VAL OT:RR:CTF:VS H015975 GOB
Lawrence M. Friedman, Esq.
Christine H. Martinez, Esq.
Barnes, Richardson & Colburn
301 East Wacker Drive
Suite 1100
Chicago, IL 60601
RE: Apportionment of Assists
Dear Mr. Friedman and Ms. Martinez:
This is in response to your correspondence of August 10, 2007 on behalf of Juno Lighting, Inc. (“Juno”). Our ruling follows.
FACTS:
You seek a ruling with respect to the apportionment and reporting of direct and indirect materials assists and associated freight costs relating to the production of lighting fixtures in Mexico.
You describe the pertinent facts as follows. Juno uses an unrelated contract manufacturer in Mexico to assemble lighting fixtures. Juno provides to the manufacturer all of the necessary production materials and parts for assembly. In addition, Juno supplies indirect materials consumed in the production of the fixtures and production machinery and equipment. Juno understands that these items constitute dutiable assists. You state that all of the finished lighting fixtures are classified under subheading 9405.10.60, Harmonized Tariff Schedules of the United States (“HTSUS”) and that they will be eligible for preferential tariff treatment under NAFTA.
You state that the value of the production material can be identified on a per-unit basis and added to the value of each finished good shipment pursuant to 19 CFR 152.103(e)(1), apportioned over the entire anticipated production. However, you state that the indirect materials are shipped to Mexico sporadically and cannot easily be allocated to individual shipments or merchandise. Further, the costs of transportation of the materials to the production facility are not assessed or paid on a per-unit quantity. Accordingly, you state that Juno cannot accurately report the full value of the material assists and freight on an entry-by-entry basis. However, Juno can identify the costs of transportation and indirect materials on a monthly basis.
You request that Juno be permitted to use an alternative method of apportionment for all assists resulting in a single monthly declaration pursuant to 19 CFR § 152.103(e). You state that Juno proposes to declare all of the assist costs from a given month on the first entry of the following month.
ISSUE:
Whether Juno may apportion its assist costs as requested – in a single monthly declaration such that all assists will be declared on the first entry of the month following the incurrence of such costs?
LAW AND ANALYSIS:
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 (19 U.S.C. § 1401a). The preferred method of appraisement is transaction value, which is defined as the "price actually paid or payable for the merchandise when sold for exportation to the United States," plus certain enumerated additions, including “the value, apportioned as appropriate, of any assist.” 19 U.S.C. § 1401a(b)(1)(C). For the purpose of this ruling we assume that transaction value is the proper basis of appraisement.
The term "assists" includes materials, components, parts and similar items incorporated in imported merchandise, and supplied by the buyer for use in connection with the production or sale for export to the United States of the merchandise. 19 U.S.C. § 1401a(h)(1).
The Customs and Border Protection (“CBP”) regulations address assists in pertinent part as follows:
(a) Assist. (1) “Assist'' means 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.
19 CFR § 152.102(a)(1).
o o o
(e) Apportionment. (1) The apportionment of the value of assists to imported merchandise will be made in a reasonable manner appropriate to the circumstances and in accordance with generally accepted accounting principles. The method of apportionment actually accepted by Customs will depend upon the documentation submitted by the importer (emphasis added). If the entire anticipated production using the assist is for exportation to the United States, the total value may be apportioned over (i) the first shipment, if the importer wishes to pay duty on the entire value at once, (ii) the number of units produced up to the time of the first shipment, or (iii) the entire anticipated production. In addition to these three methods, the importer may request some other method of apportionment in accordance with generally accepted accounting principles. If the anticipated production is only partially for exportation to the United States, or if the assist is used in several countries, the method of apportionment will depend upon the documentation submitted by the importer. [Emphasis supplied.]
19 CFR § 152.103(e).
As provided above, the apportionment of assists must be made in a reasonable manner appropriate to the circumstances and in accordance with generally accepted accounting principles. We note that you state that all of the imported goods at issue are classified under the same HTSUS provision. You state that Juno believes its proposed monthly report closely approximates the “first shipment” methodology and is the best apportionment method available to account for the subject costs. You state that the monthly addition to the entered value shortly after the materials have been received by the Mexican producer is also as clearly connected to the imported goods as is the first shipment methodology.
Upon consideration, we determine that Juno may apportion its assist costs as requested, i.e., in a monthly declaration such that all assists will be declared on the first entry of the month following the incurrence of such costs provided that such apportionment is in accordance with generally accepted accounting principles. We note that the subject goods are classified in the same HTSUS subheading and are claimed to be eligible for preferential tariff treatment under NAFTA. Juno should coordinate this reporting with the CBP port of entry.
HOLDING:
Juno may apportion its assist costs as requested, i.e., in a monthly declaration such that all assists will be declared on the first entry of the month following the incurrence of such costs, provided that such apportionment is in accordance with generally accepted accounting principles.
A copy of this ruling letter should be attached to the entry documents filed at the time the subject goods are entered. If the documents have been filed without a copy, this ruling letter should be brought to the attention of CBP.
Sincerely,
Monika R. Brenner
Chief
Valuation & Special Programs Branch