The applicability of tariff classification in subheading 9801.00.2000, HTS, to plastic storage bags from China, packaged in Mexico

NY R02752 November 14, 2005 CLA-2-39:RR:NC:SP:221 R02752 CATEGORY: Classification TARIFF NO.: 9801.00.2000 Mr. Michael E. Murphy Baker & McKenzie LLP 815 Connecticut Avenue, NW Suite 900 Washington, DC 20006-4078 RE: The applicability of tariff classification in subheading 9801.00.2000, HTS, to plastic storage bags from China, packaged in Mexico Dear Mr. Murphy: In your letter dated October 28, 2005, on behalf of ITW Space Bag, San Diego, California, you requested a ruling on whether plastic storage bags were eligible for treatment in subheading 9801.00.2000, Harmonized Tariff Schedule of the United States (HTS). The imported product consists of zippered plastic storage bags fitted with a plastic valve. The storage bags are manufactured in China and imported in bulk by ITW Space Bag, who will pay the appropriate duties upon entry. Following importation, ITW Space Bag will export the storage bags to a company in Mexico, Space Packaging de Mexico. Space Packaging will place the storage bags into boxes suitable for retail sale. ITW Space Bag will then reimport the packaged bags into the United States. You state that the legal relationship between ITW Space Bag and Space Packaging is one of bailor to bailee. ITW Space Bag retains legal ownership of the storage bags throughout the packaging process. Section 141.2 of the Customs Regulations (19 CFR 141.2) states that "Dutiable merchandise imported and afterwards exported even though duty thereon may have been paid on the first importation, is liable to duty on every subsequent importation into the Customs territory of the United States" unless specifically exempted therefrom under the HTS. Subheading 9801.00.20, HTS, provides for duty-free treatment for "articles previously imported, with respect to which the duty was paid upon such previous importation or which were previously free of duty pursuant to the Caribbean Basin Economic Recovery Act of Title V of the Trade Act of 1974 if (1) reimported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, after having been exported under lease or similar use agreements, and (2) reimported by or for the account of the same person who imported it into, and exported it from, the United States.” Customs does not consider the mere packaging of a good for retail sale as an advancement in value or improvement in condition. See John v. Carr & Sons, Inc., 69 Cust.Ct. 78, C.D. 4377 (1972), aff'd, 61 CCPA 52, C.A.D. 1118 (1974). See also Headquarters Ruling Letter ("HRL") 555624, dated May 1, 1990, which ruled that perfumes packaged into sample pouches abroad were not advanced in value or improved in condition for purposes of subheading 9801.00.10, HTS, treatment. Section 10.108, Customs Regulations (19 CFR 10.108), provides, in relevant part, that free entry shall be accorded under subheading 9801.00.20, HTS, whenever it is established to the satisfaction of the district director that the article for which free entry is claimed was exported from the United States under a lease or similar use agreement. According to Black's Law Dictionary 179 (5th ed. 1979), a bailment is "a delivery of goods of personal property, by one person to another, in trust for the execution of a special object upon or in relation to such goods, beneficial to either the bailor or bailee or both, and upon a contract, express or implied, to perform the trust and carry out such object, and thereupon either to redeliver the goods to the bailor or otherwise dispose of the same in conformity with purpose of the trust.” Headquarters ruled, in HRL 560511, dated November 18, 1997, that "bailment" is a "similar use agreement" for the purposes of subheading 9801.00.20, HTS. You assert that your client’s transaction meets all the requirements for consideration of duty free entry under subheading 9801.0020, HTS. Specifically, you indicate that the bags, being previously imported and duty paid where applicable, would be subject solely to packaging operations and would not be otherwise advanced in value or improved in condition by any process or manufacture while in Mexico. Further, the subject bags would be exported under conditions that would constitute exportation pursuant to a lease or similar use agreement and that your client, ITW Space Bag, would be the importer, exporter and reimporter of the merchandise. Based on the information submitted, the plastic storage bags that are manufactured in China and packaged in Mexico will be eligible for duty-free treatment under subheading 9801.00.2000, HTS, when returned to the United States, provided that the district director at the port of entry is satisfied that ITW Space Bag previously imported the bags and paid duty thereon; they are reimported by or for the account of ITW Space Bag; ITW Space Bag exported the bags from the U.S. under a lease or a similar use agreement; and the documentary requirements of section 10.108, Customs Regulations, are satisfied. This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177). A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Joan Mazzola at 646-733-3023. Sincerely, Robert B. Swierupski Director, National Commodity Specialist Division