HQ 224786: Ruling request on the dutiability of imported packagingmaterials upon its removal from a foreign trade zone as part of acompleted gift set of bottled spirits and glassware; packagingoperation in a foreign trade zone; 19 U.S.C. 81c(a); 19 CFR146.42(a) and 146.65

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 224786

                         October 5, 1993

FOR-2-03/CLA-2-CO:R:C:E 224786 JRS

CATEGORY:  Foreign Trade Zones/ Classification

Mr. John B. Pellegrini, Esquire
Ross & Hardies
Park Avenue Tower
65 East 55th Street
New York, New York 10022-3219

RE:  Ruling request on the dutiability of imported packagingmaterials upon its removal from a foreign trade zone as part of a
completed gift set of bottled spirits and glassware; packaging
operation in a foreign trade zone; 19 U.S.C. 81c(a); 19 CFR
146.42(a) and 146.65 

Dear Mr. Pellegrini:

     This is in response to your letter dated May 24, 1992,
requesting a ruling on behalf of your client, Joseph E. Seagram's
& Sons, Inc.

FACTS:

     You state that the your client plans to establish a
packaging operation in a foreign trade zone in Kentucky.  Under
the proposed operation, domestic, tax-paid retail-sized bottled
spirits or imported retail-sized bottled spirits, such as rum,
will be admitted into a zone along with domestic or imported
packaging materials and imported glassware.  Once in a zone, the
bottled spirits would be packaged in a gift box with two drinking
glasses.  You orally stated that the packaging material consists
of nonreusable and inexpensive cardboard boxes, cellophane and
other minimal value packaging material for use inside the
cardboard gift boxes.  Your client will not seek privileged
foreign status for the imported glassware, imported bottled
spirits or imported packaging materials, and will claim domestic
status for the spirits and packaging material of U.S. origin. 
The completed gift packages would be withdrawn from the zone and
entered for consumption at the Port of Cincinnati, Ohio.
  
     It is your position that if drinking glasses are part of a
set, where the spirits impart the essential character, the
glassware is not dutiable.  Please note this question will be
answered separately by the Food & Chemicals Classification
Branch.  It is also your opinion that the packaging materials are
not dutiable since they are usual containers for specific rate
merchandise.

ISSUES:

     Whether the proposed packaging operation described in the
FACTS section is permissible in a foreign trade zone.

     Whether imported packaging material in nonprivileged foreign
status is dutiable when it is removed from a foreign-trade zone
for consumption as part of a gift set of bottled spirits.
 
LAW AND ANALYSIS:

     Pursuant to the provisions of section 3 of the Foreign-
Trade Zones Act, as amended (19 U.S.C. 81c), foreign and domestic
merchandise of every description, except such as is prohibited by
law, may be brought into a zone without being subject to the
customs laws of the United States for the purposes set forth in
the statute.  Such merchandise may "be brought into a zone and
may be stored, sold, exhibited, broken up, repacked, assembled,
distributed, sorted, graded, cleaned, mixed with foreign or
domestic merchandise, or otherwise manipulated, or be
manufactured ... and be exported, destroyed, or sent into customs
territory of the United States therefrom, in the original package
or otherwise;".  19 U.S.C. 81c(a)(1993).  It is our opinion from
reading the plain language of the above-cited statute that the
packaging operation of combining previously manufactured, retail-
sized bottled spirits (750ml) which are both domestic and foreign
with two drinking glasses (also domestic and foreign) in an
inexpensive cardboard gift box (also domestic and foreign) is a
permissible operation that can be accomplished in a zone.

     The foreign trade zones statute further provides that, "...
when foreign merchandise is so sent from a zone into the customs
territory of the United States it shall be subject to the laws
and regulations of the United States affecting imported
merchandise...".  19 U.S.C. 81c(a)(1993) (emphasis added).  Under
section 146.65(a)(2) of the Customs Regulations (19 CFR
146.65(a)(2)), nonprivileged foreign status merchandise (see 19
CFR 146.42(a)) is subject to tariff classification in accordance
with its character, condition and quantity as constructively
transferred to Customs territory at the time the entry or entry
summary is filed with Customs.  Under this provision, the
importer chooses to have the merchandise treated, for tariff
purposes, in its condition as removed from the zone rather than
in its condition upon its admittance into the zone. 

     The General Rules of Interpretation (GRI) 5(b), Harmonized
Tariff Schedule of the United States, states, in pertinent part: 

     ..., packing materials and packing containers entered
     with the goods therein shall be classified with the
     goods if they are of a kind normally used for packing
     such goods.  However, this provision does not apply
     when such packing material or packing containers are
     clearly suitable for repetitive use.
  
     At the time of withdrawal from the foreign trade zone and
entry for consumption, the foreign packaging material is
classified with the bottled spirits, which are subject to a
specific rate of duty.  The imported packaging material itself is
not considered to be a separate article for tariff classification
purposes as it is the usual container for specific rate
merchandise and, as such, the imported packaging material is not
separately dutiable in accordance with GRI 5(b), HTSUS, upon
removal from the zone.  Please note, however, that the
merchandise processing fee is applicable in this case and is not
affected by the exemption found in 19 U.S.C. 58c(b)(8)(D)(v). 
See 19 U.S.C. 58c(b)(8)(D)(v)(an exemption from application of
the merchandise processing fee on agricultural products of the
United States that are processed and packed in a foreign trade
zone).  

HOLDING:

     The packaging operation, as described in the FACTS section
of this ruling, is a permissible operation that may be
accomplished in a foreign trade zone.

     Upon its removal from a foreign trade zone in nonprivileged
foreign status, imported packaging material (as described in the
FACTS section) combined as part of a gift set of bottled spirits
is not separately dutiable upon its entry for consumption into
the Customs territory under GRI 5(b), HTSUS.

                               Sincerely,




                               John Durant, Director