VAL-2 OT:RR:CTF:VS H048276 CMR
Ms. Margaret Lange
Kohl’s Department Stores, Inc.
N56 W17000 Ridgewood Drive
Menomonee Falls, Wisconsin 53051
RE: Request for ruling on the dutiability of certain reusable security tags imported attached to
garments
Dear Ms. Lange:
This is in response to your request of December 23, 2008 (resubmitted by letter dated January 12, 2009), on behalf of Kohl’s Department Stores, Inc. (hereinafter, Kohl’s), for a ruling on the dutiability of certain reusable security tags attached to imported garments.
FACTS:
The article under consideration is a plastic security tag consisting of two pieces, one approximately 2 inches long, 1 inch wide and 5/8 inch high at its highest point, and the other a pin that secures the tag to a garment. The larger component of the security tag includes an internal coil that will set off the security alarm if passed through security devices at designated locations in a store.
Kohl’s purchases the tags from a manufacturer in China. The tags are provided to garment factories in China, free of charge, for attachment to garments prior to exportation to the United States. You indicate that the tags are low in value, light-weight, and will be reused as they have an unlimited operational life.
In response to an inquiry from this office, you informed us that after removal at the time of sale, the tags will be returned to China for reuse.
ISSUE:
Whether the reusable security tags are dutiable as packing costs as an addition to the price actually paid or payable of the imported garments, or are classified and valued separately.
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).
In Headquarters Ruling Letter (HQ) H028000, dated June 20, 2008, Customs and Border Protection (CBP) held that security tags attached to merchandise at the time of importation into the United States were packing materials and their value was to be added to the price actually paid or payable for the imported merchandise if not already included in the transaction value. You cite to this ruling in your letter, as well as HQ 966961, dated May 3, 2004, but argue the security tags at issue herein are distinguishable from the tags in H028000 and the passive security tags in HQ 966961 because unlike the security tags in the cited rulings, these security tags are intended for repetitive use. You note that in HQ 966961, one of the security tags under consideration, i.e., the “active” security tags, was suitable for repetitive use and as a consequence, CBP held such tags were not “normal packaging and not classified with the goods.” You argue that the security tags at issue are similarly suitable for repetitive use and should therefore be separately classified from the merchandise with which they enter and also separately valued.
General Rule of Interpretation 5(b) provides:
(b) Subject to the provisions of rule 5(a) above [which are not applicable in this case], 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 materials or packing containers are clearly suitable for repetitive use.
As already noted, CBP has previously held that security tags attached to merchandise at the time of importation are packing materials. In this case, the security tags are suitable for repetitive use and, as you indicate, will in fact be exported to China for reuse. As such, by application of GRI 5(b), the security tags at issue are not classifiable with the merchandise with which they are imported, but are separately classifiable at the time of importation.
With regard to the classification of the security tags at issue, you suggested classification in subheading 8531.90 of the Harmonized Tariff Schedule of the United States (HTSUS). This subheading provides for parts of electric sound or visual signaling apparatus (for example, bells, sirens, indicator panels, burglar or fire alarms), other than those of heading 8512 or 8530. Based on the assumption that these security tags are “acoustic” security tags, we agree with your suggested classification.
HOLDING:
The reusable security tags at issue in this case are not dutiable as packing costs, as an addition to the price actually paid or payable of the imported garments, but are separately classifiable and dutiable in subheading 8531.90.90, HTSUS, which provides for “Electric sound or visual signaling apparatus (for example, bells, sirens, indicator panels, burglar or fire alarms), other than those of heading 8512 or 8530; parts thereof: Parts: Other: Other. Merchandise classifiable in subheading 8531.90.9000, HTSUS, is dutiable at the general column one rate of 1.3 percent ad valorem. This classification is based on the assumption that these are “acoustic” security tags.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch