CLA-2 CO:R:C:V 544261 EK
William F. Joffroy, Jr.
President, William F. Joffroy, Inc.
P. O. Box 698
Nogales, Arizona 85628-0698
RE: Prospective Ruling Request Regarding Dutiability of
Capital Assets and Services
Dear Mr. Joffroy:
This is in response to your letter of October 27, 1988,
regarding the dutiability of certain capital assets and services
that your company (hereinafter referred to as importer) will be
providing to its Mexican assembly plant.
FACTS:
You state that the importer will be assembling chain saws,
small engines and string trimmers in Sonora, Mexico. A number of
capital assets are to be sent to the Mexican assembly plant by
the importer. These items include the following: hand trucks,
carts, automated conveyor belt system, air compressors, battery
chargers for the fork lifts, fans, drafting tables, personal
computers, pallet trucks, tape dispensers, hydrometers, assembly
tables, dockboards, scales, ladders, air tanks, stools, digital
weight display, office equipment and work benches. You indicate
that these items will be used in the shipping/receiving
department, in the general offices and in the employee
workstation areas.
In addition, the general manager of the Mexican assembly
plant will be a U.S. citizen and will be temporarily residing in
Mexico. The general manager will be employed by the importer and
will receive all compensation from the importers office in the
United States. You state that the general manager will be
responsible for managing and directing the overall operation and
will not be directly involved in the assembly operations.
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ISSUE:
Whether the capital assets which the importer will provide,
free of charge, to the Mexican assembler and the services of the
general manager provided by the importer will be considered
dutiable assists.
LAW AND ANALYSIS:
The relevant portion of section 402(h)(1)(A) of the Tariff
Act of 1930, as amended by the Trade Agreements Act of 1979
(TAA; 19 U.S.C. 1401a(h)(1)(A)) states the following:
The term 'assist' means any of the following if
supplied directly or indirectly, and free of charge
or at a reduced cost, by the buyer of importer
merchandise for use in connection with the production
or the sale for export to the United States of the
merchandise:
. . . [t]ools, dies, molds, and similar
items used in the production of the imported
merchandise . . .
In order for the type of equipment which you have listed to
be categorized as an assist, it must be used in the production of
the imported merchandise as provided for in the statutory
language cited above. In TAA #18 (Headquarters Ruling No.
542302) dated February 27, 1981, equipment which was not used in
the production of the imported merchandise was not considered to
be an assist within the meaning of section 402(h)(1)(A)(ii) of
the TAA. These items included telephone switching equipment, an
emergency generator, air conditioning equipment and a power
transformer. More recently, this reasoning was applied in
Headquarters Ruling No. 544083 dated August 18, 1988, with
respect to merchandise which was not actually used in the
production of the imported merchandise.
Although you have not described the function of each of the
products, the majority of the items appear as if they are not
used in the production of the merchandise. These items include:
hand trucks, carts, air compressors, battery chargers for the
fork lifts, fans, drafting tables, personal computers, tape
dispensers, scales, ladders, stools and office equipment.
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However, with respect to the automated conveyor belt system,
pallet trucks, hydrometers, assembly tables, dockboards, air
tanks, digital weight display and work benches, a more detailed
description would be needed to determine if they are used in the
production of the imported merchandise.
With respect to the cost of the services rendered by the
general manager, management services as you have described are
not assists as defined in section 402(h)(1)(A) of the TAA. See,
Headquarters Ruling Nos. 543820 and 543877 dated December 22,
1986, and March 17, 1987, respectively.
Please note that it is not clear from the information
submitted as to which method of appraisement will be utilized to
value the merchandise. If the merchandise is appraised pursuant
to computed value, section 402(e) of the TAA, then the issue of
whether the items are assists is secondary to the question of
whether the equipment should be included under computed value as
the "cost or value of the materials and the fabrication and other
processing of any kind employed in the production of the imported
merchandise" or "an amount for profit and general expenses . . .
made by the producers in the country of exportation for export to
the United States." See, section 402(e)(1)(A) and (B) of the
TAA. If, in accordance with generally accepted accounting
principles of the country of production or exportation, the costs
of this equipment should be reflected in the books of the foreign
assembler as processing costs, then it may be that the costs are
to be included in determining the computed value of the final
imported product. See, TAA #9 dated October 15, 1980.
HOLDING:
The majority of the items listed in your submission will
not be considered dutiable assists. In the absence of more
detailed information, we cannot come to a conclusion as to the
automated conveyor belt system, pallet trucks, hydrometers,
assembly tables, dockboards, air tanks, digital weight display
and the work benches.
The cost of the services rendered by the general manager
provided by the importer is not an assist within the meaning of
section 402(h) of the TAA.
Sincerely,
John Durant, Director,
Commercial Rulings Division