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HQ 560635




December 15, 1997

CLA-2 RR:TC:SM 560635 JML

CATEGORY: CLASSIFICATION

TARIFF NO: 9802.00.80

Ms. Brenda S. Ambrose
Healthtex, Inc.
Logistics Manager, Sourcing Department
2303 Meadowview Road
Kinston Building, Suite 200
Greensboro, NC 27407

RE: Dutiability of packing boxes for articles imported under subheading 9802.00.80, HTSUS; commingling.

Dear Ms. Ambrose:

This is response to your letter of August 26, 1997, requesting a binding ruling on the dutiability of corrugated packing boxes for articles imported into the United States ("U.S.") under subheading 9802.00.80, Harmonized Tariff Schedule of the United States ("HTSUS").

FACTS:

The facts you provided indicate that Healthtex, Inc. ("Healthtex") is engaged in assembling various products in Honduras, El Salvador, the Dominican Republic and Mexico under subheading 9802.00.80, HTSUS. Healthtex currently supplies U.S.-origin boxes to its manufacturers for shipping its finished products to its distribution centers in the United States. You state that upon entry, those boxes generally get duty-free treatment under subheading 9801.00.10, HTSUS.

Healthtex now intends to buy corrugated boxes from a vendor in the Dominican Republic for use in shipping the finished products to the United States. Once the boxes reach the United States they will be emptied and commingled with the existing inventory of U.S.-origin boxes. You state that upon commingling it is not possible to differentiate between the origin of the boxes. The boxes will then be shipped to various countries, including the Dominican Republic for reuse. You further state that the boxes can be reused up to 5 or 6 times.

ISSUE:

What is the dutiable status of the boxes?

LAW AND ANALYSIS:

Subheading 9802.00.80, HTSUS, provides a partial duty exemption for:

[a]rticles . . . assembled abroad in whole or in part of fabricated components, the product of the United
States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubricating and painting.

All three requirements of subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

Section 10.16(f), Customs Regulations (19 CFR 10.16(f)), states that:

[a]ssembled articles which otherwise qualify for the exemption and which are packaged abroad following their assembly will not be disqualified from the exemption by reason of their having so been packaged, whether for retail sale or for bulk shipment. The tariff status of the packing materials or containers will be determined in accordance with General Rule of Interpretation 5, HTSUS (19 U.S.C. 1202).

General Rule of Interpretation ("GRI") 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 is not binding when such packing materials or packing containers are clearly suitable for repetitive use.

The Explanatory Notes ("EN") to the Harmonized Commodity Description and Coding System, which represent the official interpretation of the tariff at the international level, facilitate classification under the HTSUS by offering guidance in understanding the scope of the headings and GRIs. EN for GRI 5(b) provides that packing materials of the kind suitable for repetitive use are, for example, metal drums or containers of iron or steel. Customs is of the opinion that corrugated boxes capable of reuse 5 or 6 times are not the type of article referred to in GRI 5(b) as "clearly suitable for repetitive use." Consequently, the boxes at issue are subject to the terms of that rule.

However, Customs has held that U.S.-origin packing materials which are not advanced in value or improved in condition while abroad are separately entitled to duty free treatment as American goods returned under subheading 9801.00.10, HTSUS. Subheading 9801.00.10, HTSUS, provides for the duty-free entry of products of the U.S. that are returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, provided there has been compliance with the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1). The act of being filled with their contents is not considered to be an advancement in the condition of the container or packing materials. See HRL 731806, dated November 18, 1988. Unlike subheading 9802.00.80, HTSUS, which addresses U.S. components assembled, subheading 9801.00.10, HTSUS, does not provide for a reduction in value for U.S. components; it merely states that products fitting the terms of the heading enter free of duty. Thus, in accordance with your prior practice, the U.S.-origin boxes are entitled to duty free treatment under subheading 9801.00.10, HTSUS, provided that they are products of the U.S., are returned after having been exported, without having been advanced in value or improved in condition while abroad, upon compliance with the documentation requirements of section 10.1, Customs Regulations.

With regard to the Dominican-origin boxes (and for that matter any other box of non-U.S.-origin), the provisions of GRI 5(b), HTSUS, would apply. Upon entry they would be classified with their contents. Since they are not U.S.-origin goods they would not otherwise be entitled to duty free treatment under subheading 9801.00.10, HTSUS. Rather, they would be included in the value of and dutiable at the rate applicable to their contents. Consequently, any of the boxes which you cannot clearly establish as being of U.S.-origin will be treated accordingly.

HOLDING:

U.S.-origin corrugated boxes used for packing articles assembled under subheading 9802.00.80, HTSUS, may obtain duty free treatment under subheading 9801.00.10, HTSUS, provided they satisfy the documentary requirements of section 10.1, Customs Regulations. Pursuant to section 10.16(f), Customs Regulations, the Dominican-origin boxes are to be included in the value of and dutiable at the rate of their contents. Those boxes which cannot be clearly identified as of U.S.-origin and which do not satisfy the requirements of subheading 9801.00.10, HTSUS, will be dutiable at the rate applicable to their contents.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director
Commercial Rulings Division

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