ?1401a(b)(1(A) and (h)(3); HRL 544230; HRL 544294; HRL 544458; HRL 544667

Dear District Director

This decision concerns Headquarters Ruling Letter (HRL) 545224, issued September 19, 1994, as Internal Advice 86/92 filed by Rudolph Miles & Sons on behalf of L.M. Becker & Co. In pertinent part, HRL 545224 determined that the value of U.S. origin containers classified under subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), was part of the appraised value of the imported merchandise.

Pursuant to ?625(c)(1), Tariff Act of 1930 (19 U.S.C. Modernization) of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057), notice of the proposed modification of HRL 545224 was published on October 25, 1995, in the Customs Bulletin, Volume 29, Number 43. Two comments, which agreed with Customs proposed modification, were received in response to this notice.

FACTS:

L.M. Becker (the "importer") imports small toys, imitation jewelry and other items (the "toys") from Hong Kong, Taiwan and China. The toys are duty-paid at the U.S. port of importation and then consigned to unrelated contractors in Mexico. There the toys are placed one each in small, plastic, oval- or elliptically-shaped containers of U.S. origin, which the buyer also consigns to the Mexican contractors. The containers are designed to be sold with their contents through vending machines. The containers and their contents are re-imported into the U.S. through the port of El Paso.

HRL 545224 determined that the toys and their plastic containers were classifiable in the appropriate headings for toys, jewelry, etc., under General Rule of Interpretation (GRI) 1, HTSUS. Therefore, the U.S. origin packing, i.e., the plastic containers, and the imported merchandise, i.e., the toys, were not separately classifiable. HRL 545224 stated that the containers were used in placing the imported toys "in condition, packed ready for shipment to the United States. Accordingly, the cost of the containers was considered an addition to the price actually paid or payable in accordance with ?402(b)(1)(A) of the Tariff Act of 1930, as amended by the Trade Agreements Act of

ISSUE:

Is the value of the U.S. origin packing included in the appraised value of the imported toys?

LAW AND ANALYSIS:

Merchandise imported into the United States is appraised in accordance with ?402 of the TAA (19 U.S.C. ?1401a). The preferred method of appraisement is transaction value, defined as "the price actually paid or payable for the [imported] merchandise when sold for exportation to the United States," plus certain enumerated additions, including the packing costs incurred by the buyer with respect to the imported merchandise. 19 U.S.C. ?1401a(b)(1)(A).

Assuming transaction value is the appropriate basis of appraisement, packing costs constitute an addition to the price actually paid or payable. 19 U.S.C. ?1401a(b)(1)(A). In this regard, ?402(h) of the TAA provides:

(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). Retail packing is included in the statutory definition of packing costs and must be added to the price actually paid or payable. HRL 544230 dated December 22, 1988.

HRL 544294 dated July 7, 1989, and HRL 544458 dated February 23, 1990, held that, if packing material of U.S. origin is classifiable under subheading 9801.00.10, HTSUS, there is no legal authority to treat the packing as part of the appraised value of the imported merchandise because items which are separately classified must be separately appraised. This position was affirmed in HRL 544667 dated July 30, 1991. There we stated, in pertinent part, that:

With regard to determining appraised value, the principle that imported merchandise be appraised in accordance with its classification applies. Thus, where American packaging is classified under subheading 9801.00.10, HTSUS, and the merchandise packed in the American packaging is classified in a subheading within the nomenclature between Chapters 1 and 97, no authority exists to combine the respective appraised values. Because the packaging and merchandise are treated as separately classifiable entities, their appraised values are separate....

HRL 545224 stated that the imported articles and their plastic containers were classifiable in the appropriate headings for toys, jewelry, etc., under GRI 1, HTSUS. Thus, the U.S. origin packing, i.e., the plastic containers, and the imported merchandise, i.e., toys, were not separately classifiable. The containers were used in placing the imported toys "in condition, packed ready for shipment to the United States." 19 U.S.C. determined to be an addition to the price actually paid or payable in accordance with ?402(b)(1)(A) of the TAA. 19 U.S.C.

However, upon reviewing HRL 545224, we are of the opinion that the statement that "the imported articles and their plastic containers were classifiable in the appropriate headings for toys, jewelry, etc., under GRI 1, HTSUS" is incorrect. The National Import Specialist's memorandum further states it was suggested that the packaging material be viewed as a toy. However, the National Import Specialist stated:

This office is not in agreement with that concept. Separately imported, the egg shaped packaging would not be considered a toy. Further, the egg shaped packaging is of a kind normally used for packaging vending machine goods.

Generally, foreign packing material is classified with imported merchandise pursuant to GRI 5(b), HTSUS (provided it meets the qualifications set out in GRI 5(b), HTSUS). Thus, the foreign packing materials value is included in the appraised value of the imported merchandise. It appears that HRL 545224 treated the plastic containers as foreign packing material.

However, in this situation, the packing material is not of foreign origin, but of U.S. origin. Pursuant to HRL 544294, HRL 544458, and HRL 544667, U.S. packing materials or packing containers are separately classified from the imported merchandise contained therein. The invoice will describe the imported merchandise, i.e., toy - heading 9503, and U.S. packing, i.e., plastic container - subheading 9801.00.10. Since the items are separately classified, they are separately appraised. Therefore, the value of the U.S. packing materials or packing containers, i.e., the plastic containers, is not included in the appraised value of the imported merchandise, i.e., the toys.

HOLDING:

The value of the U.S. origin containers classified under subheading 9801.00.10, HTSUS, is not part of the appraised value of the imported merchandise.

EFFECT ON OTHER RULINGS:

HRL 545224 issued September 19, 1994, is modified as set forth above. In accordance with 19 U.S.C. ?1625(c)(1), this ruling will become effective 60 days after publication in the Customs Bulletin. Publication of rulings or decisions pursuant to 19 U.S.C. ?1625(c)(1) does not constitute a change of practice or position in accordance with ?177.10(c)(1), Customs Regulations

Sincerely,

Acting Director
International Trade Compliance
Division

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