CLA-2 CO:R:C:V 544083 EK
District Director of Customs
Laredo, Texas
RE: Response to Internal Advice No. 66/87
Dear Sir:
This is in response to your memorandum requesting internal
advice as to the dutiability of certain equipment consigned by a
domestic division of (corporation name) (hereinafter referred to
as importer) to its related company in Mexico.
FACTS:
The importer states that certain equipment is consigned,
free of charge, to its wholly owned subsidiary in Mexico to
produce steering wheels and instrument panel pads. The equipment
in question is described by the importer as follows:
1. Two different types of dryers which are used to remove excess
surface moisture from vinyl resin pellets prior to being loaded
into an extrusion molding machine for the production of vinyl
sheets. One dryer is used to force heated air through the
pellets. The second dryer uses compressed air to dry the pellets
so that no moisture is present when the vinyl resin enters the
extrusion mold. The vinyl sheets are later transferred to an
injection mold where they are formed into an instrument panel pad
(IP).
2. A high pressure washer used to wash dirt, oil, processing
residues and other contaminants from IPs after their production
is complete and prior to packaging and shipment.
3. A bulk storage tank used to store polyol, a liquid foam
material, used in the assembly of IPs. During the manufacture
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of IPs, polyol is pumped from the tank to a mold which holds the
vinyl sheet in the upper portion and the insert in the lower
portion.
4. Paint booths which are enclosed sheet metal structures
equipped with exhaust systems which allow the IPs and steering
wheels to be painted in an environment free of dust and dirt.
5. Air compressors which are used to supply compressed air at
approximately 100 lbs./square inch throughout the plant. The
compressed air is used to operate various machinery and equipment
throughout the plant.
6. A conveyor system which is used to transport raw materials
from storage areas to the first point of usage in the plant. A
second conveyer is used to move the article being produced from
one point in the manufacturing process to another.
The final imported product in this case is appraised
pursuant to computed value, section 402(e) of the Tariff Act of
1930, as amended by the Trade Agreements Act of 1979 (TAA;
19 U.S.C. 1401a(e)).
ISSUE:
Whether the machinery and equipment consigned by the
importer to its wholly owned subsidiary in Mexico is properly
included in the computed value of the final imported product.
LAW AND ANALYSIS:
As indicated above, the merchandise is appraised pursuant
to computed value. Under computed value, the value of any assist
will be added if its value is not included under section
402(e)(1)(A) or (B) of the TAA. Included in the definition of
assists are "tools, dies, molds, and similar items used in the
production of the imported merchandise." See, section
402(h)(1)(A)(ii). (emphasis added).
In TAA #18 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). These items included telephone switching
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equipment, an emergency generator, air conditioning equipment and
a power transformer. This equipment was contrasted with what was
called "general purpose equipment" such as sewing machines, ovens
drill presses, etc., which was actually used in the production of
the merchandise and held to be dutiable as assists. This
position was also followed in Headquarters Ruling No. 542762
dated January 14, 1983.
With respect to the instant case, the equipment in question
is not used in the actual production of the imported merchandise
within the meaning of the section 402(h)(1)(A)(ii) of the TAA or
the above-cited rulings.
Please note, however, that 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:
In view of the foregoing, the equipment in question is not
encompassed by the definition of assists in section
402(h)(1)(A)(ii) of the TAA. The issue regarding whether the
costs are to be included in the computed value of the final
imported product must be determined according to generally
accepted accounting principles.
Sincerely,
John Durant, Director,
Commercial Rulings Division