Applicability of GSP to certain gift wrapping and packaging articles; subheadings 9801.00.10, 9802.00.50, 9802.00.80; sets

HQ 557462 September 13, 1994 CLA-2: CO:R:C:S BLS CATEGORY: Classification TARIFF NO.: 9801.00.10, 9802.00.50, 9802.00.80 4811.90.80, 4819.20.0040, 4819.40.0040, 4819.50.4060, 3926.40.00 District Director of Customs P.O. Box 3130 Laredo, Texas 78044-3130 RE: Applicability of GSP to certain gift wrapping and packaging articles; subheadings 9801.00.10, 9802.00.50, 9802.00.80; sets Dear Madame: This is in reference to a letter dated July 7, 1993, from V. Alexander & Co., Inc., ("Alexander"), concerning the tariff treatment of certain gift wrapping and packaging articles imported from Mexico by Artfaire-C.P.S. Corporation ("CPS"). The inquirer requests a ruling as to the applicability of the Generalized System of Preferences (GSP), and subheadings 9801.00.10, 9802.00.50 and 9802.00.80, Harmonized Tariff Schedule of the United State (HTSUS), to the imported articles as well as the classification of the items. The request pertains to 1993 entries only which remain unliquidated pending our decision. Alexander has advised that CPS is no longer doing business in Mexico, and accordingly, the request for our opinion regarding country of origin marking has been withdrawn. While photographs of the various ensembles and other items were included with the request, no actual samples have been received by this office. We would also note that since Mexico's designation as a BDC for purposes of the GSP expired on the date that the North American Free Trade Agreement (NAFTA) became effective (January 1, 1994), our analysis of GSP entitlement applies only to entries filed prior to that date. Articles imported on or after January 1, 1994, will receive duty-free treatment only if they qualify as "originating goods" under the NAFTA. A discussion of this issue is beyond the scope of this ruling. FACTS: 1) 2-Roll Gift Wrap Ensemble The 2-roll gift wrap ensemble is presented in a paperboard gift box that can be used as such after purchase. As imported, it contains the following components: 2 rolls of gift wrapping paper; gift tags; pull-out bows; 3 spools of ribbon; ribbon hanks; printed and solid tissue sheets; gift cards; and a bow- tying instruction sheet. All of the components for this ensemble, with the exception of the gift wrap, are furnished ready for repackaging. The materials used to produce the gift wrap consist of 830 feet reams of gift wrap paper (in various widths), liquid adhesive, adhesive tape, and spools of cardboard which produce the finished rolls of gift wrap paper for the ensemble. In Mexico, the spool of 3-inch wide cardboard is placed on a spindle and pulled through a section of machinery that applies adhesive to one side of the cardboard and then is spiral-wound at an angle onto an iron rod in one continuous motion. The cardboard tubing produced from the process is then cut to a pre-determined length (the width of the gift wrap paper to be wound onto it). The cardboard gift wrap tubes are then taken and placed onto the hopper of the gift wrap paper roll winding machine. In this process, the gift wrap paper ream is placed onto a ream rolling machine where the paper is pulled through feed rollers. A cardboard tube is then systematically lowered in place from the tube bin where as the gift wrap paper begins to wind itself onto the cardboard tube, a 1-inch strip of adhesive tape is applied to the gift wrap paper and cardboard tube to prevent slippage during the winding process. The gift wrap paper is then cut after a pre-determined length of the paper has been wound onto the tube and a second 1-inch strip of adhesive tape is applied onto the gift wrap paper to prevent unwinding during packaging. The end product is the gift wrap paper roll which will be placed in the ensemble. Alexander states that all of the materials used to produce the gift wrap paper and the other components in the ensemble are of U.S.-origin. 2) The 3-Roll Gift Wrap Ensemble The 3-roll gift wrap ensemble is presented in a clear plastic tray. It contains 3 rolls of gift wrapping paper; finished bows; ribbon coils; and gift tags. The process used to create the gift wrap paper in this ensemble is identical to the process used to create the gift wrap paper for the 2-roll ensemble. The importer also supplies 500 yard bolts of ribbon, spools of stick-on tags, and spools of staple wire which produce the finished bows for the ensemble. The bolt of ribbon is placed on a spindle and pulled through a section of machinery that will pierce the ribbon through the "U-shaped" staple wire and continue to pull, rotate and pierce the ribbon until a gift bow is formed. The machine then completes the process by applying the sticky tag through the staple wire, closing the staple ends off and cutting off the completed bow from the continuous strand of ribbon. The completed bow is then mechanically tossed into an awaiting box to be manually placed into the ensemble. The ribbon coils are produced from the same bolts of ribbon that have been placed on a coil winding machine. The ribbon is pulled from the bolt and run through a series of spindles which winds the ribbon into a coil of a pre-determined length. The ribbon is then cut and a strip of adhesive tape is mechanically applied onto the ribbon coil to prevent the ribbon from unwinding during packaging. Alexander states that all of the components used in producing the 3-roll gift wrap ensemble are of U.S- origin. 3) Gift Bag The gift bag is made of wrapping paper. Some are made with what looks like (from the photograph) a textile cord handle; others do not have handles. In Mexico, a gift wrap paper ream is placed onto a ream rolling machine where the paper is pulled through feed rollers. The gift wrap paper is systematically shaped, creased, folded, and cut to the length of the desired gift bag. The completed folded and shaped gift bag continues through the machine where liquid adhesive is placed onto the bottom end of the bag and compressed to secure the folds that enclose the bag. In a separate process involving some of the bags, handles will be glued onto the inside of the bag and a peel-off paper backer will be applied on top of the glued handle and also on the inside of the bag to provide stability to the handle. The gift bags will be imported in bulk or as part of a gift bag ensemble presented in a clear polyester bag that contains, in addition to the bag, gift cards, ribbon hanks, and an instruction booklet. Alexander states that all of the components used in producing the gift bags are of U.S.-origin. (4) Treasure Chest Box The treasure chest box is a pre-wrapped gift box. It is made of paperboard in two parts. The external part of the box, covered with wrapping paper, is open at one end, into which the internal sleeve part of the box that holds the box's contents is inserted. According to the photograph provided, the gift box appears to be the size required to hold a dress shirt or blouse, or perhaps a sweater. For this purpose, these boxes fold up for convenient packaging. In producing the box, cardboard sheets are manually fed into a machine which has been fitted with die press/die cut plates which crease and cut to size and shape the inserted sheet. The box cutout is then taken to a separate area of the facility to have it manually removed from the sheet, where it will be seam glued with liquid adhesive on one side to form an open ended box. After the adhesive has dried, a pre-cut sheet of gift wrap paper is manually wrapped around the box and manually secured with two 1-inch strips of adhesive tape. The slide-out cardboard sleeve is then manually placed into the open-ended cardboard box where it will be manually packaged for shipping in bulk as a pre- wrapped gift box with an inner box sleeve in a knock-down state. 5) Treat/Treasure Gift Box, Pyramid Gift Box, Gift Box Tote The identity of these articles is somewhat confused. At the bottom of page 5 of the July 7, 1993, letter, after describing the production process, the articles are identified as (a) an open-ended laminated gift box, (b) laminated treasure/treat box, and (c) a gift box tote (laminated with wrapping paper). These three boxes are further described in the next few paragraphs, of the letter, but the treat/treasure box appears to be identified as a laminated pyramid box. In any event, these articles are described together in the letter because they are made from the same wrapping paper-covered paperboard material that is cut to shape to form them. The open-ended laminated gift box is not further described; it is likely capable of folding. The laminated pyramid box has a cord handle that is made from either paper or textile material. (It cannot be determined from the photograph.) It is capable of folding. The gift box tote has braided rope handles and a removable box top-like cover. Whether it is capable of folding is unknown. The lamination machine is equipped to hold a full ream of gift wrap paper, and a vat of liquid adhesive. It is designed to apply a thin film of liquid adhesive onto the gift wrap paper as it is pulled through the rollers. Once the adhesive has been applied, the paper is cut to a pre-determined length by the machine and compressed onto the cardboard sheet which is being manually fed into the unit. The laminated cardboard sheets are then manually fed into a second machine which has been fitted with die press/die cut plates which crease and cut to size and shape the inserted laminated sheet. The box cutout is then taken to a separate area of the facility to have it manually removed from the seat, where it will be seam-glued with liquid adhesive on one side to form either an open ended laminated gift box, laminated treat/treasure box or a gift box tote. The open-ended laminated gift box is imported either in bulk or as part of an ensemble. The ensemble includes the box, gift cards, ribbon hanks, and an instruction booklet. The laminated pyramid box is also imported in bulk or as part of an ensemble, and includes an assortment of boxes (we assume to mean at least two or more, in either various sizes or perhaps various colors or patterns), box handles, gift cards, ribbon hanks, and an instruction booklet. The handles consist of a piece of cording cut by hand from a spool to a pre-determined length, and placed manually into the knock-down pyramid box for assembly by the ultimate consumer. The gift box tote is then sent to an area of the facility where it could undergo further processing for specialty orders such as foil stamping or die sinking. A pair of holes are punched on two sides of the gift box tote in a separate process so that a strand of pre-cut braided rope can be inserted through the holes and knotted at the ends to create two separate handles. Upon completion, the tote will be packaged in bulk for import into the United States. Alexander states that all of the components used in producing the treasure gift box, the pyramid gift box, and the gift box tote, are of U.S.-origin. 6) Bow Tube/Candy Tube The bow/candy tube is a cylinder of paperboard covered with wrapping paper. It has plastic end covers and a braided rope handle at the tip end. It is imported either filled with finished bows and ribbon hanks or empty. The tube could be used as a gift package after purchase or, if imported empty, to hold various items for retail sale, such as candy or other products. In Mexico, wrapping paper is cut to length from the U.S.- origin reams. Sheets of gift wrap paper are glued by hand onto the cardboard tubes. Two holes are pierced into the top side of the tube to create an avenue for the tube handle. A hand- measured piece of braided rope is cut to length and inserted into each hole and knotted from the inside to secure the handle in place. The tube is now prepared to be packaged with bows and ribbon hanks. The importer supplies 500 yard bolts of ribbon, spools of stick-on tags, and spools of staple wire which produce the finished bows for the ensemble. The bolt of ribbon is placed on a spindle and pulled through a section of machinery that will pierce the ribbon through the "U-shaped" staple wire and continue to pull, rotate and pierce the ribbon until a gift bow is formed. The machine then completes the process by applying the sticky tag through the staple wire, closing the staple ends off and cutting off the completed bow from the continuous strand of ribbon. The completed bow is then mechanically tossed into an awaiting box to be manually placed into the ensemble. Finally, the bows and ribbon hanks are placed into the cardboard tube by hand and then sealed with the plastic end caps. Alexander states that all of the components used to produce the bow tube/candy tube are of U.S.-origin. ISSUE: 1) What is the proper classification of the above-described paper and paperboard gift boxes, bags, and wrapping/packaging ensembles? 2) Whether the GSP, or subheadings 9801.00.10, 9802.00.50, and 9802.00.80, HTSUS, are applicable to the imported articles. CLASSIFICATION Classification under the Harmonized Tariff Schedule of the United States (HTSUS) is governed by the General Rules of Interpretation (GRI). GRI 1 provides that classification is determined in accordance with the terms of the headings and any relative section or chapter notes. Where goods cannot be classified solely on the basis of GRI 1, the remaining rules will be applied in sequential order. The Explanatory Notes (EN'S) to the Harmonized Commodity Description and Coding System constitute the official interpretation of the nomenclature at the international level. While not legally binding, they represent the considered views of classification experts of the Harmonized System Committee. It has been the practice of the Customs Service to follow, whenever possible, the terms of the EN's when interpreting the HTSUS. In Treasury Decision (T.D.) 89-80, Customs stated that the EN's should always be consulted as guidance when classifying merchandise. (See T.D. 89-80, 23 Cust. Bull, 379 (1989), 54 Fed. Reg. 35,127 (August 23, 1989).) (See also Totes, Inc. v. United States, No. 91-09-00714, Slip Op. 92-153 (CIT September 4, 1992), 26 Cust. Bull. No. 40, 35, 37 n. 3 (September 30, 1992), citing T.D. 89-80 and acknowledging the authority of the EN's.) The above GRI's and EN's are applied to classify the merchandise at issue, as set forth below. 1) The 2-Roll and 3-Roll Gift Wrap Ensembles The 2-roll and 3-roll ensembles are not classifiable according to GRI 1, since both are articles consisting of multiple components. Under GRI 2(b), goods consisting of more than one material or substance should be classified according to the principles of GRI 3. Under GRI 3(b), goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified according to GRI 3 (a), are to be classified as if they consisted of the material or component that gives them their essential character. It is our opinion that the gift wrap ensembles are sets as contemplated under GRI 3(b). Under the EN's for GRI 3(b), the concept of "sets" is set forth as follows: (x) For the purposes of this Rule, the term "goods put up in sets for retail sale" shall be taken to mean goods which: (a) consist of at least two different articles which are, prima facie, classifiable in different headings; (b) consist of products or articles put up together to meet a particular need or carry out a specific activity; and (c) are put up in a manner suitable for sale directly to users without repacking. The gift wrap ensembles meet all of the above criteria. As sets, they will be classified, under GRI 3(b), as if consisting entirely of the component that imparts essential character. In each case, we believe that the wrapping paper imparts essential character to the ensembles. Therefore, both the 2-roll and 3- roll gift wrap ensembles will be classified under the tariff provision applicable to the ensemble's wrapping paper. However, no samples were submitted for laboratory analysis, and the inquirer's letter does not provide the detailed information necessary to allow us to classify the wrapping paper. We note that we previously issued a ruling on behalf of the importer classifying similar merchandise. In New York Ruling (NYRL) 879432, dated November 23, 1992, we classified as a set a gift wrapping ensemble according to the classification of the wrapping paper component. That set consisted of two rolls of decorative wrapping paper, six made-up bows of plastic ribbon, two reels of subheading 4811.90.80, HTSUS, which provides for other (than certain described) surface decorated paper, in rolls or sheets, weighing over 30 g/square meter. If the wrapping paper of the 2-roll and 3-roll ensembles is the same as that classified in NYRL 879432, then classification of the ensembles will be under subheading 4811.90.80, HTSUS. Heading 4811, HTSUS, covers the following kinds of paper: "Paper, paperboard, cellulose wadding and webs of cellulose fibers, coated, impregnated, covered, surface-colored, surface- decorated or printed, in rolls or sheets, other than goods of heading 4803, 4809, 4810 or 4818." If the wrapping paper of the ensembles is not the same as that classified in NYRL 879432, but falls within the description of heading 4811, HTSUS, it will be classifiable under that heading. Without a sample to analyze, we cannot be more specific. We suggest that the inquirer submit to the appraising officer a sample of the wrapping paper from each ensemble for laboratory analysis and correct classification. 2) The Gift Bag The gift bags, with or without handles, imported in bulk are classifiable, under GRI 1, in subheading 4819.40.0040, HTSUS, which provides for paper bags other than certain described sacks and bags. The gift bag ensembles appear to qualify as sets. As sets, they also would be classifiable under that subheading, since the gift bag, under GRI 3(b), would impart essential character to the gift bag ensemble. 3) Treasure Chest Box (pre-wrapped Gift Box) The treasure chest gift box is classifiable, under GRI 1, in subheading 4819.20.0040, HTSUS, which provides for other (than certain described) folding cartons, boxes, and cases of non- corrugated paper or paperboard. 4) Treat/Treasure Gift Box, Pyramid Box, Gift Tote Box The laminated open-ended gift box, if capable of folding, is classifiable, under GRI 1, in subheading 4819.20.0040, HTSUS, which provides for other (than certain described) folding cartons, boxes, and cases of non-corrugated paper or paperboard. The gift box ensemble appears to qualify as a set. Thus, under GRI 3(b), it would be classifiable under the same subheading, since the ensemble would take its essential character from the box. If the box is not capable of folding, it would be classifiable, as an individual article or as a set, under subheading 4819.50.40.40, HTSUS, which provides for other packing container, including rigid boxes. The pyramid gift box is classifiable, under GRI 1, in subheading 4819.20.0040, HTSUS, which provides for (other than certain described) folding cartons, boxes, and cases on non- corrugated paper or paperboard. If the pyramid box is imported as a