VAL-2 OT:RR:CTF:VS H028000 CMR
Peter A. Quinter, Esq.
Becker & Poliakoff
P.O. Box 9057
Ft. Lauderdale, FL 33310-9057
RE: “Security tags” affixed to merchandise prior to importation; Effect on Transaction Value
Dear Mr. Quinter:
This is in response to your letter of May 7, 2008, and follow-up of May 22, 2008, requesting a ruling on behalf of your client, Atico International USA, Inc, regarding the effect on transaction value of the addition of “security tags” to merchandise prior to importation.
The security tags at issue are manufactured in the United States and purchased by the importer (buyer). The security tags are supplied to the seller by the importer at no charge. The seller affixes the security tags to the merchandise prior to shipment. The security tags are sensors that will trigger an alarm if merchandise is removed from a store without the tag being detached. The tags are normally attached to merchandise by means of an adhesive and are only temporary, i.e., the tags are removed or deactivated by a cashier at the time merchandise is purchased. The tags are discarded with the merchandise packaging.
In your letter of May 7, 2008, you state that the price of the merchandise is negotiated before the “security tags” are affixed and that the security tags are already included in the price actually paid or payable. However, in your letter of May 22, 2008, you state that “[t]he price of the product is the same with or without the security tag affixed to the package”, or the product, we assume. You claim “the manufacturer only affixes the security tag to the package, without there being any additional cost involved.”
Are the “security tags” additions to the price actually paid or payable under transaction value as packing costs?
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) codified at 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 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, 19 U.S.C. § 1401a(h)(3) defines “packing costs” as:
. . . 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.
See also 19 C.F.R. 152.102(e).
You submit that the price of the security tags are already included in the transaction value of the imported merchandise, however, you submitted no evidence of this and your statements are conflicting and do not support your assertion. You also argue that the security tags are not used in connection with the sale of the merchandise and do not meet the definition of an assist or a packing cost. In support of your position, you cite to Headquarters Ruling Letter (HQ) 545154, dated June 3, 1994, which dealt with the question of the inclusion of hang tags and price tickets in the transaction value of merchandise. In that ruling, the U.S. Customs Service (now, Customs and Border Protection (CBP)) affirmed the decision in HQ 544708 which held that price tickets and hang tags did not meet the definition of assists in 19 U.S.C. 1401a(h)(1)(A), but did “constitute packing costs within the meaning of section 402(h)(3).” See, HQ 545154. You cite to HQ 545154 in order to distinguish the security tags arguing that they are “not necessary for store display, they do not contain relevant information about the product itself for inventory, or any other purpose.”
Based on the information submitted, it is not evident that the value of the security tags has been included in the transaction value. Further, we find that the security tags are “materials, used in placing [the] merchandise in condition, packed ready for shipment to the United States.” 19 U.S.C. 1401a(h)(3).
This is consistent with HQ 966961, dated May 3, 2004, where CBP held that passive radio frequency identification (RFID) tags imported with merchandise are normal packing materials. The RFID tags at issue in HQ 966961 could be for security applications, as is the asserted use of the tags at issue herein, as well as for other purposes. See also HQ 543086, dated October 19, 1983 (plastic bags, hang tags, hangers, and OCR (optical character recognition) tickets held to be packing costs which had to be added to the price actually paid or payable).
In light of prior precedence, security tags are considered packing costs and their value must be added to the price actually paid or payable. However, we note that in this case the security tags are manufactured in the United States. As such, they are classifiable in subheading 9801.00.10 of the Harmonized Tariff Schedule of the United States (HTSUS), are duty-free, and are not part of the appraised value of the imported merchandise. See HQ 731806, dated November 18, 1988 (U.S. Note 1, Chapter 98, mandates classification of goods in the headings of Chapter 98, if described therein, even if more specifically provided for elsewhere in the tariff. U.S. origin containers (packaging materials) are classifiable in subheading 9801.00.10, HTSUS, under General Rule of Interpretation 1, HTSUS). In HQ 544294, dated July 7, 1989, CBP held that “if packing material of U.S. origin is separately classified as American goods returned, no legal authority exists for also treating this packing as part of the appraised value of the imported [good].” See also, HQ 544667, dated July 30, 1991; HQ 545970, dated August 30, 1995; HQ 544708, dated February 13, 1992; HQ 547352, dated July 8, 1999; HQ 546287, dated April 25, 1996; HQ 546043, dated November 30, 1995; HQ 543086, dated June 7, 1983 (addressing the predecessor provision of subheading 9801.00.10, HTSUS, item 800 of the Tariff Schedules of the United States); and HQ 067369 (IA 77/81), dated July 31, 1981.
The security tags are packing costs under 19 U.S.C. 1401a(h)(3). However, since the security tags are of U.S. origin, they are classifiable under subheading 9801.00.10, HTSUS, and their value is not part of the appraised value of the imported merchandise.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction
Monika R. Brenner, Chief
Valuation and Special Programs Branch