HQ 085628: Classification and Rate of Duty of Decorative Boxes Made in Countries Entitled to Most-Favored-Nation Treatment to be Imported as the Packing Materials of Glassware Made in a Countries Subject to Column 2 Rates of Duty

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 085628

                        January 23, 1990


CLA-2  CO:R:C:G  085628  JBW  

CATEGORY: Classification







RE:  Classification and Rate of Duty of Decorative Boxes Made in
     Countries Entitled to Most-Favored-Nation Treatment to be
     Imported as the Packing Materials of Glassware Made in a
     Countries Subject to Column 2 Rates of Duty

Dear :

          This ruling is in response to your inquiry of September
21, 1989, on behalf of , regarding the
classification and rate of duty under the Harmonized Tariff
Schedule of the United States Annotated (HTSUSA) of decorative
boxes produced in countries subject to most-favored-nations (MFN)
rates of duty that will serve as the packing materials for
glassware made in countries subject to column 2 rates of duty.

FACTS:

          The merchandise under consideration is described as
decorative boxes or box sleeves.  Box sleeves are similar to
boxes except that they have no bottom; the sleeves fit over plain
cardboard boxes to provide a finished exterior for retail sale. 
 currently plans to have these boxes or box sleeves
manufactured in a country in western Europe, whose products
ordinarily enter the United States subject to MFN rates of duty. 
 will then export the boxes or box sleeves to an eastern
European country to serve as packing materials of glassware of
that country and subject to column 2 rates of duty.  The
glassware and packing will then be imported into the United
States.

ISSUE:

          What is the classification and rate of duty for
decorative boxes or box sleeves produced in countries that
ordinarily are subject to MFN rates of duty that will serve as
the packing material for glassware made in countries subject to
column 2 rates of duty?

LAW AND ANALYSIS:

          The General Rules of Interpretation (GRI's) set forth
the legal framework in which merchandise is classified under the
HTSUSA.  GRI 5(b) states, in relevant part, that:

          [P]acking 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 does not apply when
          such packing materials or packing containers
          are clearly suitable for repetitive use.

Applying this rule, the decorative boxes and box sleeves are
classified as glassware.  This classification is not in dispute. 
If both the glassware and packing materials were to originate in
eastern Europe, then they would be classified under the heading
for glassware and be charged the column 2 rate of duty.  You
argue, however, that the decorative boxes and box sleeves, being
products of western Europe, should be charged the MFN rate of
duty.  We disagree.

          Stated differently, GRI 5(b), HTSUSA, requires, for
classification purposes, that the identity of packing materials
not suitable for repetitive use be subsumed by the identity of
the goods contained.  The effect of such a rule is that the
container does not exist when determining classification; the
product being imported is simply the good contained.  Moreover,
the statutory definition of transaction value, the principal
determinant of the amount of duty paid other than classification,
requires that the cost of packing materials be included in the
value of the goods contained. 19 U.S.C.A.  1401a(b)(1)(A) (West
Supp. 1989).  In both instances, the statutes require that the
packing materials be considered as part of the goods they
contain, not as separate tariff entities. See Kurt S. Adler, Inc.
v. United States, 68 Cust. Ct. 162, 167, C.D. 4345, aff'd, 61
C.C.P.A. 68, C.A.D. 1122 (1974) (recognizing long-standing
Congressional policy of treating the cost of containers as part
of the value of the goods, not separate as separate tariff
entities).

          General Note 3, HTSUSA, governs the application of
rates of duty.  General Note 3(a)(i), HTSUSA, provides: "[T]he
rates of duty in column 1 are rates which are applicable to all
products other than those countries enumerated in paragraph (b)
of this note."  General Note 3(b), HTSUSA, referred to in General
Note 3(a)(i), states, in relevant part: "Notwithstanding any of
the foregoing provisions of this note, the rates of duty shown in
column 2 shall apply to products, whether imported directly or
indirectly, of the [countries listed]."  

          The General Notes focus on products.  As demonstrated
above, customs law considers the good, not the packing material,
to be the product imported.  Thus, when these rules are read
together, one may conclude that the good imported and not the
packing material determines the country of origin for purposes of
deciding whether column 1 or column 2 duty rates apply.

          In your letter, you present three arguments.  First,
you contend that in order for goods to become "products of" a
country for purposes of General Notes 3(a)(i) or 3(b), they must
undergo either a substantial transformation in or become a bona
fide part of commerce of the country.  Second, you distinguish
GRI 5(b) from General Headnote 6(b)(i) of the Tariff Schedule of
the United States (TSUS) and conclude that GRI 5(b) directs only
classification.  Finally, you argue that MFN treatment will be
denied to the packing materials of western European origin by
their inclusion as part of their contents.

          We acknowledge the requirement that General Note 3(b)
be strictly construed.  Furthermore, our determination in this
case is reached independently of prior judicial and
administrative interpretations of the TSUS.  As stated above, we
believe that the operation of GRI 5(b) creates, in essence, an
additional mechanism by which the country of origin of packing
materials is lost.  Moreover, GRI 5(b) not only directs
classification but also influences the rate of duty applied, for,
as noted in your submission, rate of duty is the amount of duty
applied, "resulting in the first instance, from the
classification thereof."  Bradford Co. v. American Lithographic
Co., 12 C.C.P.A. 318, 323, No. 2386 (1924).  Finally, MFN
treatment is not denied.  As stated by the United States Court of
Customs and Patent Appeals, the packing materials receive no less
favorable treatment than would the same items originating in any
other MFN country under the same circumstances.  Kurt S. Adler,
61 C.C.P.A. at 72. 

          In the course of your submission, you address a number
of cases in which either the courts or the Customs Service has
segregated goods, imported together, that include products
subject to different rates of duty.  E.g., Coastal States
Marketing, Inc. v. United States, 10 C.I.T. 613, 646 F. Supp. 255
(1986).  We believe that the operation of GRI 5(b) in this case
distinguishes cases involving packaging materials from those
involving the classification of and rate of duty for the products
themselves.  We do not, however, rule at this time as to the
treatment of goods determined to be sets or composite goods under
GRI 3, HTSUSA.
HOLDING:

          Pursuant to GRI 5(b), the decorative boxes and box
sleeves are classified with the glassware with which they will be
imported.  The decorative boxes and box sleeves will also be
assessed the same rate of duty as the glassware.


                              Sincerely,



                              John Durant, Director