VAL:RR:IT:VA W548559 jsj
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX
1617 Sixth Avenue
Suite 1000
Seattle, Washington 98101
Re: Bar Code Labels and Equipment; Shipping Cartons; Price Actually Paid or Payable; Packing Costs; Assists.
Dear XXXXXXXXXX:
The purpose of this correspondence is to respond to your request dated June 7, 2004. The correspondence in issue requested, on the behalf of XXXXXXXXXXX a binding valuation ruling concerning the transaction involving the creation of bar code labels for shipping cartons.
This ruling is being issued subsequent to the following: (1) A review of your submission dated June 7, 2004; (2) A review of the "Buying Agent Agreement" between XXXXXXXXX, the importer, and XXXXXXXXXXXXXXXX, the buying agent, dated May 14, 2001, as well as the Addendum also dated May 14, 20011; (3) A telephone conversation between you and a representative of my office conducted on June 22, 2004; and (4) An electronic mail submission received on July 2, 2004, specifically identifying that information determined by the importer to be confidential.
XXXXXX, hereinafter the importer, requested confidential treatment pursuant to 19 C.F. R. 177.2 (b)(7) for information denoted in bold type in its ruling request. Customs and Border Protection has concluded that the information for which confidential treatment has been sought was clearly identified and is commercial or financial information the disclosure of which would cause substantial harm to the competitive position of the ruling requester or another interested party. Confidential treatment will, therefore, be extended in accordance with the request of importer. Confidential information would be underscored in this ruling letter and will be redacted in the public version.
FACTS
The importer advises U.S. Customs and Border Protection (CBP), that it has requested that it’s foreign buying agent purchase equipment and hire personnel to create bar codes and labels for shipping cartons. The importer will use the information on the bar codes to facilitate the movement of its merchandise through its agent, for the costs of the equipment and the personnel necessary to create the bar codes and apply them to the shipping cartons. distribution center. The importer will be invoiced by XXXXXXXXXXXXX, hereinafter the buying the buying agent, for the cost of the equipment and the personnel necessary to create the bar codes and apply them to the shipping cartons.
The buying agent will create the bar codes and apply them to the outer aspect of the shipping cartons of merchandise received from the importer's suppliers. CBP is advised that the suppliers of the importer's merchandise will pack all cartons in a condition ready for export, but prior to export the suppliers will advise the buying agent of the number of cartons and the contents of each carton. The buying agent will input the information regarding the contents of the containers into its computer system and create a Uniform Commercial Code 128 bar code label. The label will enable the importer to determine the contents of the carton to the "sku" level.
When the importer receives the cartons at its distribution center, the bar code will be scanned and the information uploaded into its computer system. The importer advises that "[i]f the carton is store packed, it is routed to that store where the contents are removed from the cartons to be placed on the selling floor and the carton is discarded.” If the carton of merchandise is not store packed, then on receipt in the United States the carton is opened, the merchandise received is noted and then it is shipped to the proper store.
The expenses incurred by the importer will include the purchase of the equipment, on-site installation, personnel training, software and printing equipment. The importer will incur recurring charges for labels, printing ribbons, maintenance, personnel and facilitation of the electronic date interface transmission from the country of export to the importer in the United States.
The importer's Customs Compliance Specialist advises CBP that the importer and the buying agent are not related and that neither the importer nor the buying agent are related to the seller of the bar code labeling equipment.
ISSUE
Should the expenses incurred by the importer, for the purchase and operation of shipping carton bar code labeling equipment and supplies be considered part of the price actually paid or payable, or expenses be added to the price actually paid or payable as assists or packing costs?
LAW AND ANALYSIS
The federal agency responsible for interpreting and applying the United States Code and the regulations of U.S. Customs and Border Protection, as they relate to the final appraisement of merchandise, is Customs and Border Protection. Customs and Border Protection, in accordance with its legislative mandate, fixes the final appraisement of imported merchandise in accordance with Section 402 (b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979.
The preferred method of appraisement is transaction value. The transaction value of imported merchandise is:
the price actually paid or payable for merchandise when sold for exportation to the United States, plus amounts equal to-
(A) the packing costs incurred by the buyer with respect to the imported merchandise;
(B) any selling commissions incurred by the buyer with respect to the imported merchandise;
(C) the value, apportioned as appropriate, of any assist;
(D) any royalty or license fee related to the imported merchandise that the buyer is required to pay, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the United States; and
(E) the proceeds of any subsequent resale, disposal, or use of the imported merchandise that accrue, directly or indirectly, to the seller. 19 U.S.C. 1401a (b)(1).
The "price actually paid or payable," as defined in the Trade Agreements Act, is:
the total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller. 19 U.S.C. 1401a (b)(4)(A). (Emphasis added).
Price Actually Paid or Payable
CBP has long held the position that all monies paid to a foreign seller or to a party related to a seller are part of the price actually paid or payable for imported merchandise pursuant to the transaction value method of appraisement. See HQ 542169 (Sept. 18, 1980), TAA #6; HQ 547532 (Nov. 2, 2001). The presumption that all payments made by a buyer to a seller are part of the price actually paid or payable for imported merchandise was affirmed by the Court of Appeals for the Federal Circuit in Generra Sportswear Co. v. United States, 905 F. 2d. 377 (Fed. Cir. 1990), rehearing denied, (Fed. Cir. 1990). See also HQ 547532 (Nov. 2, 2001). The court in Generra held that the term "total payment" in the definition of the phrase "price actually paid or payable" was intended to be all inclusive. See id. at 379. The reasoning underlying the Court's decision stems from the language of section 1401 a (b)(4)(A) which states that the price actually paid or payable is the "total payment" made for imported merchandise whether the payments are "direct or indirect." 19 U.S.C. 1401a (b) (4)(A).
The review undertaken by CBP, subsequent to a discussion with a representative of the importer, establishes that the expenses incurred by the importer for the purchase and operation of the bar code labeling equipment is not part of the price actually paid or payable. No payments made for the equipment, supplies or its operation inure directly or indirectly to the seller of the merchandise purchased by the importer and shipped in the cartons identified with the bar code labels. Relying on the statements of the importer's representative, the importer, the seller of the bar code labeling equipment, the seller of the merchandise purchased by the importer and the buying agent are not "related parties" as defined by CBP regulations.
Assists
The transaction value method of appraisement is, in part, "the price actually paid or payable.. .plus amounts equal to - ...(C) the value, apportioned as appropriate, of any assist." 19 U.S.C. 1401a (b)(1). The term "assist" is defined in 19 U.S.C. 1401a (h) as:
any of the following if supplied directly or indirectly, and free of charge or at a reduced cost, by the buyer of imported merchandise for use in connection with the production or sale for export to the United States of the merchandise:
(i) Materials, components, parts, and similar items incorporated in the imported merchandise.
(ii) Tools, dies, molds, and similar items used in the production of imported merchandise.
(iii) Merchandise consumed in the production of imported merchandise.
(iv) Engineering, development, artwork, design work, and plans and sketches that are undertaken elsewhere than in the United States and are necessary for the production of the imported merchandise. Id.
The "imported merchandise" in the prospective transaction is wearing apparel and accessories. The bar code labeling equipment, the recurring supplies and the personnel necessary to operate the equipment and label the cartons do not fall within any of the definitions of an assist. The expenses incurred by the importer for the purchase and operation of the bar code labeling equipment are not dutiable as an assist.
Packing Costs
The transaction value method of appraisement is further, in part, "the price actually paid or payable. . .plus amounts equal to - ...(A) the packing costs incurred by the buyer with respect to the imported merchandise." 19 U.S.C. 1401a (b)(1). The phrase "packing costs" is defined in 19 U.S.C. 1401a (h) as:
the costs of all containers and coverings of whatever nature and of packing, whether for labor or materials, used in placing the merchandise in condition, packed ready for shipment to the United States. It is the conclusion of CBP that the cost of the bar code labeling equipment, the recurring supplies and the personnel necessary to operate the equipment and label the cartons are not "packing costs" as defined in the CBP laws. The bar code labeling equipment and the labels are not containers or coverings. The labels are used not to pack the merchandise for shipment but, rather, to identify and track it. The merchandise purchased by the importer is "in [a] condition, packed ready for shipment to the United States" prior to the bar code labels being attached to the shipping cartons. See HQ 549385 (Feb. 1, 1988); HQ 543026 (Mar. 17, 1983); Cf. HQ 542834 (July 20, 1982) (TAA No.49).
HOLDING
The expenses incurred by XXXXXXXXXXXX, the importer, for the purchase and operation of the bar code labeling equipment are not part of the price actually paid or payable and are not assists or packing costs that must be added to the price actually paid or payable.
Sincerely
Virginia L. Brown, Chief
Value Branch