CLA-2 CO:R:CV:V 544147 DH
Irving W. Smith, Jr., Esq.
1331 Pennsylvania Avenue, N.W.
Suite 1200F
Washington, D.C. 20004
RE: Reconsideration of Internal Advice Regarding
the Dutiability of Photomasks
Dear Sir:
This is in response to your letter of June 3, 1987,
requesting a review of Headquarters Ruling Letter (HRL) 543889,
dated May 12, 1987.
In this ruling, we held that a photomask, which is used in
the transfer of integrated circuitry patterns onto silicon
wafers, is an assist within the meaning of section
402(h)(1)(A)(ii) of the Tariff Act of 1930, as amended by the
Trade Agreements Act of 1979 (TAA; 19 U.S.C. 1401). Further, we
concluded that the value of the assist is its cost of production
which included the engineering and development costs incurred by
the importer in producing the photomask.
FACTS:
You have provided additional information upon which to base
this reconsideration. You state that under the current
processing the photomask does not come into contact with either
the silicon wafer or the photoresist coating on the silicon
wafer. The image is projected onto the photoresist by
ultraviolet light. You state that the photomask merely transfers
the pattern (technical know-how) of the mask to the photoresist
plastic material on the wafer. You allege that the transfer of
the image does not cause any physical change in the silicon wafer
and that the image actually transferred is not the same as the
image on the photomask in that it will undergo changes in length,
width, and rounding of any corners during the developing process
(washing with solvent) of the photoresist.
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ISSUES:
Does the photomask fall within the definition of an assist
under section 402(h)(1)(A)(ii)?
If the photomask is determined to be an assist, is the
design and engineering work performed in the United States to be
included in the value?
LAW AND ANALYSIS:
As explained in Headquarters Ruling Letter 543889, the
definition of the term "assists" in section 402(h)(1)(A)
specifies those items or services which are treated as assists
when supplied directly or indirectly to the buyer of imported
merchandise, free of charge or at a reduced cost, for use in
connection with the production or the sale for export to the
United States of the imported merchandise. Included in these
items or services are "tools, dies, molds, and similar items used
in the production of the imported merchandise" pursuant to
section 402(h)(1)(A)(ii).
We have stated in TAA No. 54, dated November 12, 1982, that
a mold is ordinarily perceived as an item which gives final shape
and form to the manufactured article. You contend that since the
photomask does not come into contact with the photoresist coated
wafer that the photomask can not give final shape and form to the
imported product.
The fact that the image of the photomask is transferred to
the photoresist coated wafer by projection rather than by actual
physical contact is immaterial. The mask is still used directly
in the manufacture of the article, in the same way that a mold is
used. We believe that the differences between these two methods
is insignificant in the determination of whether or not the
photomask can be considered an assist. We are also of the
opinion that Headquarters Ruling Letters 542936, dated November
12, 1982 ("mother disks") and 542625, dated January 18, 1982
("working films") are not analogous to this situation. In both
those rulings, an intermediate article (a metal stamper and a
printing plate, respectively) was used to transfer the
information from the "design" article (mother disk and working
film) to the final product. In this case, the photomask itself
is used; there is no intermediate article.
You also contend that the engineering and development costs
related to the photomask should not be included in the value of
the assists furnished the foreign producer in light of the
holding in TAA No. 12, dated November 25, 1980.
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In TAA No. 12, the importer provided design work to a
manufacturer in the United States which produced "bare" circuit
boards, then delivered them to the importer. These boards were
then shipped with other components to be assembled in Mexico.
We held under those facts that the boards were assists as
defined in section 402(h)(1)(A)(i) of the TAA, as materials,
components, parts and similar items incorporated in the imported
merchandise. The value of the assist was determined to be based
upon the price of acquisition since it was acquired by the
importer from an unrelated seller. We referred to the Statement
of Administrative Action pertaining to materials, components,
parts, and similar items incorporated in the imported merchandise
in drawing this conclusion. The Statement of Administrative
Action provides:
If the assist was acquired by the importer
from an unrelated seller, the value of the
assist is the cost of acquiring it. If the
element was produced by the importer or
person related to him, its value would be the
cost of producing it. The value shall
include transportation costs to the place of
production. (emphasis added)
The cost of acquiring the "bare" circuit boards from the
unrelated U.S. seller only included the price paid by the buyer
to the manufacturer without the additional cost of the design
work since it was the service of manufacturing the "bare" circuit
boards which was purchased and not the design work.
Under the present situation, the importer has developed the
design work and manufactured the mold from the design work.
Therefore, the mold would be valued based upon the costs of
producing the mold including the transportation costs to the
place of production. Included within these costs is the cost of
the design work undertaken within the United States. The
Statement of Administrative Action regarding tools, dies, molds
or other similar items used in the production of the imported
merchandise provides:
If the assist was acquired by the importer
from an unrelated seller, the value of the
assist is the cost of acquiring it. If the
element was produced by the importer or
person related to him, its value would be the
cost of producing it.... (emphasis added)
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In accordance with section 402(h)(1)(A)(iv), it is the
policy of the Customs Service not to duty services performed in
the United States assuming that section is applicable. However,
this is not the case in either TAA No. 12 or the present
situation. The items being valued in these cases fall under
section 402(h)(1)(A)(i) and 402(h)(1)(A)(ii) of the TAA and are
therefore valued pursuant to their specific provisions in the
Statement of Administrative Action.
Therefore, we uphold our conclusion in Headquarters Ruling
No. 543889, that the value of the assist is the cost of
production which includes the engineering and development costs
incurred in the United States by the importer in producing the
photomask.
HOLDING:
We conclude that the photomask constitutes a mold under
section 402(h)(1)(A)(ii). Further, we conclude that the design
and engineering work performed in the United States by the
importer is to be included in the cost of production.
Sincerely,
Harvey B. Fox
Director, Office of
Regulations and Rulings