CLA-2 CO:R:C:S 557013 MLR
Jamie R. Schloss
10100 Santa Monica Boulevard
Century City North, Suite 750
Los Angeles, California 90067
RE: Applicability of duty exemption to mutilated clothing
samples sold by the importer to its salespeople.
Dear Mr. Schloss:
This is in response to your letter of November 13, 1992,
requesting a ruling on behalf of Hawaii Pacific Group, Inc.
(hereinafter HPG), concerning the free entry of mutilated
clothing articles.
FACTS:
HPG intends to import mutilated clothing articles into the
U.S. HPG then proposes to charge its salespeople the cost of
these articles for using them as samples. You state that similar
transactions are practiced at Bugle Boy Industries, Inc.
ISSUE:
Whether mutilated clothing articles sold by the importer to
its salespeople, are entitled to duty-free treatment under
subheading 9811.00.60, Harmonized Tariff Schedule of the United
States Annotated (HTSUSA), as samples.
LAW AND ANALYSIS:
Subheading 9811.00.60, HTSUSA, provides for the free entry
of any sample valued not over $1.00 each, or marked, torn,
perforated, or otherwise treated so that it is unsuitable for
sale or for use otherwise than as a sample, to be used in the
U.S. only for soliciting orders for products of foreign
countries. The controlling factor is whether the importer uses
the samples for the purpose of soliciting purchase orders for
foreign merchandise and the creation of demand for future orders.
In Carson M. Simon & Co. v. United States, 46 Cust. Ct. 118,
C.D. 2243 (1961), sample wallpaper books, imported from France,
were distributed, unsolicited, to decorators throughout the U.S.
for the purpose of obtaining orders for the wallpapers of the
French manufacturer. Some of the recipients remitted payment for
the books. The U.S. Government contended that the language of
paragraph 1821(a) of the Tariff Act of 1930, as added by Public
Law 85-211 (the predecessor provision of subheading 9811.00.60,
HTSUSA), was confined to samples directly related to the
solicitation of orders from foreign manufacturers, for the
purpose of expanding international trade; therefore, where an
American concern purchased samples from abroad for distribution
to its potential U.S. customers, paragraph 1821 would not apply.
The United States Customs Court, in considering the
legislative history of this provision, stated that:
...with respect to samples of nominal value, or so
treated as to have no other use than in the
solicitation of orders for merchandise, the conditions
of...[the statute] are met if the samples represent the
goods to be ordered, and the goods have been produced
in a foreign country.
It was held that there is no statutory requirement of foreign
ownership of the samples, nor did the legislative background of
the provision reveal a congressional intent to so limit the terms
of the pertinent provisions.
Similarly, in Headquarters Ruling Letter (HRL) 553290 dated
November 5, 1984, a foreign manufacturer sold wallpaper sample
books to an importer who sold them to dealers. The manufacturer
paid the importer a commission on the sale of wallcoverings and
books sold to dealers. It was held that so long as the purpose
of the books was to solicit orders for foreign goods, the
commission paid to the importer did not amount to a commercial
enterprise in the sample books; accordingly, the wallpaper books
were entitled to free entry under item 860.30, Tariff Schedules
of the United States (TSUS) (now 9811.00.60, HTSUSA). In HRL
556219 dated December 23, 1991, lens cleaning cloths, that in
some instances were sold to a distributor who sold them to
retailers to give to customers as free samples for the sole
purpose of soliciting orders for foreign-made standard size
cloths, were not disqualified from free entry under subheading
9811.00.60, HTSUSA, as samples.
These decisions are contrasted with Cosmos Shipping Company,
Inc. v. United States, C.D. 4285 (1971), where a French
manufacturer sold commercial size toothpaste tubes to a U.S.
distributor who sold them to a retailer at a minute profit, who,
in turn, packaged the tubes with other cosmetics and sold them to
its customers at a price substantially less than the aggregate
retail price of the cosmetics contained in the kit. The U.S.
Customs Court held that the toothpaste tubes were not "samples"
within the meaning of item 860.30, TSUS, stating that the common
meaning of the word "sample" precludes the notion of a sale.
Although, the plaintiff argued that the "real" sales would be
realized upon the reorders and the sales made by the distributor
to the retailer, the court found that the transaction at issue
"constitut[ed] nothing other than the introductory sale of an
ordinary commercial article...." Id. at 283-284.
Guidelines regarding the manner in which textile samples
should be marked or otherwise treated to render them eligible for
duty-free treatment under subheading 9811.00.60, HTSUSA, are set
forth in the Interim Update to Customs Directive 3500-07, dated
January 4, 1989. The guidelines provide that wearing apparel
samples must either be (1) mutilated by cutting or tearing a
section from, or punching a hole into the garment, or (2)
indelibly marked with the word "SAMPLE" in a prominent and
visible area. If the garment is mutilated by means of cutting,
the cut must be: (1) visible; (2) appear on the outside of the
main body of the garment, but not on a seam or border; and (3) of
a size which is a minimum of 2 inches in length. The Customs
Directive also provides that the invoice must contain the
statement "Mutilated Samples - 9811.00.60" prior to importation
of the article into the U.S.
Subheading 9811.00.60, HTSUSA, and the predecessor tariff
provisions, specifically state that one of the requirements for
duty-free treatment is that the sample be "unsuitable for sale".
However, the cases cited above did not preclude duty-free
treatment in every instance where the article at issue was sold
at one point after importation. If HPG mutilates the samples
according to the guidelines, they can hardly be deemed "ordinary
commercial articles" as in Cosmos, whether or not sold for their
use as samples. It is therefore our opinion that HPG's sale of
the clothing articles to its salespeople as a cost for using them
as samples will not preclude duty-free treatment under subheading
9811.00.60, HTSUSA, unless HPG's motivation in importing and
selling the articles is something other than only for soliciting
purchase orders for the foreign clothing articles.
HOLDING:
Based on the information submitted, the clothing articles
will not be precluded from being entered as samples under
subheading 9811.00.60, HTSUSA, by the fact that the importer
charges its employees the full cost of the articles for using
them, provided all of the requirements of this tariff provision
are met, in that the articles are marked, torn, perforated, or
otherwise treated (if they are valued over $1.00 each) so that
they are unsuitable for sale or for use otherwise than as
samples, and are used in the U.S. only for soliciting orders for
such articles from foreign countries.
Sincerely,
John Durant, Director