Monday, May 11, 2009

Dutiable Components of Valuation: Packing

For the last two months, we have discussed issues related to valuation of imported merchandise. Last week the blog addressed assists, a dutiable component of valuation. The answer to last week’s multiple-choice question can be found at the end of this article.

Packing costs are defined as "the cost of all containers (except instruments of international traffic) and coverings of whatever nature or materials used in placing merchandise in condition, packed and ready for shipment to the United States." Packing costs are dutiable, and must be included in the value of imported merchandise. Packing costs are dutiable whether they are itemized separately on the invoice, or paid to the seller under a separate invoice. See 19 CFR 152.102(e).

The following are considered examples of dutiable packing:

  • Using Cardboard boxes, Styrofoam, and pallets.
  • Hanging of garments in a container
  • Attachment of hangtags or price tickets; however, if supplied by a U.S. party, they may be eligible for duty-free treatment.

Extra packing that is not necessary to put the merchandise in condition ready for export is not dutiable. If a cardboard box is sufficient, but the importer also wants the goods vacuum packed, the cost for vacuum packing is not included in transaction value.

To test our understanding of this concept, let's take a look at an example.

Roller Company manufactures ball bearings that are sold to Bearings R’ Us for $300 each. Bearings R’ Us ordered 1500 ball bearings and was invoiced $450,000. Bearings R’Us requested that the ball bearings be vacuum packed before being placed in individual boxes for placement in the final cardboard box for shipping. Because of the additional packing, Roller Company submitted the invoice for the bearings showing $450,000 with the shipment and sent a separate invoice for the packing after the shipment was on the water. The separate invoice showed $1,500 for the shipping cartons and individual boxes and $2,000 for the vacuum packaging for a total of $3,500. What value should duty be calculated on?

A. $450,000
B. $451,500
C. $452,000
D. $453,500
E. None of the above.

The answer will be provided next Monday when we continue to discuss the topic of valuation.

Answer to Assists – Monday May 4, 2009
The answer is C. The value of the molds used in the production of merchandise supplied free of charge is dutiable, along with the cost of transportation of the mold from Taiwan to Japan. The value of the drawings is not dutiable since they were created in the U.S.

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