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.

§1625(c)(1)), as amended by §623 of Title VI (Customs

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

1979 (TAA) (19 U.S.C. §1401a(b)(1)(A)).

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.

§1401a(h)(3). Accordingly, the cost of the containers was

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.

§1401a(b)(1)(A).

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

(19 CFR §177.10(c)(1)).

Sincerely,

Acting Director

International Trade Compliance

Division