HQ 0544216 - Dutiability of certain costs as assists - United States International Trade Commision Rulings

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HQ 544216

August 17, 1988

CLA-2 CO:R:C:V: 544216 DHS

CATEGORY: VALUATION

William F. Joffroy, Jr.
William F. Joffroy, Inc.
P.O. Box 698
Nogales, Arizona 85628-0698

RE: Dutiability of certain costs as assists

Dear Mr. Joffroy:

This is in response to your letter of July 19, 1988, requesting a ruling as to whether certain costs will be considered by Customs as dutiable assists pursuant to section 402(h) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. 1401a).

FACTS:

You indicate that your client will be assembling certain electrical connectors in Mexico and importing them into the United States under item 807.00, Tariff Schedules of the United States (TSUS).

You state that many fixed assets that are purchased in the United States by the importer are to be provided to the Mexican assembly operation for use in the shipping/receiving department, the general offices, the employees' workstations and for the purpose of supplying air to the plant. You indicate that this equipment is not to be used in the production of the merchandise to be imported into the United States.

You state that the importer has assigned one of its United States employees to be the general manager of the assembly plant in Mexico for the purpose of managing and directing the overall operations. He will be compensated from the importer in the United States, but will reside in Mexico.

ISSUES:

Whether equipment, supplied free of charge by the importer, which is not used in the production of the imported merchandise, is considered an assist.

Whether compensation to be paid to a general manager by the importer for services performed at a foreign assembly plant constitute an assist.

LAW AND ANALYSIS:

The definition of an assist, as set forth in section 402(h)(1)(A) of the Tariff Act is:

...any of the following if supplied directly or indirectly, and free of charge or at reduced cost, by the buyer of imported merchandise for use in connection with the production or the sale for export to the United States of the merchandise:

(i) Materials, components, parts, and similar items incorporated in the imported merchandise.
(ii) Tools, dies, molds and similar items used in the production of the imported merchandise.
(iii) Merchandise consumed in the production of the imported merchandise.
(iv) Engineering, development, art work, design work, and plans and sketches that are undertaken elsewhere than in the United
States and are necessary for the production of the imported merchandise.

You inquire as to the dutiability of equipment consisting of air compressors, various scales, forklift trucks, carts, containers, tape dispensers, dock levelers, pallet truck, dock seal, dock loading lite, JIB lift, personal computers, office equipment and copiers, board marker, matrix printer, eye wash station, work benches and stools, plugs and socket air drops. You state that this equipment will not be utilized in the production of the imported merchandise but in the operation of other areas of the assembly plant.

In Customs Headquarters Ruling Letter 542122, dated September 4, 1980 (TAA No. 4), we held that general purpose equipment, such as sewing machines, ovens, drill presses, etc., furnished free of charge or at a reduced cost and used abroad in the production of merchandise imported into the United States, is dutiable under section 402(h)(1)(A)(ii). However, in Customs Headquarters Ruling Letter 542302, dated February 27, 1981 (TAA No. 18), Customs concluded that air conditioning equipment, a power transformer, telephone switching equipment and emergency generators did not fall within the definition of an assist, since they were not used in the production of the merchandise.

Since the equipment listed above is not used in the production of the imported merchandise but is used to operate the other areas of the assembly plant, the equipment is not an assist within the meaning of section 402(h)(1)(A) of the Tariff Act.

With respect to the management services described above, it has consistently been the position of the Customs Service that management services of this type are not considered assists. See, TAA Nos. 4, 20, 46 and Headquarters Ruling Nos. 543820 dated December 22, 1986, and 543877 dated March 17, 1987.

HOLDING:

In reference to the case before us, we conclude in accordance with the holdings of the cases cited above that the equipment does not fall within the definition of an assist, since it is not used in the production of the merchandise. Further, we conclude that the salary paid to the U.S. employed manager, who is residing in Mexico, is not an assist. Please note that no information has been provided and this ruling does not address the issue of the applicability of transaction value as a method of appraisement.

Sincerely,

John Durant, Director

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