HQ 115828 - Entry of shipments for personal use; informal entry; shipments with a value of less than $200; shipments valued between $200-$2000; quota/visa requirements for personal use shipments; 19 U.S.C. 1321; 19 CFR 10.151 - United States International Trade Commision Rulings

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HQ 115828

December 2, 2002

ENT-1 RR:IT:EC 115828 RSD

CATEGORY: ENTRY

Mr. Arthur Briggs
Vice President
Dominion Customs Consultants, Inc.
1220 Sheppard Avenue East
Suite 400
Willowdale, Ontario M2K 2S5

RE: Entry of shipments for personal use; informal entry; shipments with a value of less than $200; shipments valued between $200-$2000; quota/visa requirements for personal use shipments; 19 U.S.C. 1321; 19 CFR 10.151

Dear Mr. Briggs:

This is in response to your letter dated October 16, 2002, on behalf of Sears Canada Merchandising Services (SCMS) concerning shipments of merchandise for personal use and the applicability of the informal entry procedures of Section 321(a)(2)(C) of the Tariff Act 1930, as amended, (19 U.S.C. 1321(a)(2)(C).

FACTS:

SCMS of Toronto, Ontario is a partnership between Sears Canada Inc. (SCI) (99%) and 3978524 Canada Limited (1%). Sears Roebuck and Co. (“Roebuck”), a U.S. corporation, owns approximately 54% of SCI’s shares.

Roebuck does not currently have the in-house logistics capability to fulfill apparel orders from its catalogues and through internet sales channels. SCMS does have the logistics capability to process United States catalogue customer apparel orders. Accordingly it has entered into an agreement with Roebuck to offer select SCMS merchandise for sale in Roebuck’s U.S. catalogues, and over the Roebuck internet website, Sears.com.

The merchandise that will be offered will consist mainly of textile articles, such as men’s and women’s ready-to-wear clothing, jewelry and seasonal goods, such as Christmas decorations. It is expected that all items will have a selling price of less than two hundred ($200) U.S. dollars.

The SCMS sales will be filled from inventory held at the SCMS distribution center in Belleville, Ontario, Canada. SCMS owns 100% of the Belleville inventory. It is estimated that Canadian manufacturers will produce about 40% of the Belleville inventory. The balance of the merchandise will be acquired from various international suppliers. Roebuck will employ telephone sales associates or use third parties acting on its behalf to process U.S. customers orders. The customer orders for SCMS merchandise will be electronically transmitted to SCMS in Canada for fulfillment.

SCMS will pick and pack the customer orders it receives from its inventory in Belleville and will prepare the customer invoices and the bills of lading. The goods will then be transferred to a third party common carrier (courier) for delivery direct to individual purchasers in the United States. SCMS will provide shipping confirmation to Roebuck, which will in turn notify the customer that the merchandise has been shipped.

Roebuck will record the sale, collect the selling value and state taxes from the customer, and remit to SCMS the proceeds, net of their sales commission. The Roebuck sales commission is based on a percentage of the customer selling value, and is included in the selling price to the customer.

It is anticipated that the majority of the shipments will be valued at less than $200 (U.S. dollars). You inquire if such shipments may be entered under informal entry procedures free of duty and tax and not be subject to quota or visa requirements.

There also may be some shipments that are valued over $200 but less than $2,000. You want confirmation that when such shipments are made to an individual purchaser for his or her personal use, the informal entry procedure may still apply, even if the imported merchandise is subject to duty based on the rate applicable for the tariff number under which the imported articles are classified. You also want to know whether textile articles imported for personal use of the importer and not resale are exempt from quota and visa requirements.

ISSUES:

Whether shipments of merchandise made to an individual purchaser for his or her personal use valued under $200 can be imported under the informal entry procedures free of duty.

Whether shipments of merchandise made to individuals for personal use that are valued over $200 and up to $2,000 can be entered under the informal entry procedures.

Whether merchandise imported for personal use is exempt from the textile visa and quota requirements.

LAW AND ANALYSIS:

Section 321(a)(2)(C) of the Tariff Act of 1930, as amended (19 U.S.C. §1321(a)(2)(C)), provides for the duty free entry of articles valued at $200 or less which are imported by one person on one day. The purpose of this provision is to minimize expense and inconvenience to the government disproportionate to the revenue that is collected. The applicable regulations are found in sections 10.151, 10.153 and 143.23(j) of the Customs Regulations (19 CFR §§ 10.151, 10.153 and 143.23(j)).

Section 10.151 provides that shipments valued at not over $200 may be entered under informal entry procedures free of duty and tax, unless there is reason to believe that the shipment is one of several lots covered by a single order or contract and that it was sent separately for the express purpose of securing free entry or of avoiding compliance with any pertinent law or regulation.

You indicate that most of the shipments will be valued at $200 or less and that they will be for the personal use of Roebuck’s customers. Further, each shipment will be ordered by and sent directly to the individual purchaser. Provided each importer claims the Section 321 exemption on no more than one shipment a day, and provided the shipment is not one of several increments of a single order sent separately to avoid payment of duty, the administrative exemption from duty will apply in these circumstances and the informal entry procedures will also apply to such a shipment. In other words, such shipments may be imported free of duty under the informal entry procedures.

You also inquire about shipments over $200 but under $2000. 19 U.S.C. § 1498 authorizes the Secretary of the Treasury to prescribe rules and regulations for the declaration and entry of, among other things, imported merchandise when the aggregate value of the shipment does not exceed a certain amount. Pursuant to 19 U.S.C. § 1498, Subpart C of Part 143 of the Customs Regulations (19 CFR Part 143, Subpart C) provides for the informal entry of merchandise. Section 662 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. 103-182, 107 Stat. 2057 (1993) amended 19 U.S.C. § 1498 by increasing the amount to $2500 as the maximum dollar amount the Secretary of the Treasury could prescribe by regulation for the purposes of entry and declaration of merchandise. T.D. 98-28, effective July 2, 1998, amended the Customs Regulations, including Subpart C of Part 143, pursuant to 19 U.S.C. § 1498, to increase the maximum amount for informal entries to $2000.

Pursuant to 19 U.S.C. § 1498, 19 CFR § 143.21(a) provides that shipments of merchandise not exceeding $2,000 in value may be entered under informal entry. However, the same regulation also provides that merchandise which is classified in Sections VII VIII, XI, and XII; Chapter 94 and Chapter 99 Subchapters III and IV, HTSUS may only be entered under the informal entry procedures if its value does not exceed $250. Textile articles (Section XI of the Harmonized Tariff Schedule of the United States (HTSUS)) are among those articles listed in 19 CFR § 143.21(a) subject to the $250 limit for informal entry. You have not provided information regarding the classification of the imported merchandise, but you indicate that many of the shipments will contain textile articles, which means that they may fall in Section XI of the HTSUS. Therefore, if a shipment has a value greater than $250 and the merchandise contained in the shipment is classified in any one of the sections mentioned in 19 CFR § 143.21(a), the informal entry procedures may not be used. Furthermore, you are correct that shipments greater than $200 and up to $2000 are subject to the applicable rate of duty for the tariff number under which the articles contained in the shipment are classified.

In addition, we have been informed by the Customs Office of Field Operations, that bilateral textile agreements that the United States has negotiated with various governments provide that textile articles imported for personal use of the importer and not for resale, regardless of value, except for tailor-made suits from Hong Kong, are exempt from quota, visa and certification requirements. (See U.S. Customs Service Textile Status Report Current Visa and Exempt Certification Requirements for Textiles dated October 3, 2002.)

HOLDING:

In accordance with 19 CFR 10.151 articles that are ordered by individual purchasers for their personal use, valued at $200 or under, which are shipped directly to the customer, may be entered under the informal entry procedures and are entitled to duty free entry under the provisions of Section 321 of the Tariff Act of 1930, as amended, provided that the use of this exemption is restricted to a single shipment imported by one person on one day.

In accordance with 19 CFR 143.21(a), shipments valued over $200 and up to $2,000 may be entered under the informal entry procedures. However, if the value of a shipment is over $250, and the merchandise contained in such a shipment is classified in one of the sections of the HTSUS mentioned in 19 CFR § 143.21(a), then the informal entry procedures cannot be used.

Textile articles imported for personal use of the importer and not for resale, except for tailor-made suits from Hong Kong, are exempt from the quota and visa certification requirements regardless of their value.

Sincerely,

Gina Grier

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