VAL CO:R:C:V 545154 CRS
Alan G. Lebowitz, Esq.
Harold I. Loring, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman
12 East 49th Street
New York, NY 10017
RE: Request for reconsideration of HRL 544708; packing; assists;
hang tags; price tickets
Dear Messrs. Lebowitz and Loring:
This is in reply to your letter dated November 16, 1992, on
behalf of your client, The Limited, Inc. (the buyer), in which you
requested reconsideration of Headquarters Ruling Letter (HRL)
544708 of February 13, 1992. Following a meeting on April 7, 1994,
an additional submission was made in a letter dated April 13, 1994.
We regret the delay in responding.
HRL 544708 concerned the dutiability of price tickets and hang
tags purchased by the buyer (in the U.S. and Hong Kong) and
provided free of charge to sellers of merchandise (garments)
imported by the buyer. The sellers attached the price tickets and
hang tags to the merchandise prior to its being exported to the
U.S. The ruling held that the hang tags and price tickets were
properly part of the transaction value of the imported merchandise.
However, you state that the price tickets and hang tags are
placed on the imported garments solely for the convenience of the
buyer's U.S. retail customers. The price tickets indicate the
price and size of a garment, and provides a scannable bar code
containing information on style, size, color, manufacturer and
sales department. The hang tags serve to advertise and promote
brand names, and describe the garment. Furthermore, you note that
payment for these articles is not made to the sellers of the
garments, but directly to the printers who produce them.
It is your position that the cost of price tickets and hang
tags can only be included in transaction value if payments in
respect of these items are part of the price actually paid or
payable for the merchandise, or constitute one of the enumerated
additions thereto. You maintain that the payments are neither
direct nor indirect payments to the seller, and thus are not part
of the price of the imported merchandise. Furthermore, you state
that the price tickets and hang tags are not additions to the price
actually paid or payable under the provision for assists or packing
costs, and therefore cannot be included in transaction value.
Instead, you maintain that the price tickets and hang tags are
selling expenses of the buyer relating to U.S. marketing
activities. Accordingly, you have requested that we reconsider HRL
The issue presented is whether the instant price tickets and
hang tags constitute an addition to the price actually paid or
payable of imported merchandise.
LAW AND ANALYSIS:
Merchandise imported into the United States is appraised in
accordance with section 402 of the Tariff Act of 1930, as amended
by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. 1401a). The
preferred method of appraisement under the TAA is transaction
value, defined as "the price actually paid or payable for the
merchandise when sold for exportation to the United States," plus
five statutorily enumerated additions. 19 U.S.C. 1401a(b)(1).
Of the five additions to the price actually paid or payable,
only two can be considered relevant for purposes of this ruling.
They are: packing costs incurred by the buyer with respect to the
imported merchandise; and the value, apportioned as appropriate, of
any assist. The term "packing costs" is defined by section 402(h)
of the TAA which provides in pertinent part:
(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).
The term "assist" is defined as that which is supplied
directly or indirectly by the buyer of imported merchandise, and
free of charge or at reduced cost, for use in connection with the
sale of the merchandise for export to the U.S. 19 U.S.C.
1401a(h)(1)(A). There are four categories of assist; but only the
first, encompassing "materials, components, parts and similar items
incorporated in the imported merchandise," is potentially relevant
to the instant situation.
However, the price tickets and hangs tags are not incorporated
in the imported merchandise and, consequently, do not meet the
definition of assists. On the other hand, Customs has consistently
held that hang tags and price tickets constitute packing costs
within the meaning of section 402(h)(3). In HRL 543086, dated
October 19, 1983, the issue was whether fabric labels, hang tags,
plastic bags, hangers and "OCR tickets," provided free of charge,
were an addition to the price actually paid or payable under
section 402(b)(1)(A) of the TAA. The labels were permanently
incorporated into the imported merchandise and thus were deemed to
be assists. However, in regard to the other items we stated:
The plastic bags are "coverings of whatever nature"
under the above definition. While we agree...that the
other items are not containers or coverings, we believe
they are "materials used in placing the merchandise in
condition packed ready for shipment....Accordingly, for
appraisement purposes, all of these items are "packing
costs (sic) and, since they are evidently not included in
the price, their costs must be added to the price
[actually] paid or payable.
HRL 543086 at 2. Similarly, in HRL 067369 dated July 31, 1981
(also cited as IA 77/81), price tags were held to come within the
definition of packing costs, notwithstanding the fact that the tags
served to identify the price and the stock number of the goods to
which they were attached.
The instant hang tags and price tickets convey similar
information. However, they are also items which the buyer has seen
fit to have attached to imported garments in order to pack the
merchandise in a certain condition for its use in the U.S, e.g.,
ready for retail display, or ready to convey information for
inventory or other purposes. It is in this sense that the price
tickets and hangs tags are materials used to place merchandise "in
condition, packed ready for shipment," within the meaning of
section 402(h)(3) of the TAA. Customs therefore continues to
adhere to the position expressed in the above rulings.
Accordingly, the cost of these items should be added to the price
actually paid or payable.
Pursuant to the foregoing, HRL 544708 dated February 13, 1992,
The price tickets and hang tags supplied by the buyer to the
seller are materials used in placing merchandise in condition,
packed ready for shipment. As such, the cost of these items is an
addition to the price actually paid or payable for imported
merchandise within the meaning of section 402(b)(1)(A) of the TAA.
Harvey B. Fox, Director
Office of Regulations and Rulings