RR:IT:VA 547489 KCC
Mr. Robert Swierupski, Director
National Commodity Specialist Division
U.S. Customs Service
6 World Trade Center
New York, NY 10048
RE: IA 22/99; 19 CFR 10.17; 9802.00.80
Dear Mr. Swierupski:
This is in response to your memorandum (CLA-2-:RR:NC:N1:101; NY File #E85659) dated August 20, 1999, requesting internal advice concerning the valuation of U.S.-manufactured radios used in the assembly of automobiles subsequently imported into the U.S. It is our understanding that this internal advice request results from a compliance assessment performed by Customs on Toyota Motor Sales, U.S.A., Inc. (“Toyota USA”). We regret the delay in responding.
FACTS:
Matsushita Communication Industrial Corp. (“MCIC”), a U.S. manufacturer, manufactures radios for installation into automobiles. The radios are sold by MCIC to AMAC Corp. (“AMAC”), which is a California-based export division of Panasonic Corp. (“Panasonic”). AMAC then sells the radios to Matsushita Electric Industrial (“MEI”) in Japan for $176.99 per unit, F.O.B. U.S. port of export. We have been provided with an invoice demonstrating this sale from AMAC to MEI. Once in Japan, MEI sells the radios domestically to Toyota Motor Corp. (“Toyota”) at the yen equivalent of $208.06 per unit. Toyota then incorporates the radios into automobiles, and the automobiles are subsequently imported into the U.S.
Toyota USA claims that the price paid by Toyota to MEI for the radios starts with the base U.S. price ($186.60) at which the same radios are sold by
Panasonic to U.S.-based Toyota factories. To that price MEI adds 11.5% which covers the post-export expenses such as international freight, insurance, duties, and handling charges.
ISSUE:
Whether the submitted documentation reflects the cost for the U.S.-produced radios when last purchased, FOB U.S. port of export.
LAW AND ANALYSIS:
Subheading 9802.00.80, Harmonized Tariff Schedule of the United States (“HTSUS”), provides a partial duty exemption for:
[a]rticles *** assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubricating and painting.
It is our understanding that all concerned parties agree that the three requirements of subheading 9802.00.80, HTSUS, are satisfied and that the U.S.-produced radios may be eligible for a duty allowance. The only issue that remains to be determined concerns the appropriate value of the radios.
In this regard, an article entered under subheading 9802.00.80, HTSUS, is subject to duty upon the full value of the imported assembled article, less the cost or value, within the meaning of section 10.17, Customs Regulations (19 CFR 10.17), of the U.S. components assembled therein. 19 CFR 10.17 provides the following concerning the determination of the cost or value of the U.S. components:
[t]he value of fabricated components to be subtracted from the full value of the assembled article is the cost of the components when last purchased, f.o.b. United States port of exportation or point of border crossing as set out in the invoice and entry papers, or, if no purchase was made, the value of the components at the time of their shipment for exportation, f.o.b. United States port of exportation or point of border crossing, as set out in the invoice and entry papers. However, if the appraising officer concludes that the cost or value of the fabricated components so ascertained does not represent a reasonable cost or value, then the value of the components shall be determined in accordance with section 402 or section 402a, Tariff Act of 1930, as amended (19 U.S.C. §1401a, 1402).
As reiterated in HQ 546336, issued September 19, 1996, it is Customs position that the “cost of components when last purchased,” refers to the price in effect at the date of exportation. See HQ 559570, dated June 6, 1997. 19 CFR 10.17 is very clear that the value of fabricated components is the cost of the components when last purchased, FOB U.S. port of export, as set out in the invoice and entry papers. The provided invoice clearly provides that U.S.-based AMAC sold radios to Japan-based MEI, the radios were destined for export to Japan, and the price stated on the invoice was $176.99 per unit. We take this price to be the price in effect at the date of exportation. Therefore, in accordance with 19 CFR 10.17, the proper value of the radios in the instant case is $176.99.
HOLDING:
The submitted documentation reflects the cost for the U.S.-produced radios when last purchased, FOB U.S. port of export, and the value of the radios, in accordance with 19 CFR 10.17, is $176.99.
Sincerely,
Thomas L. Lobred
Chief, Value Branch