CLA-2 RR:CR:TE 962439 JFS
Mr. Jayson Ahern
Port Director
Miami Service Port
6601 W. 25th Street
Miami, FL 33102-5280
RE: Internal Advice Request; Classification of “Extra” Packing Containers Included in Shipment; Application of GRI 5 (b), HTSUSA; de minimis.
Dear Mr. Ahern:
This letter is in reply to your memorandum, dated November 19, 1998, regarding the request for Internal Advice, dated November 3, 1998, filed by ABC Distributing, Inc., requesting a ruling on the classification of “extra” packing containers. Prior to the issuance of this ruling the samples and all submissions were considered. A meeting was not requested. The issues were discussed telephonically with the importer and the importer was invited to submit additional information prior to this ruling.
FACTS:
The items under consideration are:
Rectangular Box: The box is constructed of corrugated cardboard and is 20 ½” long, 7” tall, and 5 ¼” deep. On the exterior of the box there is a picture of a yellow plastic toy truck that contains a blue racecar in its trailer. The toy is called “2 in 1 RACING TEAM.” The only use for this box is to hold and protect the toy truck.
Clear Polyurethane Bag: The bag is constructed of clear polyurethane and is 14” by 13 ½”. The bag is also intended as packaging for a child’s toy. On the exterior of the bag is a white adhesive sticker with “Jewelry/Train Case – 14 PC Set, for ages 3 & up” printed on its exterior. The sticker is not easily removed, and doing so results in either damaging the plastic bag or leaving residue from the sticker on the bag.
The Requestor, ABC Distributing, Inc. (ABC), owns and operates a catalogue company. Consumers order items from ABC’s catalogue. ABC, operating out of a warehouse, fills the orders and ships the goods directly to the consumer. ABC purchases and imports the goods from vendors outside of the United States. It is common practice, with each shipment of goods already packaged for sale, for the vendors to include “extra” packing containers. The “extra” packing containers consist of boxes and polyurethane bags that are identical to the containers in which the goods are actually shipped. The only difference is that the containers under consideration are shipped empty. The stated purpose of these “extra” boxes and bags is to allow ABC (1) to replace containers that have been damaged during shipment, and (2) to put a returned item in a new container so that the item can be resold.
The “extra” packing containers constitute a minor portion of each shipment. For example, one invoice shows that a total of 1,557 items were shipped. Out of that shipment, there were 45 empty boxes. Thus the “extra” boxes constituted 2.9% of the total shipment. Another invoice reflects a shipment containing a total of 21,812 items. Out of this shipment, there were 636 empty boxes. The “extra” boxes comprised 3% of the total shipment. There is no additional charge for the boxes and bags because their cost is incorporated into the purchase price of the goods.
ISSUE:
Pursuant to General Rule of Interpretation 5 (b) of the Harmonized Tariff Schedule of the United States Annotated (HTSUSA), should empty extra boxes included in a shipment of goods that are the normal packing containers for the goods, be considered packing containers?
LAW AND ANALYSIS:
Classification under the HTSUSA is made in accordance with the General Rules of Interpretation (GRI). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI may then be applied.
The Harmonized Commodity Description and Coding System, Explanatory Notes (ENs), represent the official interpretation of the Harmonized System at the international level (for the 4 digit headings and the 6 digit subheadings) and facilitate classification under the HTSUSA by offering guidance in understanding the scope of the headings and GRI. The Explanatory Notes (ENs), although not dispositive or legally binding, provide a commentary on the scope of each heading of the HTSUS, and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
ABC requests that the containers be classified as packing containers, because the boxes and bags are only used to replace the original damaged packaging. GRI 5 (b), HTSUSA, governs when containers will be considered packing materials and consequently classified in accordance with the goods that are inside of them. GRI 5 (b), HTSUSA, states:
Subject to the provisions of rule 5(a), . . . packing materials and packing containers entered with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision is not binding when such packing material or packing containers are clearly suitable for repetitive use.
GRI 5 (b), HTSUSA (emphasis added).
GRI 5 (b), HTSUSA, lists three criteria that, if met, require that the packing containers be classified with the goods with which they are shipped. (1) The container must be entered with the goods inside of it. (2) The container must be of a kind that is normally used for packing the goods that are being imported. (3) Generally, the container is not suitable for repetitive use. It is undisputed that (1) the boxes and bags in question are of the kind normally used for packing the imported goods, and (2) that the boxes and bags are not suitable for repetitive use. Accordingly, the remaining issue to be decided is whether the boxes and polybags are considered “packing containers entered with the goods therein.”
If the boxes and bags were imported by themselves, without any other goods, then GRI 5 (b), HTSUSA, would not even be considered. In which case the polybags would be classified under Heading 3923, HTSUSA, as:
Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics.
The cardboard boxes would be classified under Heading 4819, HTSUSA, as:
Cartons, boxes, cases, bags and other packing containers, of paper, paperboard, cellulose wadding or webs of cellulose fibers; box files, letter trays and similar articles of paper or paperboard of a kind used in offices, shops or the like.
Customs is considering whether the “extra” boxes and polybags meet the requirements of GRI 5 (b), HTSUSA, because (1) there are relatively few empty containers included with each shipment, and (2) the containers are the normal packing containers for the goods imported. Thus, it is necessary to determine if the term “packing containers entered with the goods therein“ encompasses packing containers that are shipped empty, yet included with a shipment of the goods for which they were intended.
When interpreting and implementing the HTSUS, Customs must first determine
whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for . . . [Customs] must give effect to the unambiguously expressed intent of Congress. To ascertain whether Congress had an intention on the precise question at issue, [Customs] employ[s] the traditional tools of statutory construction. The first and foremost tool to be used is the statute's text, giving it its plain meaning.
Ammex, Inc. v. United States, 2000 Ct. Int’l Trade, Slip Op. 2000-108, 8-9, 116 F. Supp.2d 1269 (2000).
The outcome of this ruling will be determined by what weight and effect is given to the word therein. “When interpreting a statute ‘we should, . . . if at all possible, [] give effect and meaning to all the terms.’” Bausch & Lomb Inc. , 148 F.3d 1363, 1367 (Fed. Cir. 1998) (citing U.S. v. Menasche, 348 U.S. 528, 539, 99 L. Ed. 615, 75 S. Ct. 513 (1955). “Therein” is not defined within the HTSUSA.
When a word is undefined in a statute, the agency and the reviewing court normally give the undefined term its ordinary meaning. A fundamental canon of statutory construction is that, unless otherwise defined, words will be interpreted as taking their ordinary, contemporary, common meaning. To assist it in ascertaining the common meaning of a tariff term, the court may rely upon its own understanding of the terms used, and it may consult lexicographic and scientific authorities, dictionaries, and other reliable information sources.
Precision Specialty Metals, Inc., v. United States, Slip Op. 202000-121, 116 F. Supp 2.d 1350, 1362, 2000 Ct. Intl. Trade LEXIS 123, at **29-30, (Sept. 20, 2000) (citations omitted).
Webster’s New World Dictionary defines “therein” as “in or into that place, time, or thing. “ Webster’s New World Dictionary 1388 (3d College ed. 1988). The plain meaning of the term packing containers entered with the goods therein can be none other than requiring that the packing container house the goods that are being imported. If Customs rules that the “empty” polybags and boxes are packing containers, Customs would be rendering the word “therein” meaningless. Thereby failing to give GRI 5 (b) its full force and effect. It is evident from the plain meaning of GRI 5 (b), HTSUSA, that the intent of Congress was to classify packing containers in the same classification as the goods that are shipped inside of them.
Another argument that requires consideration is whether the de minimis rule should be applied. The de minimis rule has traditionally been applied by Customs to determine if the presence of some ingredient in an imported commodity affects its classification. Ruth F. Sturm, A Manual of Customs Law, 182 (1974). In this case, it would be argued that the amount of the packing materials entering the United States is too small, or de minimis, to warrant classification.
Customs has applied the de minimis rule when determining whether the presence of an item prevents a good from being a set pursuant to GRI 3 (b), HTSUSA. In Headquarters ruling (HQ) 950466, dated January 6, 1992, the set in question consisted of an elastic cord lace system for athletic shoes. The lace system contained two stretch lace cords and plastic clips that secured the cords. Included with the lace system was a four-inch plastic sticker. The importer argued that the inclusion of the plastic sticker precluded the entire package from being classified as a set because the sticker played no part in the function of the set. Customs agreed that the sticker played no part in the function of the lace set. However, Customs ruled that this did not preclude the lace system from being classified as a set because the plastic sticker was immaterial and therefore de minimis. Customs explained the criteria that must be met for an item to be considered de minimis. “[A] component which is merely an incidental or immaterial element of an entire article, does not enhance its value, and has no commercial purpose, is disregarded for classification purposes.”
In HQ 953472, dated March 21, 1994, when considering how to classify a printed leaflet and business reply mail card packaged with athletic footwear, Customs applied the criteria that was set forth in HQ 950466. Customs first ruled that the leaflet and shoes did not satisfy a particular purpose and therefore did not constitute a set. Customs then ruled that the shoes and the printed materials could not be joined together to make up a single complete article and therefore were not composite goods. Finally, Customs ruled that the leaflet was not packing materials because it did not protect the merchandise during shipping, nor was it used for display purposes. However, Customs did rule that the literature should be disregarded for classification purposes because it was de minimis. Customs concluded that the printed material was “an incidental or immaterial “component” of the package.” Emphasis added.
In order to meet the “de minimis” criteria set forth in HQ 950466, the “extra” packing materials must be an “element” or “component” of the imported merchandise. While it is probable that at some point in time after importation the containers will be joined with the merchandise imported, it is settled Customs law that merchandise is classified in its condition at the time of entry. Accordingly, the “de minimis” rule cannot be applied, because at the time of entry the polybags and boxes are not an “element” of the imported article.
ABC also contends that the packing containers constitute “spare parts” and therefore should be classified in accordance with the goods with which they were shipped. The problem with this argument is that the extra polybags and boxes are not “spare parts.” They are not extra components of the imported goods and cannot replace a defective or damaged components of the imported goods. Moreover, the Headings and Legal Notes of the HTSUSA govern when items are “parts” and how they will be classified. There is no provision in the HTSUSA treating the subject packing containers as parts.
The “extra” packing containers that are shipped empty, without matching goods, are not packing containers pursuant to GRI 5 (b). This ruling is based on the plain and clear meaning of GRI 5 (b), which requires that the goods be shipped inside of the packing containers in order for the packing containers to be classified with the goods.
HOLDING:
The polyurethane bags are classifiable under Heading 3923, HTSUSA, which provides for “[a]rticles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics.” The cardboard boxes are classifiable under Heading 4819, HTSUSA, which provides for
[c]artons, boxes, cases, bags and other packing containers, of paper, paperboard, cellulose wadding or webs of cellulose fibers; box files, letter trays and similar articles of paper or paperboard of a kind used in offices, shops or the like.
The designated category may be subdivided into parts. If so, visa and quota requirements applicable to the subject merchandise may be affected. Since part categories are the result of international bilateral agreements which are subject to frequent renegotiations and changes, to obtain the most current information available, we suggest that you check, close to the time of shipment, The Status Report on Current Import Quotas (Restraint Levels), an internal issuance of the U.S. customs Service, which is available for inspection at your local Customs office.
Due to the changeable nature of the statistical annotation (the ninth and tenth digits of the classification) or restraint (quota/visa) categories, you should contact your local Customs office prior to importation of this merchandise to determine the current status of any import restraints or requirements.
Sincerely,
John Durant, Director
Commercial Rulings Division