March 6, 1996
CLA-2 RR:TC:SM 559549 MLR
TARIFF NO.: 9811.00.60
Port Director U.S. Customs Service P.O. 9516 El Paso, TX 79985
RE: Internal Advice; Applicability of duty exemption under HTSUS subheading 9811.00.60 to ceramic tile; Mexico; boards; sample
This is in reference to your memorandum dated September 28, 1995, forwarding a request for internal advice filed by Rudolph Miles & Sons Inc. ("Rudolph Miles"), on behalf of American Olean Tile Company ("AOTC"), concerning the applicability of subheading 9811.00.60, Harmonized Tariff Schedule of the United States (HTSUS) to ceramic tiles. Photocopies of the tiles mounted on boards were submitted.
Your office states that the ceramic tile entered by AOTC was allegedly for use solely as samples in taking orders. Rudolph Miles states that Mexican ceramic tile, glazed, and valued at less than $1.00 each, were imported from Mexico as samples (either board mounted or in boxes). The record includes a letter from John A. Steer Co., Customs Brokers, requesting a ruling from New York concerning tiles imported by AOTC. This letter states that tiles from Spain, Italy, Brazil, and Mexico are imported as samples for soliciting orders for merchandise, and that some of the tiles will be mounted on boards after importation, or will be used "as is" by salesmen. It is stated that AOTC's business requires large quantities of samples (either board-mounted or otherwise) because of its large volume of sales. The tiles are provided to AOTC's retailers and distributors for display in order to entice buyers to purchase AOTC's products. The letter also states that AOTC maintains a "sample department;" that AOTC receives the tiles in various sizes of shipments, including full container- or truck-load quantities; and that each order for samples is covered by an AOTC purchase order marked: "Samples." Some of the vendors supply the tiles free of charge or at reduced cost, and in such instances, it is stated that the fair market value of the tiles as well as the price to be paid is provided. It is stated that when the tiles are supplied at no charge or at reduced costs, the invoices and shipping documents indicate that the tiles are "samples." Furthermore, the letter indicates that in the rare instances when the tiles have a fair market value greater than $1.00, they are entered under heading 6908, HTSUS. The letter also states that AOTC routes all of the sample shipments to its sample department and fully segregates them from normal distribution channels. Once in the sample department, the tiles are cut and mounted on sample boards, whereas some are used in the condition received.
The record includes an AOTC purchase order for 7384 tiles (568 cartons), in four different styles. The purchase order is marked "samples" and "please mark: for sample boards." The Spanish invoice for this purchase order states "muestras//samples" and "without commercial value," but a "statistic value only" in the amount of $1741.24 is provided. The tiles covered by this invoice are entered under subheading 9811.00.60, HTSUS.
The record also includes an AOTC purchase order for Mexican tiles with no indication that they should be samples. The tiles for the corresponding invoice indicates that 810 tiles were imported at a base price ranging from $3.92 to $4.25. These tiles were entered under subheading 6908.90.00, HTSUS. The record also contains an AOTC purchase order for Mexican tiles, which states "subtle steps stone sample material" and "samples of no commercial value." The corresponding invoice shows that the tiles have a base price of $4.25, and they were entered under subheading 6908.90.00, HTSUS.
Whether the ceramic tiles are entitled to duty-free treatment under subheading 9811.00.60, HTSUS.
LAW AND ANALYSIS:
Subheading 9811.00.60, HTSUS, provides for the free entry of: [a]ny sample ... valued not over $1 each, or marked, torn, perforated or otherwise treated so that it is unsuitable for sale or for use otherwise than as a sample, to be used in the United States only for soliciting orders for products of foreign countries.
The controlling factor is whether the importer uses the samples for the purpose of soliciting purchase orders for foreign merchandise and the creation of demand for future orders. With respect to the ceramic tiles from Mexico, section 181.62, Customs Regulations (19 CFR 181.62), provides that commercial samples of negligible value may be imported duty-free from Canada or Mexico under subheading 9811.00.60, HTSUS, if they are imported solely for the purpose of soliciting orders for foreign goods, and if valued over $1.00, are properly marked, torn, perforated or otherwise treated prior to arrival in the U.S. so that they are unsuitable for sale or for use except as commercial samples.
In Carson M. Simon & Co. v. United States, 46 Cust. Ct. 118, C.D. 2243 (1961), sample wallpaper books, imported from France, were distributed, unsolicited, to decorators throughout the U.S.
for the purpose of obtaining orders for the wallpapers of the French manufacturer. Some of the recipients remitted payment for the books. The U.S. Government contended that the language of paragraph 1821(a) of the Tariff Act of 1930, as added by Public Law 85-211 (the predecessor provision of subheading 9811.00.60, HTSUS), was confined to samples directly related to the solicitation of orders from foreign manufacturers, for the purpose of expanding international trade; therefore, where an American concern purchased samples from abroad for distribution to its potential U.S. customers, paragraph 1821 would not apply.
The United States Customs Court, in considering the legislative history of this provision, stated that:
...with respect to samples of nominal value, or so treated as to have no other use than in the solicitation of orders for merchandise, the conditions of...[the statute] are met if the samples represent the goods to be ordered, and the goods have been produced in a foreign country.
Consequently, it was held that there is no statutory requirement of foreign ownership of the samples, nor did the legislative background of the provision reveal a congressional intent to so limit the terms of the pertinent provisions.
In Headquarters Ruling Letter (HRL) 557584 dated March 21, 1994, Customs held that certain pharmaceutical products were entitled to free entry under subheading 9811.00.60, HTSUS, if valued at $1.00 or less, and they are only used as samples for soliciting orders for products of foreign countries. However, in the instances where the value was greater than $1.00, only those products with markings which included the words "sample - not for sale" were eligible for duty-free treatment under this provision.
In this case, it is stated that the tiles are distributed to AOTC's retailers and distributors for display to entice customers to purchase AOTC's tiles. In the case of the tiles imported from Spain, we are satisfied that they qualify for duty-free entry under subheading 9811.00.60, HTSUS, as long as the tiles are only used to solicit orders for foreign merchandise. The AOTC purchase order indicates that the order is for samples. The Spanish invoice also indicates that the tiles are samples, and 7384 tiles were imported at a value of $1,741, which indicates that the tiles individually are valued at less than $1.00.
In the case of the tiles imported from Mexico, while some of the AOTC purchase orders indicate that the order is for samples, the Mexican invoices do not indicate that the tiles are samples. The fact that the invoices do not indicate that the tiles are samples does not necessarily disqualify them from entry under subheading 9811.00.60, HTSUS, if AOTC shows that the tiles will only be used to solicit orders for foreign merchandise, and the tiles individually are valued at $1.00 or less, or are marked or otherwise treated so that the tiles are unsuitable for sale or for use otherwise than as a sample. However, with respect to the tiles from Mexico, the record only includes examples of tiles which individually are valued at more than $1.00, and no evidence is presented to show that they are marked as samples or otherwise treated to render them unsuitable for sale or any use other than as samples for obtaining orders for similar merchandise. Furthermore, although AOTC states that some of the tiles may be mounted on boards in their sample department in Pennsylvania, in order to qualify for duty-free treatment under subheading 9811.0060, HTSUS, the tiles must be marked as samples or be mounted on boards at the time of entry if they are valued individually at more than $1.00.
Based on the information submitted, the ceramic tiles valued at $1.00 or less, for which the AOTC purchase order indicates that they are "samples," may be entered duty-free under subheading 9811.00.60, HTSUS, if AOTC only uses them as samples for soliciting orders for similar merchandise from foreign countries. In order for the ceramic tiles valued at more than $1.00 to qualify for entry under subheading 9811.00.60, HTSUS, the tiles must be marked as samples or otherwise treated to render them unsuitable for sale or any use other than as samples for obtaining orders for similar merchandise at the time of entry.
This decision should be mailed by your office to the internal advice requester no later than 60 days from the date of this letter. On that date the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.
John Durant, Director Tariff Classification Appeals Division