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HQ H096897

April 6, 2011
OT:RR:CTF:VS H096897 BGK

CATEGORY: Classification

Mr. Marcel Kaminstein
Cruise Industry Solutions LLC
CruiseOps
480 NE 30th St, Suite 2001
Miami, Florida 33137

RE: Shipper’s Export Declaration filing and Chapter 98, Harmonized Tariff Schedule of the United States, for trunk show model sales onboard cruise ships

Dear Mr. Kaminstein:

This is in response to your request for a binding ruling, dated January 28, 2010, on behalf of Cruise Industry Solutions, LLC concerning the eligibility of certain trunk show model sales onboard cruise ships for preferential tariff treatment under Chapter 98, Harmonized Tariff Schedule of the United States (HTSUS), and the proper procedure for filing a Shipper’s Export Declaration (SED).

FACTS:

Your company conducts “trunk show” events onboard cruise ships that sail in and out of the U.S., whereby the goods, mostly jewelry, are on-loaded to the ship at a U.S. port and allowed to sail for one week to a year. All of the collections are either goods created in the U.S. or are goods from overseas that have previously been imported and are purchased or consigned from importers whom have already paid the duty before placement on the ship. It is stated in your letter that the goods will not land in any other country except back in the U.S. at the end of the cruise; however, it has been clarified that the cruise does dock at the ports of other countries.

The goods sail under consignment agreements between your company and the cruise ship retail operator. In some instances the goods being sold onboard are consigned to your company from the jewelry companies, and in other instances the goods have been purchased by your company. Copies of sample consignment agreements have been provided.

You are seeking clarification on how to file an SED electronically because there is no destination for “high seas”, and a ruling on the goods’ eligibility for preferential tariff treatment under subheadings 9801.00.10 and 9801.00.20, HTSUS.

ISSUES:

Are the goods eligible for preferential tariff treatment under subheading 9801.00.10, HTSUS, or subheading 9801.00.20, HTSUS?

LAW AND ANALYSIS:

You have inquired about the eligibility of the goods for preferential tariff treatment under two separate provisions of Chapter 98, HTSUS: subheading 9801.00.10, HTSUS, and subheading 9801.00.20, HTSUS.

I. Subheading 9801.00.10, HTSUS: U.S. Goods Returned

Subheading 9801.00.10, HTSUS, provides that “products of the United States when returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad” may be entered duty-free, provided that the documentary requirements of 19 C.F.R. § 10.1 are satisfied.

The first question presented is whether the goods are considered products of the United States.

Pursuant to 19 C.F.R. § 134.1(b):

“Country of origin” means the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin” within the meaning of this part….

It is stated that some of the collections are created in the U.S. For purposes of this ruling, we will assume this is correct, and this provision is satisfied for those collections.

In HRL H108655, dated December 28, 2010, U.S. origin security equipment maintained by the on-board security personnel was loaded onto the vessel in the U.S., but was never unloaded at a foreign port, even though the vessel stopped at foreign ports. The equipment was eventually to be unloaded at U.S. ports. It was held that so long as the documentary requirements of 19 C.F.R. § 10.1 were met, the U.S. origin security equipment would be eligible for subheading 9801.00.10, HTSUS, treatment. Similarly, in HRL 557668, dated March 3, 1994, U.S.-crafted jewelry sailed on board cruise ships on consignment until it was sold. If it was necessary to return the pieces to the owner, CBP held that the jewelry would be eligible for subheading 9801.00.10, HTSUS, treatment so long as all the proper documentation was completed.

In this case, it has been stated that the goods will not be unladen in any other country except back in the U.S. at the end of the cruise; however, the cruise does dock at foreign ports. HRL H108655 is applicable to these facts. The goods will be considered exported for purposes of Chapter 98, HTSUS, preferential tariff treatment.

The U.S. origin goods are eligible for subheading 9801.00.10, HTSUS, preferential tariff treatment, provided the documentary requirements of 19 C.F.R. § 10.1 are satisfied.

19 C.F.R. § 10.1(a) requires that, unless otherwise provided for, a declaration by the foreign shipper and a declaration by the owner, importer, consignee, or agent having knowledge of the facts must be filed in connection with the entry of articles in a shipment valued over $2,000 and claimed to be duty-free under subheading 9801.00.10, HTSUS. Relevant to this situation, “[a] certificate from the master of a vessel stating that products of the United States are returned without having been unladen from the exporting vessel may be accepted in lieu of the declaration of the foreign shipper. . ..” 19 C.F.R. § 10.1(c). See also HRL 557668, dated March 3, 1994.

19 C.F.R. § 10.1(b) states:

In any case in which the value of the returned articles exceeds $2,000 and the articles are not clearly marked with the name and address of the U.S. manufacturer, the port director may require, in addition to the declarations required in paragraph (a) of this section, such other documentation or evidence as may be necessary to substantiate the claim for duty-free treatment. Such other documentation or evidence may include a statement from the U.S. manufacturer verifying that the articles were made in the United States, or a U.S. export invoice, bill of lading or airway bill evidencing the U.S. origin of the articles and/or the reason for the exportation of the articles.

Also relevant is 19 C.F.R. § 10.1(d), which provides that “[i]f the port director is reasonably satisfied, because of the nature of the articles or production of other evidence, that the articles are imported in circumstances meeting the requirements of subheading 9801.00.10, HTSUS, [ . . . the port director] may waive the requirements for producing the documents specified in [19 C.F.R. § 10.1(a)].”

We find that the goods of U.S. origin will be eligible for subheading 9801.00.10, HTSUS, preferential tariff treatment, provided the proper documentation is submitted. While your company should be able to provide all the necessary documentation, it does not appear customers will be able to obtain the required documentation to avail themselves of subheading 9801.00.10, HTSUS, treatment.
II. Subheading 9801.00.20, HTSUS: Goods Previously Imported

You state that the importers from whom the non-U.S. origin goods were purchased or consigned paid duty upon the previous importation. It is important to note that “[i]n the absence of a specific provision to the contrary, the tariff status of an article is not affected by the fact that it was previously imported into the customs territory of the United States and cleared through customs whether or not duty was paid upon such previous importation.” U.S. Note 2, Subchapter I, Chapter 98, HTSUS. Subheading 9801.00.20, HTSUS provides such an exception. Therefore, unless the goods meet all the requirements of subheading 9801.00.20, HTSUS, it will be irrelevant if duty was paid upon a previous importation.

Subheading 9801.00.20, HTSUS, provides duty-free treatment for:

[a]rticles, previously imported, with respect to which the duty was paid upon such previous importation . . . 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 person who imported it into, and exported it from, the United States.

The first issue is whether or not duty has been paid upon a previous importation. You have stated that this is the case, and for purposes of this ruling, we will assume this is correct and this provision is satisfied. As above, the goods also satisfy the next two requirements; the goods are not advanced in value or improved in condition and are considered exported.

Unlike subheading 9801.00.10, HTSUS, goods being imported under subheading 9801.00.20, HTSUS, must not only be exported, but must be exported under a lease or similar use agreement. In this case, you state that the goods are loaded onto the ship as part of a “trunk show” arrangement. You have clarified that in some circumstances this means you purchase the goods from the original importer to be sold on the ship through a consignment agreement with the retail operator, and in other instances, the goods are consigned to you from the owner and then consigned to the retail operator to be sold on the ship.

In Werner & Pfleiderer Corporation v. United States, 17 C.I.T. 916 (1993), a case interpreting the amended language of item 801.00, Tariff Schedule of the United States, predecessor to subheading 9801.00.20, HTSUS, the Court of International Trade stated that “the provision concerning goods exported under lease, in particular, is not ‘the sort of exemption from duties which must be narrowly construed.’” Werner, 17 C.I.T. at 918 (citing Atlas Copco, Inc. v. United States, 10 C.I.T. 790, 792, 615 F. Supp. 1446, 1448 (1986)). In holding that a loan was a similar use agreement, the court opined that if the drafters of the provision intended the provision to encompass nothing broader than a lease, then the language “similar use agreement” would not have been added to the provision. In Skaraborg Invest USA v. United States, 9 F. Supp. 2d 706, 22 C.I.T. 413 (1998), in discussing Werner, the court commented that it “. . .has equated a ‘similar use agreement’ to a loan for temporary use. Skaraborg, 9 F. Supp. 2d at 710 (citing Werner, 17 C.I.T. at 918). It went on to further state that “A ‘loan’ is broadly defined as ‘[a] lending. . . . Anything furnished for temporary use to a person at his request, on condition that it shall be returned . . . .’ Black's Law Dictionary 936 (6th ed. 1990) (emphasis added).” Id.

Your company, and those companies whom consign to you, are only consigning the articles at issue to the retail operator for temporary use. You expect that at the end of the set term your articles will be returned or you will be paid for those articles which were sold. Title does not transfer to the retail operator.

This is similar to HRL 560827, dated February 25, 1998, in which a company sent samples of merchandise overseas with U.S.-based sales representatives for the purpose of soliciting orders. The samples in HRL 560827 were only entrusted to the sales representatives for the duration of each trip. This is similar to the situation at issue in that the goods are only consigned to the retail operators for a specific duration. CBP found in HRL 560827 that the agreement with the sales representatives constituted a similar use agreement. As such, we find that the consignment agreements with the retail operator constitute similar use agreements for the purpose of subheading 9801.00.20, HTSUS.

The second section of subheading 9801.00.20, HTSUS, requires that the goods be “. . . reimported by or for the account of the person who imported it into, and exported it from the U.S.” Your company handles the reimportation, not the cruise ship retail operator. In this case, if the goods are purchased from the original importer before being loaded onto the vessel, the goods are not being reimported by or for the account of the original importer, and cannot meet the requirements of subheading 9801.00.20, HTSUS, for the first importation after sale. In the case of a consignment or a subsequent sailing of purchased goods, you will either be importing the goods on behalf of the original importer or will be reimporting goods you previously imported, respectively. As such the goods would qualify as being reimported by or for the account of the previous importer and exporter. As in the case of the goods imported under subheading 9801.00.10, HTSUS, a passenger who has purchased any of the consigned goods will not be able to avail themselves of subheading 9801.00.20, HTSUS, because they will not be the original importer and will not be able to provide the necessary documentation.

III. SED Filing

Regarding your question on the SED, we note that the U.S. Department of Commerce has jurisdiction over the SED. According to the U.S. Census Bureau, 15 C.F.R. § 30.37(m), may be applicable. The exemption listed in 15 C.F.R. § 30.37(m) provides:

Carriers' stores, not shipped under a bill of lading or an air waybill (including goods carried in ships aboard carriers for sale to passengers), supplies, and equipment for departing vessels, planes, or other carriers, including usual and reasonable kinds and quantities of bunker fuel, deck engine and steward department stores, provisions and supplies, medicinal and surgical supplies, food stores, slop chest articles, and saloon stores or supplies for use or consumption on board and not intended for unlading in a foreign country, and including usual and reasonable kinds and quantities of equipment and spare parts for permanent use on the carrier when necessary for proper operation of such carrier and not intended for unlading in a foreign country. Hay, straw, feed, and other appurtenances necessary to the care and feeding of livestock while en route to a foreign destination are considered part of carriers' stores of carrying vessels, trains, planes, etc.

Therefore, as it appears an exemption applies, no filing would be necessary. Further questions on this issue, however, should be directed to the U.S. Census Bureau.

HOLDING:

The goods of U.S. origin are eligible for preferential tariff treatment under subheading 9801.00.10, HTSUS, provided the documentary requirements of 19 C.F.R. § 10.1 are satisfied. The previously imported goods are eligible for preferential tariff treatment under subheading 9801.00.20, HTSUS, as set forth above.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

 

Monika R. Brenner
Chief, Valuation & Special Programs Branch

Office of Homeland Security - Washington DC

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