OT:RR:CTF:VS H269793 CMR
David M. Murphy, Esq.
Grunfeld, Desiderio, Lebowitz,
Silverman & Klestadt LLP
399 Park Avenue, 25th Floor
New York, NY 10022-4877
RE: Applicability of Subheading 9811.00.60, HTSUS; Samples; Foreign Trade Zone
Dear Mr. Murphy:
This is in response to your submission of October 14, 2015, on behalf of your client, Jill Acquisition LLC (“J. Jill”), requesting Customs and Border Protection (CBP) reconsider its decision in Headquarters Ruling Letter (HQ) H265070, dated September 14, 2015. We note that there is a change in the facts presented in your current request regarding the proposed transaction in that the draft contract between J. Jill and the buyer has been amended. As such, this ruling is not a reconsideration of HQ H265070, but a new ruling based on the changed facts.
FACTS:
J. Jill imports samples, and receives some unsolicited samples, from suppliers and potential suppliers. The samples imported by J. Jill will be entered under subheading 9811.00.60, Harmonized Tariff Schedule of the United States (HTSUS).
J. Jill proposes to dispose of the samples by selling them to an unrelated buyer who would assume risk of loss and title to the samples after their admission into a Foreign Trade Zone with “zone-restricted” status. The sales contract between J. Jill and the buyer states, in relevant part:
Jill agrees to sell the Samples to Buyer solely for exportation from the United States and sale outside the United States. Jill agrees to retain risk of loss, assume all costs and responsibility for the proper transportation of the Samples from the location or locations designated by Jill to a designated Foreign Trade Zone (FTZ). Buyer agrees it will admit the Samples into the FTZ in “zone restricted” status as defined under 19 C.F.R. § 146.44. Buyer will purchase, assume risk of loss and title to the Samples after the admission into the FTZ in zone-restricted status. Buyer agrees to supply Jill copies of the duly authorized Customs Forms 214 and supporting documentation after admission to the FTZ. Buyer agrees the Samples will be withdrawn from the FTZ for direct exportation or transportation and exportation under Customs Bond as required by U.S. Customs regulations, Title 19, Code of Federal regulations. Buyer agrees to supply Jill will (sic) all export documentation including but not limited to all FTZ forms, CBP Form 7512’s, Shipper’s Export Declarations/Automated Export System transmissions, bills of lading, invoices, packing lists and manifests.
ISSUE:
Whether the sale of samples under the proposed transaction negates their duty-free status under subheading 9811.00.60, HTSUS.
LAW AND ANALYSIS:
For purposes of this decision, we will presume that the samples imported by J. Jill meet the requirements of subheading 9811.00.60, HTSUS, which provides:
Any sample (except samples covered by heading 9811.00.20 or 9811.00.40), valued not over $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 United States only for soliciting orders for products of foreign countries.
The contract for sale states that the samples are sold to the buyer “solely for exportation from the United States and sale outside the United States.” In addition, as noted in the FACTS above, the sale occurs within the FTZ after admission of the samples into the FTZ under zone-restricted status, which means the samples cannot be reimported into the U.S., but can only be exported.
19 CFR § 146.44(a) provides, in relevant part, that:
Merchandise taken into a zone for the sole purpose of exportation, destruction
. . . or storage will be given zone-restricted status on proper application. That status may be requested at any time the merchandise is located in a zone, but cannot be abandoned once granted. Merchandise in zone-restricted status may not be removed to Customs territory for domestic consumption except where the Board determines the return to be in the public interest.
In addition 19 CFR § 146.44(c) provides:
Merchandise considered exported – (1) For Customs purposes. If the applicant desires a zone-restricted status in order that the merchandise may be considered exported for the purpose of any Customs law, all pertinent Customs requirements relating to an actual exportation shall be complied with as though the admission of the merchandise into zone constituted a lading on an exporting carrier at a port of final exit from the U.S. Any declaration or form required for actual exportation will be modified to show the merchandise has been deposited in a zone in lieu of actual exportation, and a copy of the approved Customs Form 214 may be accepted in lieu of any proof of shipment required in cases of actual exportation.
In HQ 557683, dated March 3, 1994, Customs (now, CBP) held that, among other things, the disposition of samples imported under subheading 9811.00.60, HTSUS, by exportation or sale for export to be used as samples or to be reconstituted abroad into useful footwear did not preclude eligibility of the samples for duty-free treatment under subheading 9811.00.60, HTSUS.
Provided that the Buyer supplies Jill with copies of the Customs Forms 214 and supporting documentation after admission to the FTZ, prior to passage of title and risk to the Buyer, then based on our previous ruling and the fact the sale of the samples occurs in the FTZ, such sale will not preclude the imported samples from duty-free treatment under subheading 9811.00.60, HTSUS. Therefore, in order to make this clear, we would suggest switching the order of the following two sentences in the sales contract: “Buyer will purchase, assume risk of loss and title to the Samples after the admission into the FTZ in zone-restricted status. Buyer agrees to supply Jill copies of the duly authorized Customs Forms 214 and supporting documentation after admission to the FTZ.” Assuming this change is made and all other requirements of subheading 9811.00.60, HTSUS, are satisfied, the samples will qualify for duty-free entry under the provision.
HOLDING:
Based on the information provided, the sale of the samples after entry into the FTZ under zone-restricted status does not preclude the samples from duty-free eligibility under subheading 9811.00.60, HTSUS.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch