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HQ 559113




July 24, 1995

CLA-2 R:C:S 559113 DEC/RSD

CATEGORY: CLASSIFICATION VALUATION

TARIFF NO: 9802.00.80

Mr. R. Kevin Williams
O'Donnell, Byrne & Williams
20 North Wacker Drive
Suite 146
Chicago, Illinois 60606

RE: Ceramic figurine; Joe Montana signature card; 9802.00.80, HTSUS; 19 CFR 10.16; Assist; 19 U.S.C. 1401a

Dear Mr. Williams:

This is in response to your letter dated March 24, 1995, in which you seek a ruling on behalf of your client, Enesco Corporation (Enesco), regarding the eligibility of ceramic figurines from China for the partial duty exemption under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS)

FACTS:

Enesco is a designer and importer of ceramic giftware. The subject of this ruling is the ceramic figurines representing Joe Montana, a recently retired quarterback of the Kansas City Chiefs from the National Football League. The figurine will depict Mr. Montana poised to throw a pass in his team uniform. The figurine will be mounted on a molded plastic base. At the front center of the base will be a framed card holder that will contain a card with Mr. Montana's authentic and original signature which will be glued into the holder.

The signature cards will be made from art boards produced in the United States. After purchasing the art boards, Enesco will cut them to the proper dimensions for the signature cards and then send them to Mr. Montana for his signature. After Mr. Montana signs and returns the cards, Enesco ships the cards to the foreign
manufacturer of the figurines where one card will be glued into the card holder of each figurine. In addition to the cost of the art board, Enesco will incur costs for labor and transportation, and it must pay a set fee to Mr. Montana for each card he signs. Enesco will provide the signature cards to the manufacturer free of charge. The price that Enesco pays the manufacturer does not include the cost of the signature cards. We assume that the figurine, base, and card holder are of foreign origin.

ISSUES:

1. Whether the Joe Montana signature cards are assists whose value must be included in the appraised value of the ceramic figurines upon importation into the United States.

2. If the value of the Joe Montana signature cards are dutiable assists, whether the value of the cards is deductible from the value of the ceramic figurines under the terms of 9802.00.80, HTSUS.

LAW AND ANALYSIS:

1. ASSISTS

Merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA: 19 U.S.C. 1401a). The preferred method of appraisement is transaction value, which is defined as the "price actually paid or payable for merchandise when sold for exportation for the United States," plus certain enumerated additions.

Among the additions to the price actually paid or payable of imported merchandise that are provided for in the TAA are assists. 19 U.S.C. 1401a(h)(1)(A), defines the term assist as 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, artwork, 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. In the instant case, the importer will supply the U.S.-produced Joe Montana signature cards free of charge to the manufacturers of the imported figurines. The signature cards will be mounted on the base of the completed figurines. Therefore, the signature cards are components or materials that will be incorporated into the finished figurines which the buyer will supply free of charge, and thus they constitute assists under 19 U.S.C. 1401a(h)(i). Accordingly, in determining the transaction value of the imported figurines, the value of the signature cards will be added to price actually paid or payable of the imported figurines.

Regarding the value of the assist, sections 152.103(d)(1) and (2), Customs Regulations (19 CFR 152.103(d)(1)&(2)), provide that depending upon the type of assist, the value is either the cost of its acquisition or the cost of its production. In either case, the value of the assist includes transportation costs to place of production. Consequently, in this case, the value of the assists would include the cost of the art board, costs involved in cutting the cards such as the labor costs, fees paid to Joe Montana and the cost of transporting the cards to the place of production.

2. 9802.00.80, HTSUS

Subheading 9802.00.80, HTSUS, provides for a partial duty exemption for

(a)rticles . . . assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process such as cleaning, lubricating, and painting

All three requirements of subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the
cost or value of the United States components assembled abroad, provided the section 10.24, Customs Regulations (19 CFR 10.24), documentary requirements are satisfied.

Section 10.14(a), Customs Regulations (19 CFR 10.14(a)), states, in part, that

The components must be in condition ready for assembly without further fabrication at the time of their exportation from the United States to qualify for the exemption. Components will not lose their entitlement to the exemption by being subjected to operations incidental to the assembly either before, during, or after their assembly with other components.

Operations incidental to the assembly process are not considered further fabrication operations, as they are of a minor nature and cannot always be provided for in advance of the assembly operations. However, any significant process, operation or treatment whose primary purpose is the fabrication, completion, physical or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUS, to that component. See 19 CFR 10.16(c).

Section 10.16(a), Customs Regulations (19 CFR 10.16(a)), provides that assembly operations for purposes of subheading 9802.00.80 encompass any method used to join solid components such as gluing, welding, soldering, riveting, or the use of fasteners and may be accompanied by operations that are incidental to the assembly as provided in section 10.16(b). In this case, the foreign processing is a qualifying assembly process consisting of gluing the signature cards into the card holder. The regulations expressly include gluing as an acceptable assembly operation under section 10.16. Therefore, an allowance in duty may be made for the cost or value of the signature cards under 9802.00.80, HTSUS. The cost of the cards to be deducted from the full appraised value of the imported figurines includes the cost of the art board, the cost of cutting the board to proper dimensions and the cost of transporting the cards to the port of exportation. See 19 CFR 10.17.

Section 10.11(b), Customs Regulations (19 CFR 10.11(b)), provides, in part, that the "[a]llowance of an importer's claim is dependent upon meeting the statutory requirements for the exemption under subheading 9802.00.80 and his complying with the documentary requirements set forth in section 10.24."

Section 10.24(a), Customs Regulations 19 CFR 10.24(a), requires the submission of a foreign assembler's declaration with the entry of articles claimed to be entitled to the exemption under subheading 9802.00.80, HTSUS. The declaration must
state that, to the best of the assembler's "knowledge and belief", the articles being imported were assembled, in whole or in part, from components that are products of the U.S., and must contain certain information concerning the U.S. components, including their description, their marks of identification, quantity, unit value at time and place of export from the U.S., the port and date of export from the U.S. and the name and address of the manufacturer. 19 CFR 10.24(a)(1). The declaration must also include a description of the assembly operations performed abroad, as well as an endorsement by the importer certifying the accuracy of the declaration and other documents submitted.

HOLDING:

The signature cards are considered dutiable assists under 19 U.S.C. 1401a(h)(1)(A). Assuming compliance with the documentation requirements of 19 CFR 10.24, it is our opinion that allowance in duty may be made under subheading 9802.00.80, HTSUS, with respect to the cost or value of the Joe Montana signature cards since the ceramic figurines will be assembled in part of U.S.-fabricated components, the components will be exported from the United States in a condition ready for assembly without further fabrication, they will not lose their physical identity by change in form, shape or otherwise, and they will not be advanced in value or improved in condition abroad except by being assembled.

A copy of this ruling should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director

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