CLA-2 CO:R:C:S 557683 WAS
Robert B. Silverman, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman
245 Park Avenue
New York, N.Y. 10167-0002
RE: Applicability of subheading 9811.00.60, HTSUS, to mutilated
footwear samples
Dear Mr. Silverman:
This is in response to your letter dated November 3, 1993,
on behalf of L.A. Gear, Inc., concerning the applicability of
subheading 9811.00.60, Harmonized Tariff Schedule of the United
States (HTSUS), to mutilated footwear samples.
FACTS:
You state that L.A. Gear imports mutilated footwear samples
under the duty-free provision for samples under subheading
9811.00.60, HTSUS. You further submit that in their condition as
imported, these mutilated samples are unsuitable for sale or for
use otherwise than as samples and will be used in the U.S. only
for soliciting orders for products of foreign countries. L.A.
Gear is contemplating a program for disposing of these samples
once they are no longer needed. You state that L.A. Gear is
contemplating disposing of these samples as follows:
(1) distribution of the samples to charity;
(2) exportation or sale for export to be used as samples
abroad;
(3) reconstitution into useful footwear and exportation or
sale for export; or
(4) exportation or sale for export to be reconstituted
abroad into useful footwear.
In cases (3) and (4), reconstitution would consist of
filling in the drilled-out holes, etc., which mutilated the
footwear in the first place, but in either case, the footwear
would not be sold in the U.S., unless reimported duty-paid.
ISSUE:
Whether under the proposed four scenarios, the mutilated
footwear samples would qualify for duty-free treatment under
subheading 9811.00.60, HTSUS.
LAW AND ANALYSIS:
Subheading 9811.00.60, HTSUS, provides for the free entry of
samples which are either valued at less than $1 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 of
foreign made merchandise and the creation of demand for future
orders.
We have previously held that samples of footwear which were
imported into the U.S. for the purpose of taking orders, and
after use donated to charity were eligible for duty-free
treatment under subheading 9811.00.60, HTSUS. See HRL 557282
dated September 16, 1993. In HRL 557282, samples of athletic
type footwear were imported into the U.S., with a stencil of the
legend "SAMPLE NOT FOR RESALE" on the inside rear quarter of the
footwear and also a sewn-in label on the inside quarter at the
arch. After the samples were sent to the sales force, they were
either destroyed or donated to charity. We held that the sample
footwear in that case was eligible for duty-free entry under
subheading 9811.00.60, HTSUS.
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 wallpaper of the
French manufacturer. The United States Customs Court in Carson
considered the legislative history of the predecessor provision
to subheading 9811.00.60, HTSUS, and concluded that sample goods
must be used after importation to solicit orders for products of
foreign countries. The court 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."
Similarly, in Headquarters Ruling Letter (HRL) 553290 dated
November 5, 1984, a foreign manufacturer sold wall paper 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) (the precursor to subheading
9811.00.60, HTSUS). 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, HTSUS, 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 in turn 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 United States 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
283-234.
Subheading 9811.00.60, HTSUS, specifically states 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 L.A. Gear,
Inc. mutilates the samples according to the prescribed
guidelines, they can hardly be deemed "ordinary commercial
articles" as in Cosmos. Thus, the fact that the mutilated
samples which are unsuitable for sale will be exported, does not
affect eligibility for duty-free treatment under subheading
9811.00.60, HTSUS. If, however, it is known at the time of
importation that the samples later may be rendered "suitable for
sale" while in the U.S., we do not find that such samples meet
the requirements of this statute. Therefore, the reconstitution
of the footwear into footwear which is "suitable for sale" in the
U.S. will preclude eligibility of the footwear for duty-free
treatment under subheading 9811.00.60, HTSUS.
Provided that the district director at the port of entry is
satisfied that the mutilated footwear samples are initially
imported only for soliciting orders for foreign-made products,
and in their condition as imported, are not suitable for sale,
the footwear samples will be entitled to duty-free treatment
under subheading 9811.00.60, HTSUS.
HOLDING:
Based on the information submitted, the footwear samples
will not be precluded from being entered as samples under
subheading 9811.00.60, HTSUS, by the fact that the importer plans
to donate the samples to charity, export them for sale or
reconstitution abroad or to be used as samples abroad, provided
that all of the other requirements of this tariff provision are
met. However, the reconstitution of the footwear into footwear
which is "suitable for sale" in the U.S. will preclude
eligibility of the footwear for duty-free treatment under
subheading 9811.00.60, HTSUS.
Sincerely,
John Durant, Director
Commercial Rulings Division