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HQ 560802




March 19, 1998

MAR-2 RR:CR:SM 560802 KSG

CATEGORY: MARKING

Catherine L. Holmes
The A.W. Fenton Company Inc.
P.O. Box 360614
Columbus, Ohio 43236-0614

RE: 19 U.S.C. 1304; 19 CFR 134.46; U.S. flag;

Dear Ms. Holmes:

This is in reference to your letter of December 17, 1997, on behalf of your client Rocky Shoes & Boots Co., Inc., requesting a binding ruling on the marking of corrugated boxes used to pack shoes and boots. A sample box was sent with your letter.

FACTS:

You state that corrugated boxes are manufactured in the U.S. and shipped to a manufacturer of shoes and boots in China. The boxes are shipped flat and will be assembled by folding and packed with shoes or boots in China. A hang tag is affixed to each pair of shoes or boots and a label will be sewn into the footwear bearing the country of origin of the footwear. The shoes are sold to the ultimate purchaser in the box.

The sample box, which is black, contains the company logo and on the front of the box, in the right hand corner, there is an American flag and the phrase "MADE IN THE USA" in large white lettering. On one side of the box, there is the phrase "MADE IN THE USA" and a U.S. address in white lettering.

The importer and the foreign manufacturer are not related.

You ask if the boxes are entitled to duty free entry under subheading 9801 or 9802 of the Harmonized Tariff Schedule of the United States ("HTSUS"). You also ask if the value of the boxes should be included in the appraised value of the imported merchandise. Lastly, you ask if the boxes should be marked to show either the country of origin of the box or the origin of the footwear.

ISSUES:

Whether the value of the U.S. origin boxes should be included in the appraised value of the imported footwear.

Whether the boxes will be entitled to a duty exemption under subheading 9801.00.00, HTSUS, or subheading 9802.00.80, HTSUS.

Whether the boxes should be marked to show the country of origin of the shoes and/or the country of origin of the box.

LAW AND ANALYSIS:

1. Value question

The preferred method of appraising merchandise imported into the United States is transaction value pursuant to section 402(b) of the Trade Agreements Act of 1979 (TAA). Section 402(b) of the TAA provides, in pertinent part, that the transaction value of imported merchandise is "the price actually paid or payable for the 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. See 19 U.S.C.

Assuming transaction value is the appropriate basis of appraisement, packing costs constitute an addition to the price actually paid or payable. In this regard, section 402(h) of the TAA, 19 U.S.C. 1401a(h)(3) 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.

The cost of packing materials and containers provided by the buyer is included in the statutory definition of packing costs and normally must be added to the price actually paid or payable. However, HRL 544294, dated July 7, 1989, and HRL 544458, dated February 23, 1990, held that, if packing material of U.S. origin is classified 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. In HRL 544667, dated July 30, 1991, Customs stated 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...

This Customs position was recently affirmed in HRL 546287, dated April 25, 1996, which dealt with imported frozen vegetables packaged in U.S. origin containers. Accordingly, if the boxes are entitled to duty free treatment under subheading 9801.00.10, HTSUS, their appraised value would not be included in the transaction value of the footwear.

2. Entitlement to a duty exemption

Subheading 9801.00.10, HTSUS, provides that products of the U.S. when 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 may be entered duty free provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1) are satisfied.

The question in the instant case is whether the corrugated boxes, which are packed flat and undergo minor assembly by folding in China, are advanced in value or improved in condition.

The court held in Border Brokerage Company, Inc. v. United States, 314 F. Supp. 788 (1970), that tomatoes of American origin were entitled to duty free entry under item 800.00, Tariff Schedules of the United States ("TSUS") (the predecessor to subheading 9801.00.10, HTSUS). The tomatoes were shipped to Canada where they were unloaded, unpacked, sorted, graded by color and size, and repacked. The court stated that the test to be applied in item 800 cases is whether the merchandise of American origin has itself (apart from its container) been the object of advancement in value or improvement in condition while abroad. The court noted that there was no cleaning, wiping or individual wrapping of any of the involved tomatoes in Canada. Further, in Superscope, Inc. v. United States, 727 F. Supp. 629 (CIT 1989), the court held that American glass panels that were repackaged in New Zealand as part of unassembled cabinets were entitled to duty free status under item 800.00, TSUS.

In both Border Brokerage Company and Superscope, the only processing occurring was sorting and repackaging. Customs held in HRL 560635, dated December 15, 1997, that U.S. origin corrugated boxes shipped to other countries for packaging finished products were eligible for duty free treatment under subheading 9801.00.010, HTSUS. The ruling letter noted that Customs has previously held that 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. Forming the box by folding is a change in the condition of the box but it is not an advancement in value or improvement in condition. See HRL 555664, dated August 8, 1990.

Accordingly, we find that the American boxes, which are finished when they are shipped abroad, are not advanced in value and improved in condition and therefore, are eligible for duty free treatment under subheading 9801.00.10, HTSUS, upon compliance with the documentary requirements of 19 CFR 10.1.

Since we find that the boxes are entitled to duty free treatment under subheading 9801.00.10, HTSUS, we need not discuss the entitlement to preferential duty treatment under subheading 9802.00.80, HTSUS.

3. Country of origin marking

Section 304 of the Tariff Act of 1930 (19 U.S.C. 1304), provides that unless excepted, every article of foreign origin imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article.

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements of 19 U.S.C. 1304. Your proposed marking would not be acceptable under 19 U.S.C. 1304 because the ultimate purchaser could believe that the phrase "Made in U.S.A." appearing on the box means that the footwear was made in the U.S. Since the U.S. is not the country of origin of the footwear, the sample box would violate 19 U.S.C. 1304.

With regard to the second part of your question, the box is not required to be marked with its country of origin. See 19 CFR 134.24(d). The box also does not have to be marked with the country of origin of the footwear if the shoes are properly marked unless the special marking requirements of 19 CFR 134.46 are triggered. See 19 CFR 134.24(d)(3). Section 134.46, Customs Regulations (19 CFR 134.46) provides:

In any case in which the words "United States," or "American," the letters "U.S.A.," any variation of such words or letters, or the name of any city or location in the United States, or the name of any foreign country or locality other than the country or locality in which the article was manufactured or produced appear on an imported article or its container, and those words, letters or names may mislead or deceive the ultimate purchase as to the actual country of origin of the article, there shall appear legibly and permanently in close proximity to such words, letters or name, and in at least a comparable size, the name of the country of origin preceded by "Made in," "Product of," or other words of similar meaning.

The above special marking requirements would not be triggered in this case if there is no reference to the U.S. on the box. However, if a U.S. address appears on the box, in a manner which may mislead or deceive the ultimate purchaser as to the actual country of origin of the imported footwear, the country of origin of the footwear must appear on the box in conformity with the requirements of 19 CFR 134.46. With regard to the sample, the U.S. address which appears on the side of the box with no other information may mislead or deceive the ultimate purchaser as to the country of origin of the imported footwear and, therefore, the special marking requirements of 19 CFR 134.46 are triggered.

If you wish to mark the box with its country of origin, it should be marked "box made in U.S.A." We note that if the only U.S. reference on the box is the phrase "box made in U.S.A.," the special marking requirements of 19 CFR 134.46 would not be triggered.

HOLDING:

The U.S. origin boxes are not advanced in value and improved in condition and therefore, are eligible for duty free treatment under subheading 9801.00.10, HTSUS, upon compliance with the documentary requirements of 19 CFR 10.1.

Since the boxes are entitled to duty free treatment under subheading 9801.00.10, HTSUS, their appraised value would not be included in the transaction value of the footwear.

The marking on the sample box violates 19 U.S.C. 1304 because the ultimate purchase may believe that the country of origin of the imported footwear is the U.S. There is no requirement that the box be marked with its country of origin. However, if the box is to be marked with its country of origin, it should be marked "box made in U.S.A."

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is 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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