RR:IT:VA 546561 KCC
Port Director
U.S. Customs Service
P.O. Box 3130
Laredo, Texas 78044-3130
RE: Internal Advice; parts and accessories of televisions and
electronic articles; amending protest; 19 CFR 174.14(a) and
174.28; 402(b); transaction value; related parties;
402(g)(1); circumstances of the sale; sale for exportation;
J.L. Wood v. United States; HRLs 544230, 545254, 546069,
544775, 543633 and 545474; 402(b)(1)(B); packing costs;
402(h)(3); buying commission; Pier 1 Imports, Inc. v.
United States; J.C. Penney Purchasing Corp. v. United
States; Rosenthal-Netter, Inc. v. United States; destined
for the U.S.; HRL 545368; 9801.00.20; 19 CFR 10.108;
similar use agreement; bailment; HRL 222863
Dear Port Director:
This is in regard to a memorandum from the Supervisor Import
Specialist, Duty Assessment Branch II, dated November 7, 1996,
forwarding a request for Internal Advice dated October 10, 1996,
submitted by Baker & McKenzie on behalf of Zenith Electronics
Corporation. The issues raised are whether the protestant can
amend its Protests, whether the imported Products are entitled to
duty-free treatment pursuant to subheading 9801.00.20, Harmonized
Tariff Schedule of the United States ("HTSUS"), and whether the
Products imported from Mexico are appraised under transaction
value pursuant to 402(b) of the Tariff Act of 1930, as amended
by the Trade Agreements Act of 1979 ("TAA"), codified at 19
U.S.C. 1401a, based on the purchase price between Zenith and the
Asian vendors. Information obtained in a telephone conversation
between Zenith's Counsel and a member of my staff on March 20,
1997, obtained at the July 15, 1997, meeting and contained in an
additional submissions dated September 8, 1997, was taken into
consideration in reaching this decision. We regret the delay in
responding.
FACTS:
The Products at issue are various foreign origin replacement
parts and accessories for Zenith's main products, televisions and
numerous electronic products. Zenith imports the Products from
unrelated vendors in various Asian countries, with the exception
of Lucky Goldstar Electronics, Inc. ("Lucky Goldstar"), to whom
Zenith is related. As of November 1995, Lucky Goldstar owns a
fifty-seven percent (57%) interest in Zenith. Zenith states that
it imports only a few articles from Lucky Goldstar and it is the
parties' long-standing policy to sell products to each other at
an arm's length price. As evidence of this practice, Zenith
provided two sets of invoices for two different products. The
invoices show that Zenith paid Lucky Goldstar the same price for
each product before and after the parties became related. Thus,
Zenith states the relationship with Lucky Goldstar had no effect
on the prices charged by Lucky Goldstar to Zenith for the parts
and accessories. Counsel states that Zenith employs two buying
agents in Asia, Zenith Taiwan, a wholly-owned subsidiary of
Zenith, and HMO, Inc. a subsidiary of GC Thorsen, Inc., who act
on behalf of Zenith in seeking and securing vendors. Counsel
states that Zenith provides these agents with product
specifications and requirements and the terms which Zenith will
accept.
Prior to July 1994, Zenith entered the Products into the
Long Beach port for consumption under transaction value pursuant
to 402(b) of the TAA based on the price Zenith paid the foreign
vendors. The Products then entered Zenith's Chicago warehouse
until they were resold to U.S. customers.
In July 1994, Zenith moved its warehouse operations to
Partes de Television de Reynosa, S.A. de C.V. ("Partes"), a
wholly owned Mexican subsidiary of Zenith, to save on freight,
labor and real estate costs. The previously imported duty-paid
Products contained in the Chicago warehouse were moved to Partes.
Now, Zenith imports its Products through the Long Beach port to
McAllen, Texas via a Transportation and Exportation Bond. Zenith
submitted samples of Customs Form 7512, Transportation Entry and
Manifest of Goods Subject to Customs Inspection and Permit for
Transportation and Exportation class of entry. The Products are
then exported from the U.S. and proceed to the Partes warehouse.
At the Partes warehouse, the Products are unloaded and
stored for a temporary period of time. When Zenith requires
Products to fulfill U.S. customers orders, Partes simply
repackages the Products for resale and ships them to the U.S. per
Zenith's instructions. Zenith re-imports the Products and the
U.S. customers either take title to the goods at entry or at
customer specified locations. The U.S. customers pay Zenith for
the goods. Partes does not receive money from the U.S.
customers. Partes is paid by Zenith for its packing operation,
including temporary storage and handling, through occasional
lump-sum payments. Zenith has submitted samples of its invoices
to the U.S. customers which make no mention of Partes or Mexico.
Counsel states that the Products enter Mexico under bond and free
of duty pursuant to Mexico's Maquiladora Program and, thus, they
never enter Mexico's commerce. Zenith submitted copies of
Zenith's Mexican Ministry of Commerce and Industrial Development
Permits and Mexico's entry documents documenting the in-bond
importation of various Products into Mexico. Counsel states that
Zenith never planned to divert the Products into the Mexican
commerce upon the occurrence of any particular contingency and
Zenith does not transfer title to the Products to Partes or any
other party. Counsel states that Zenith merely consigns the
Products to Partes for temporary storage.
The terms of sale between Zenith and all the foreign vendors
are "FOB Foreign Port." Counsel states that title and risk of
loss to the Products pass from the foreign vendor to Zenith when
the Products are laden aboard vessels bound for the U.S. in the
foreign port specified by the parties in sales contracts. With
regard to its buying agents, Zenith notes that title passes from
the foreign vendors to the buying agents and then simultaneously
to Zenith at the foreign port. Zenith has submitted
representative samples of its purchase orders, packing lists, and
commercial invoices as evidence that Zenith takes title in the
foreign country and that the U.S. is the final destination of the
Products. Additionally, Zenith has submitted bills of lading
from shipping companies as evidence that the U.S. is the final
destination of the Products and that Zenith is responsible for
paying freight and related charges from Asia to the U.S.
Counsel states all of Zenith's foreign vendors are aware
that the Products are being manufactured pursuant to Zenith's
specifications for importation into the U.S. Zenith's
specifications for the Products include the requirement that the
Products meet all U.S. technical and safety standards and carry
all required U.S. technical and safety labels. Zenith also
requires that the Products be marked in accordance with U.S.
Customs country of origin marking requirements. Moreover,
Zenith's accessories require that Zenith's name and the Zenith
product name be displayed in English on the product and product
packing. Counsel stated in the March 20, 1997, telephone
conversation that Zenith orders the Products from the foreign
vendors for their own inventory. Counsel noted that Zenith
orders its parts, i.e., transistors, and accessories, i.e.,
remote controls, based on their tracking information which
analyzes the demand for their televisions. Thus, based on the
number of televisions Zenith is making, Zenith can estimate the
amount of parts and accessories they need to procure. Counsel
maintains that all of the imported Products are specifically
produced for Zenith, a U.S. company, for resale in the U.S.
market.
With regard to Zenith's importation from Partes, Zenith made
entry under transaction value pursuant to 402(b) of the TAA and
based the value of each Product on the full resale price paid to
Zenith by its U.S. customer. Zenith now submits that the proper
appraisement of Products imported from Partes is transaction
value pursuant to 402(b) of the TAA based on the price Zenith
paid the foreign vendor. Additionally, in letters dated October
7 and 8, 1996, to the Supervisory Import Specialist, Counsel has
requested to amend all Zenith's protests by adding an additional
ground. Zenith submits that the Products previously entered into
the U.S. duty-paid, which were warehoused in Chicago, and then
moved to Partes, are entitled to duty-free treatment under
subheading 9801.00.20, HTSUS. Counsel stated in the March 20,
1997, telephone conversation that Zenith has not claimed drawback
on any of the Products eligible for subheading 9801.00.20, HTSUS,
duty-free treatment.
ISSUE:
1. Whether the protestant can amend its Protests.
2. Whether the Products imported from Mexico should be
appraised pursuant to transaction value of 402(b) of the TAA
based on the purchase price between Zenith and the Asian vendors.
If so, are the packing costs incurred in Mexico a statutory
addition to the price actually paid or payable pursuant to
402(b)(1)(B) of the TAA.
3. Whether the imported Products are entitled to duty-free
treatment pursuant to subheading 9801.00.20, HTSUS.
LAW AND ANALYSIS:
1. Amendment to Protest
With regard to whether Zenith may amend its protests,
174.14(a), Customs Regulations (19 CFR 174.14(a)), provides
that:
A protest may be amended at any time prior to the
expiration of the 90-day period within which such
protest may be filed determined in accordance with
174.12(e). The amendment may assert additional claims
pertaining to the administrative decision which is the
subject of the protest, or may challenge an additional
administrative decision relating to the same category
of merchandise which is the subject of the protest.
For the presentation of additional grounds or arguments
in support of a valid protest after the 90-day period
has expired see 174.28.
174.28, Customs Regulations (19 CFR 174.28), which provides:
In determining whether to allow or deny a protest filed
within the time allowed, a reviewing officer may
consider alternative claims and additional grounds or
arguments submitted in writing by the protesting party
with respect to any decision which is the subject of a
valid protest at any time prior to disposition of the
protest....
Zenith submits that the Products previously entered into the
U.S. duty-paid, which were warehoused in Chicago, and then moved
to Partes, are entitled to duty-free treatment under subheading
9801.00.20, HTSUS. Zenith has submitted its additional ground in
writing in its letters dated October 7 and 8, 1996, to the
Supervisory Import Specialist. For most of the entries under
protest the October 7 and 8, 1996 additional ground was submitted
to Customs well after the 90-day period set forth in 19 CFR
174.14(a). Thus, Customs may consider Zenith's additional
ground, as set forth in the October 7 and 8, 1996 letters, only
if its an additional ground asserted against a valid claim set
forth in its protests.
The representative protest submitted to this office asserts
that the appraised value of all the imported merchandise was
incorrect. Additionally, Zenith stated that "...in other cases,
there was no 'importation' of the merchandise so that no duties
would be owed." We do not find any language in the protest which
raises the duty-free claim of subheading 9801.00.20, HTSUS.
Thus, the protest does not "cryptic[ly], inartistic[ly], or
poorly drawn," raise as a protested administrative decision the
duty-free claim. See, Mattel, Inc. v. United States, 72 Cust.
Ct. 257, C.D. 4547, 37 F. Supp. 955 (1974) and HRL 224447 dated
September 26, 1996. Pursuant to the representative protest
submitted, Zenith's letters claiming duty-free treatment pursuant
to subheading 9801.00.20, HTSUS, were not timely submitted.
Therefore, you may not consider this additional ground pursuant
to 19 CFR 174.28.
2. Valuation
The preferred method of appraising merchandise imported into
the U.S. is transaction value pursuant to 402(b) of the TAA.
402(b)(1) of the TAA provides, in pertinent part, that
transaction value of imported merchandise is the "price actually
paid or payable for the merchandise when sold for exportation to
the United States," plus enumerated statutory additions including
packing costs incurred by the buyer. 402(b)(1)(A) of the TAA.
-Related Parties:
Imported merchandise is appraised under transaction value
only if the buyer and seller are not related, or if related, the
transaction value is deemed to be acceptable. In this situation,
one of Zenith's foreign vendors, Lucky Goldstar, is a related
party pursuant to 402(g)(1) of the TAA. 402(b)(2)(B) of the
TAA provides that transaction value between related parties is
acceptable only if an examination of the circumstances of the
sale indicates that the relationship between the parties does not
influence the price actually paid or payable, or the transaction
value of imported merchandise closely approximates the
transaction value of identical or similar merchandise in sales to
unrelated buyers in the U.S. or the deductive or computed value
for identical or similar merchandise. Although you did not
specifically seek advice regarding whether the relationship
between Zenith and Lucky Goldstar affects the price of the
imported merchandise, we feel a brief discussion of this issue is
warranted.
Under the circumstances of sales approach, if the parties
buy and sell from one another as if they were unrelated,
transaction value will be considered acceptable. Thus, if the
price is determined in a manner consistent with normal industry
pricing practice, or with the way the seller deals with unrelated
buyers, the price actually paid or payable will be deemed not to
have been influenced by the relationship. Furthermore, the price
will not be influenced if it is shown that the price is adequate
to ensure recovery of all costs plus a profit that is equivalent
to the firm's overall profit realized over a representative
period of time in sales of merchandise of the same class or kind.
Statement of Administrative Action, reprinted in Customs
Valuation under the Trade Agreements Act of 1979, Department of
the Treasury, U.S. Customs Service (October 1981) at 54;
152.103(j)(2), Customs Regulations (19 CFR 152.103(j)(2)).
Counsel states that Zenith and Lucky Goldstar buy and sell
from one another as if they were unrelated. As evidence of this
practice, Zenith provided two sets of invoice for two different
products. The invoices show that Zenith paid Lucky Goldstar the
same price for each product before (invoice dated September 6,
1995, for part number 597-106A; and invoice dated September 22,
1995, for part number 521-250S) and after the parties became
related (invoice dated January 24, 1996, for part number 597-106A; and invoice dated January 1, 1996, for part number 521-250S). Thus, Counsel contends that transaction value is
acceptable between Zenith and its related foreign vendor, Lucky
Goldstar.
A similar argument was raised in HRL 545272 dated August 17,
1995, in which the importer argued that the sale between the
related parties should be used for determining the transaction
value of the imported merchandise because the parties allegedly
dealt with each other at arm's length as though they were
unrelated. In support of this position, the imported stated that
a 1986 sales agreement between the parties was negotiated at a
time when the parties were not related and that the pricing of
the merchandise remained in effect subsequent to 1989 even after
the parties became related. In determining that this evidence
was insufficient to justify that the related dealt with each
other as if unrelated, HRL 545272 stated:
Based on the above, it appears when that the joint venture
was formed, the corporate relationship between [the related
parties] may not have immediately effected the price of the
existing products. However, for a transaction to be truly
arm's length, a pricing scheme cannot stay in effect
indefinitely because market conditions can change over time.
The original sales contract was negotiated in 1986 and 1987,
but the actual sales of the [imported products] occurred
several years later, such as in the sample entry provided by
the Office of Regulatory Audit, where the transaction
occurred in 1991. To ensure that prices of the products are
kept current, the parties may have to review the prices and
make adjustments. At some point, the parties may even have
to renegotiate with each other. In other words, we believe
that even though the prices for some the [imported products]
were initially set when they were unrelated, it does not
necessarily establish that the relationship between [the
related parties] did not influence the price of the
[imported product] over an indefinite period of time. The
fact that the prices remained unchanged over a period over
several years is some indication that the relationship may
have influenced the price. In order for Customs to accept
the transfer price, additional evidence of its validity is
needed.
It is our opinion that HRL 545272 is applicable to this
situation. The mere fact that the prices remain unchanged before
and after Zenith and Lucky Goldstar became related is not prima
facie evidence that the parties relations did not influence the
price. This fact must be examined along with other evidence
regarding the circumstances of sale to determine whether
transaction value is an acceptable method of appraisement between
the related parties. As no other evidence or positions were
presented by your office or Zenith, we have not formulated on
opinion on this issue.
-Sale for export and Mexican packing costs:
In this situation, we first need to examine whether a sale
for exportation to the U.S. occurred between Zenith and the
foreign vendors. For Customs purposes, the word "sale" generally
is defined as a transfer of ownership in property from one party
to another for a consideration. J.L. Wood v. United States, 62
CCPA 25, 33 C.A.D. 1139 (1974). While J.L. Wood was decided
under the prior appraisement statute, Customs adheres to this
definition under the TAA. The primary factors to consider in
determining whether there has been a transfer of property or
ownership are whether the alleged buyer has assumed the risk of
loss, and whether the buyer has acquired title to the imported
merchandise. See, Headquarters Ruling Letter (HRL) 544775 dated
April 3, 1992, and HRL 543633 dated July 7, 1987. Also relevant
is whether, in general, the roles of the parties and circumstance
of the transaction indicate that the parties are functioning as
buyer and seller. See, HRL 545474 dated August 25, 1995.
A similar factual situation was addressed in HRL 544230
dated December 22, 1988, in which the imported merchandise was
entered into the U.S. from El Salvador under a Transportation and
Exportation Bond and then shipped to Mexico for a retail
packaging operation. After the packaging operation, the
merchandise was imported into the U.S. for retail sale. In that
ruling, Customs determined that the sale for exportation occurred
between the El Salvador seller and the U.S. importer and that the
packing operation in Mexico did not alter that conclusion. HRL
544230 determined that the Mexican packaging operation fell
within the statutory definition of packing costs set forth in
402(h)(3) of the TAA, which states:
the cost of all containers and coverings of whatever
nature and of packing, whether for labor or materials,
used in placing the merchandise in condition, packed
ready for shipment to the United States.
The imported merchandise was not packed ready for shipment to the
United States until it was packaged in Mexico. Thus, the
transaction value was based on the price paid to the seller with
an addition for the packing operation performed in Mexico
pursuant to 402(b)(1)(A) of the TAA.
Additionally, in HRL 545254 dated November 22, 1994, Customs
held that a sale between a foreign company and a United States
company which included an intermediate shipment through a
Canadian bonded warehouse operation was a sale for exportation to
the United States, and transaction value was determined to be the
proper method of appraisement. Thus, the fact that the goods in
the subject transactions were first shipped to Canada and placed
in a bonded warehouse, did not preclude the use of transaction
value. HRL 545254 stated that no contingency of diversion
existed with regard to an alternative disposition of the goods in
Canada. Namely, the merchandise which did not meet the quality
standards was not sold in Canada but was removed from the bonded
warehouse and returned to the exporter.
However, Customs found transaction value inapplicable as a
means of appraisement in HRL 546069 dated August 1, 1996, where
cheese, intended for the United States market, was shipped
through Holland and placed in a bonded warehouse for inspection
to ensure the cheese met contract specifications before its final
shipment to the United States. If the cheese did not meet
specifications, it could be sold in the European market. Given
those facts Customs found that the evidence submitted did not
establish that the cheese was destined for the United States
market.
Based on the above-cited precedent, it is our opinion that
the Products are sold for exportation and destined for the United
States at the time Zenith purchased them from the Asian sellers.
Zenith has submitted purchase orders, invoices, packing lists,
Customs Forms and bills of lading as evidence that the Products
are sold for exportation and destined for the United States at
the time Zenith purchased the Products from the Asian sellers.
Both the purchase orders and invoices indicate that the terms of
sale or shipping terms are FOB Asian shipping port through Los
Angeles to McAllen, Texas. Thus, the Products are destined to
the U.S. at the time of purchase. Additionally, the bills of
lading show shipment from Asia to the United States and Zenith as
the consignee, who is responsible for paying the shipping costs.
Title to the Products is transferred from the foreign vendors to
Zenith at the time the Products are loaded onto the vessels bound
for the U.S. The foreign vendors receive payment for the
Products shortly after the Products are loaded aboard a vessel
bound to the United States through letters of credit. Zenith has
also submitted copies of Customs Form 7512, Transportation Entry
and Manifest of Goods Subject to Customs Inspection and Permit
for Transportation and Exportation class of entry, as evidence
that they are importer of record when making entry into the U.S.
Additionally, in HRL 545368 dated July 6, 1995, Customs
examined a number of factors to ascertain whether imported hair
dryers were clearly destined for the United States in determining
whether a sale for exportation took place between the foreign
manufacturer and the middleman. In this case the imported
products exclusively used English on their packaging and on the
care manual; they contained UL safety label on the packaging;
they used 110-volt electrical current, which is not used outside
of North America; they incorporated a circuit interruption
device, which is required only in the U.S.; they used U.S.
trademarks on the product and product packaging and statements on
the shipping documents showed that the merchandise was to be
delivered to the importer in the U.S. Thus, Customs held that
the products were clearly destined for the United States. As the
manufacturer and middleman were unrelated and it was presumed
that they negotiated at arm's length, Customs determined that the
transaction value was based upon the price actually paid or
payable by the middleman to the manufacturer.
With regard to the Products being destined for the United
States, we find that the Products are similarly situated to the
hair dryers in HRL 545368. Zenith submitted a sample of an
imported accessory, "SpaceSound,"as evidence that its Products
are destined to the United States at the time of purchase. The
Product and its packaging comply with U.S. Customs country of
origin marking requirements in that it carries the statement, in
English, that the Product is "Made in China." Zenith's trademark
for the Product, its copyrighted logo, and Zenith's name appear,
in English, on the Product, its packaging, and user's manual.
Zenith states that, when mandated by U.S. law, the Products
possess safety features, such as circuit interrupter devices,
which are required in the United States but are not required in
other countries, including Mexico. Counsel notes that the sample
accessory carries a UL safety label and a Federal Communications
Commission product identification number. Thus, an examination
of the Product and its packaging indicates that it is destined to
the United States. Counsel states that all of its Products are
treated in a manner similar to the submitted sample.
Based on the evidence submitted, the Products which are
imported in-bond through the U.S. and then re-packaged in Mexico
for importation in the U.S. are clearly destined for the United
States at the time Zenith purchased them from the Asian vendors.
Similar to HRL 544230, we find that the imported merchandise is
not packed ready for shipment to the United States until it has
been packaged in Mexico. It is our opinion that the costs
incurred in Mexico, temporary storage and handling, are integral
to this packing operation and, therefore, meet the statutory
definition of packing costs in 402(h)(3) of the TAA. The
packing costs are a statutory addition to the price actually paid
or payable pursuant to 402(b)(1)(A) of the TAA. The Products
are appraised pursuant to transaction value under 402(b) of the
TAA based on the price actually paid or payable between Zenith
and the foreign vendors with an
addition for the packing costs incurred by Zenith in Mexico.
-Buying Agent:
We note that in acquiring the Products from the foreign
vendors, Zenith on occasion uses Buying Agents. Counsel states
that Zenith provides these agents with product specifications and
requirements and the terms which Zenith will accept. Thus, the
agents act on behalf of Zenith in seeking and securing vendors.
As a general matter, bona fide buying commissions are not added
to the price actually paid or payable. Pier 1 Imports, Inc. v.
United States, 708 F. Supp. 351, 13 CIT 161, 164 (1989). The
existence of a bona fide buying commission depends upon the
relevant factors of the individual case. J.C. Penney Purchasing
Corp. v. United States, 451 F. Supp. 973 (Cust. Ct. 1978). In
this regard the importer has the burden of proving the existence
of a bona fide agency relationship and that payments to the agent
constitute bona fide buying commissions. Rosenthal-Netter, Inc.
v. United States, 679 F. Supp. 21, 23, 12 CIT 77, 78 (1988).
Since the buying agency issue was not raised in this request and
no evidence was submitted, we have not formulated a position as
to whether it is dutiable.
3. Subheading 9801.00.20
We previously found in 1 of this ruling that pursuant to
the representative protest, the protests may not be amended to
include the duty-free claim under subheading 9801.00.20, HTSUS.
However, if you find that a protest timely and properly raises
the subheading 9801.00.20, HTSUS, issue, the analysis below
should be used in your disposition of the protest.
Subheading 9801.00.20, HTSUS, provides for the duty-free
treatment of:
[a]rticles, previously imported, with respect to which
the duty was paid upon such previous importation ... if
(1) reimported, without having been advanced in value
or improved in condition by any process of manufacture
or other means while abroad, after having been exported
under lease or similar use agreements, and (2)
reimported by or for the account of the person who
imported it into, and exported it from, the United
States.
The predecessor of subheading 9801.00.20, HTSUS, was item
801.00 of the Tariff Schedules of the United States (TSUS). That
particular provision was amended in 1984 to provide for, inter
alia, articles that had been exported under "similar use
agreements" and leases to entities other than foreign
manufacturers. Trade and Tariff Act of 1984, Pub. L. No. 98-573,
118, 98 Stat. 4922 (1984). Before the amendment, duty-free
treatment applied only to merchandise that had been exported
under lease to foreign manufacturers.
In this case Zenith claims that the Products qualify for
duty-free treatment under subheading 9801.00.20, HTSUS, as a
"similar use agreement." Based upon the information presented,
the Products imported from Mexico were being reimported by or for
the account of the person who imported them into, and exported
them from, the United States, namely Zenith. Furthermore, while
in Mexico, the Products were stored and repackaged for return to
the U.S. and Partes was compensated for the storage service in
lump sum payments from Zenith. Thus, while in Mexico the
Products were not advanced in value or improved in condition by
any process of manufacture or other means.
In regard to whether the parts and accessories were exported
under a lease or similar use agreement, it is our opinion that
the agreement between Zenith and Partes is not a lease as Zenith
did not grant Partes with the right to use the parts and
accessories in exchange for periodic payments. Rather, Zenith is
the party that is paying Partes for its services. See Werner &
Pfleiderer Corp. v United States, 17 CIT 916, 918 (1993), citing
to Black's Law Dictionary 889 (6th ed. 1990) defining a "lease"
as, "a contract by which one owning ... property grants to
another the right to possess, use and enjoy it for specified
period of time in exchange for periodic payment."
However, it is our opinion that the relationship between
Zenith and Partes is a bailment agreement for Partes to hold and
repackage the goods until they are needed by Zenith's customers.
See HRL 222863 dated July 1, 1991. The term "bailment" is
defined as:
[a] delivery of goods of personal property, by one person to
another, in trust for the execution of a special object upon
or in relation to such goods, beneficial either to the
bailor or bailee or both, and upon a contract, express or
implied, to perform the trust and carry out such object, and
thereupon either to redeliver the goods to the bailor or
otherwise dispose of the same in conformity with the purpose
of the trust. Black's Law Dictionary 129 (5th ed. 1979).
Therefore, in the spirit of the liberal interpretation of
subheading 9801.00.20, HTSUS, we find that this bailment
arrangement is a "similar use agreement" within the meaning of
subheading 9801.00.20, HTSUS, and that the Products are eligible
for duty-free treatment under subheading 9801.00.20, HTSUS,
provided you are satisfied that the Products for which free entry
are claimed were duty-paid on a previous importation. See 19 CFR
10.108.
HOLDING:
Based on the representative protest submitted, Zenith may
not amend its protest by adding its additional ground that the
Products previously entered into the U.S., which were warehoused
in Chicago, and then moved to Partes, are entitled to duty-free
treatment under subheading 9801.00.20, HTSUS, pursuant to 19 CFR
174.28.
Based on the evidence presented, the Products are clearly
sold for exportation to the U.S. from the foreign vendors. Thus,
assuming transaction value is acceptable, the Products are
appraised under 402(b) of the TAA based on the price actually
paid or payable between Zenith and the foreign vendors. The
packing costs incurred by Zenith and paid to the Mexican related
party are to be added to the price actually paid or payable in
determining transaction value.
If a protest timely and properly raises the subheading
9801.00.20, HTSUS, claim, it is our opinion that the Products
are eligible for duty-free treatment under subheading 9801.00.20,
HTSUS. In order to receive duty-free treatment under this tariff
provision, no specific documents are required; rather, the
importer must establish to your satisfaction that the statutory
requirements have been met.
This decision should be mailed by your office to the
internal advice requester no later than 60 days from the date of
this letter. On that date 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 the public
via the Diskette Subscription Service, Freedom of Informational
Act and other public access channels.
Sincerely,
Acting Director
International Trade Compliance
Division