HQ 545721 - Application for Further Review of Protest No. 1101-93- 100211; Merchandise Processing Fee; Foreign Trade Zone; 19 USC 81c, 1484(a)(1)(A); 19 CFR 24.23, 141.4, 146.43(b), 146.62, 146.63(a) - United States International Trade Commision Rulings

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HQ 545721

February 27, 1995

VAL CO:R:C:V 545721 LPF

CATEGORY: VALUATION ENTRY

District Director
U.S. Customs Service
2nd and Chestnut Streets
Room 102
Philadelphia, PA 19106-2999

RE: Application for Further Review of Protest No. 1101-93- 100211; Merchandise Processing Fee; Foreign Trade Zone; 19 USC 81c, 1484(a)(1)(A); 19 CFR 24.23, 141.4, 146.43(b), 146.62, 146.63(a)

Dear Sir:

This is a decision on an application for further review of a protest filed April 8, 1993, against your decision concerning the assessment of merchandise processing fees on motor vehicles. The entry was liquidated on February 26, 1993. We regret the delay in responding.

FACTS:

On March 27, 1989 motor vehicles were transferred from the foreign trade subzone (FTZ) of Chrysler Motor Corporation, the importer, and entered for consumption. It is our understanding, based on worksheets included in the file, that foreign vehicle parts such as engine assemblies, radios, starters, oxygen sensors, and alternator assemblies were admitted to the subzone for manufacture of the vehicles. The worksheets include values for the various parts.

You assessed the merchandise processing fee (MPF) on the total zone value of the motor vehicles produced in the FTZ, which included the value of domestic status merchandise and other U.S. origin value added in the FTZ. The protestant submits that the MPF should not be assessed on the total zone value.

ISSUE:

Whether it was appropriate to assess the MPF on the total zone value of the merchandise.

LAW AND ANALYSIS:

Under the Foreign Trade Zones Act of 1934, as amended (19 U.S.C. 81c), when the foreign vehicle parts are sent from a zone into the U.S. Customs territory, they are subject to the laws and regulations of the U.S. affecting imported merchandise. In this case, the laws and regulations concerning the assessment of merchandise processing fees are at issue.

Although the vehicles contain domestic status merchandise, because they are composed in part of foreign status merchandise they must be entered for consumption in the Customs territory via formal entry. Section 484(a)(1)(A), Tariff Act of 1930, as amended (19 U.S.C. 1484(a)(1)(A)); sections 141.4, 146.62, 146.63(a), Customs Regulations (19 CFR 141.4, 146.62, 146.63(a)).
In particular, section 146.43(b), Customs Regulations (19 CFR 146.43(b)) provides that domestic status merchandise mixed or combined with merchandise in another zone status may not be transferred from the zone into the Customs territory without a permit. Accordingly, the foreign status vehicle parts combined with the domestic status merchandise would not be exempt from formal entry. See section 141.4, Customs Regulations (19 CFR 141.4).

Section 24.23(b)(1)(i)(A), Customs Regulations (19 CFR 24.23(b)(1)(i)(A)) provides, in pertinent part, that merchandise that is formally entered or released is subject to the payment of an ad valorem fee, which shall be based on the value of the merchandise as determined under section 402 of the Tariff Act of 1930, as amended by the Trade Agreements act of 1979 (TAA), codified at 19 U.S.C. 1401a. Although several kinds of merchandise are exempt from the MPF, no exemption is provided for domestic merchandise comprising articles manufactured in FTZs containing both domestic and foreign merchandise. Such an article entered for consumption from an FTZ is subject to the MPF, based upon the appraised value of both the domestic and foreign merchandise.

HOLDING:

Because formal entry is required for the motor vehicles due to its foreign status portion, the MPF is properly assessed on the total zone value of the merchandise. You are directed to deny the protest. A copy of this decision with the Form 19 should be sent to the protestant.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision, 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 to the public via the Diskette Subscription Service, the Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director
Commercial Rulings Division

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