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HQ 223989


November 18, 1992

ENT-1-03-CO:R:C:E 223989 JRS

CATEGORY: ENTRY LIQUIDATION

Regional Director, Regulatory Audit Division U. S. Customs Service
Pacific Region
1 World Trade Center, Suite 705
Long Beach, CA 90831-0700

RE: Request for Internal Advice Regarding Applicability of the Merchandise Processing Fee (MPF) to Payments for Assists Disclosed After Entry of Merchandise; 19 U.S.C.

Dear Sir:

This responds to your request for internal advice (FILE: AUD:8:O:R MCR, dated May 22, 1992) above-referenced. Our advice follows.

FACTS:

Fujitsu Microelectronics, Inc. (FMI) imports semiconductors and other electronic components from its parent company, Fujitsu Ltd. of Tokyo, Japan (FJ). The imported products originate from either Japan, Singapore or Malaysia.

Every quarter, FMI voluntarily disclosed additional payments it made to the foreign supplier relative to previous importations. The payments for assists were mostly for engineering, design and other similar services incurred outside of the United States. The company's correspondence to Customs disclosing the assists specified the entry number or invoices associated with the additional charges. Also, the company voluntarily tendered the additional duty on the assists related to previously imported items which were dutiable. However, the company did not pay the merchandise processing fee related to the assists pertaining to either the dutiable or duty free importations. The company explained that the user fee was not paid because they were informed by the responsible import specialist that the merchandise processing fee does not apply to assists.

ISSUE:

Whether payments for assists made by the importer and disclosed to Customs after the entry of the related merchandise are subjected to the merchandise processing fee.

LAW AND ANALYSIS:

The Customs and Trade Act of 1990 (Public Law 101-382, signed August 20, 1990) amended the law pertaining to the merchandise processing fee (MPF) by restructuring the ad valorem fee set forth in 19 U.S.C. 58c(a)(9) and (10) to conform it to the international obligations of the United States under GATT. Section 111(b)(2) of the Act amended 19 U.S.C. 58c by providing, in pertinent part, the following under 19 U.S.C. 58c(b)(8)(A)(i): "the fee charged under subsection (a)(9) for the formal entry or release of merchandise may not exceed $400 or be less than $21." Under 19 U.S.C. 58c(a)(9), an ad valorem fee of .17% is imposed on all formal entries for consumption and warehouse withdrawals for consumption.

Section 19 U.S.C. 58c(b)(8)(D)(ii) provides: "The fee charged under subsection (a)(9) or (10) of this section with respect to processing of merchandise shall ... except as otherwise provided in this paragraph, be based on the value of the merchandise as determined under section 1401a of this title."

The preferred method of appraisement is transaction value which is defined by Section 402(b)(1) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA, 19 U.S.C. 1401a(b)) as "the price actually paid or payable for the merchandise when sold for exportation to the United States" plus certain additions specified in 402(b)(1)(A) through (E). The term "price actually paid or payable" is defined in TAA section

...the total payment (whether direct or indirect...) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller.

The amounts actually paid to the seller should be included in the price actually paid or payable, or included in the transaction value of the merchandise as an addition to the price actually paid or payable as "the value, apportioned as appropriate, of any assist," pursuant to Section 402(b)(1)(C). Any amount included in the price actually paid or payable as an assist is dutiable. An assist, however, may be apportioned in a reasonable manner appropriate to the circumstances and in accordance with generally accepted accounting principles. 19 CFR 152.103(e). Assists must be declared at the time of entry. Whether the assists are itemized separately from the purchase price or included in the purchase price listed on an invoice (19 CFR 141.86(a)(11) is left to the discretion of the importer. In either case, the assist must be part of the entered value on the CF 7501.

From the facts provided, it appears that the payments made by the importer to the seller, or the assists provided by the importer to the seller are to be included in the transaction value of the imported merchandise. Payments for assists disclosed by FMI should be subjected to the MPF, irrespective of whether the related merchandise was dutiable or free since they are part of the value of the merchandise. The payments made by FMI increased the value of the imported products and are thus part of the appraised value of the imported merchandise.

We agree with your analysis of the statute. The assists pertained to products which do not fall under Chapter 98 of the Harmonized Tariff Schedule of the United States (which is exempt from the MPF with the exception of subheadings 9802.00.60 and 9802.00.80); the imported products did not originate from a U.S. Insular Possession, a least developing or Caribbean Basin Initiative country; and the payments made by FMI increased the value of the imported products. 19 U.S.C. 58c(b)(8)(B); 19

If a liquidation of an entry occurred without taking into account an assist, Customs may voluntarily reliquidate, within ninety days of the original liquidation, and assess the MPF on the increased value of the imported product on reliquidation. 19 U.S.C. 1501.

The liability for the payment of all duties on the part of the importer may be enforced "notwithstanding the fact that an erroneous construction of law or regulation may have enabled the importer to pass his goods through the customhouse without payment." 19 CFR 141.1(b). We note that under 19 U.S.C. 58c(g)(3) and 19 CFR 24.23(e), all administrative and enforcement provisions of the Customs laws and regulations relating to Customs duties apply to the MPF, as well as to all Customs user fee provisions.

HOLDING:

Payment for assists made by the importer and disclosed to Customs after entry of the related merchandise are subjected to the MPF.

Sincerely,

John Durant, Director

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