CLA-2 RR:CR:SM 560850 CW
Mr. Alan Harlam
President
Karew
500 Wood Street
P.O. Box 929
Bristol, R.I. 02809-0929
RE: Eligibility of decorative steel banding assembled to bathroom
accessory products abroad for
subheading 9802.00.80, HTSUS, treatment; assists
Dear Mr. Harlam:
This is in response to your letter of September 19, 1997,
requesting a ruling on the dutiable status of stamped metal
banding of U.S. origin which is returned to the U.S. after having
been assembled to various bathroom accessory products in China.
FACTS:
You state that your company's bathroom accessory line
consists of waste baskets, tissue box covers, lotion dispenser
with cover, toothbrush holder, drinking cup and holder, soap dish
with stand, and a towel holder, all of which are made, at least
in part, of metalwork components.
The basic steel shape of each item (which you describe as the
"base") is created in China from flat steel stock which is cut to
shape, stamped with a pattern (top and bottom border for the
banding), and welded into final shape. Each piece is decorated
with a banding made in the U.S. from cold rolled steel that is
stamped with a decorative pattern. The banding is shipped to
China in 100-foot coils. In China, the banding is cut to length
and spot-welded onto the steel, after which a single coat of
paint is applied to the steel to protect it from rusting during
the ocean shipment to the U.S.
When the products arrive at your factory in the U.S., they
are subjected to decorative painting which includes a special
paint treatment on the banding portion of each piece and a three-step process on the remainder of the piece. Each piece then
undergoes a final inspection, labeling (hang tag & UPC label),
and packaging.
You ask whether the steel banding which is provided to the
Chinese facility free of charge is considered an assist and
whether the banding is exempt from duty under subheading
9802.00.80, Harmonized Tariff Schedule of the United States
(HTSUS).
ISSUES:
1. Whether the banding is considered an assist under the
Customs valuation statute.
2. Whether the banding is eligible for a duty allowance
under subheading 9802.00.80, HTSUS, when returned to the U.S. as
part of the bathroom accessory products.
LAW AND ANALYSIS:
Assist
Merchandise imported into the U.S. is appraised in
accordance with section 402 of the Tariff Act of 1930, as amended
by the Trade Agreements Act (TAA; 19 U.S.C. 1401a). The primary
method of appraisement under the TAA is transaction value,
defined in section 402(b) of the TAA (19 U.S.C. 1401a(b)), as the
price actually paid or payable for the merchandise when sold for
exportation to the U.S., plus amounts equal to the value,
apportioned as appropriate, of any assist. 19 U.S.C.
1401a(b)(1)(C). The term "price actually paid or payable" means
the total payment (whether direct or indirect) made, or to be
made, for imported merchandise by the buyer to, or for the
benefit of, the seller. 19 U.S.C. 1401a(b)(4). The term
"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 U.S. of the merchandise: materials,
components, parts and similar items incorporated in the imported
merchandise. 19 U.S.C. 1401a(h)(1)(A)(i).
The subject steel banding is a component supplied free of
charge by your company (i.e., the buyer) to the Chinese company
(i.e., the seller) for use in connection with the production of
the imported metalwork components. Therefore, the banding is an
assist whose value must be added to the price actually paid or
payable for the imported merchandise.
If the assist consists of materials, components, parts, or
similar items incorporated in the imported merchandise, and was
produced by the buyer, its value would be the cost of production.
19 CFR 152.103(d)(1). Since you state that the steel banding
was produced by your company in the U.S., the value of the
subject assist would be its cost of production. The value of
this type of assist would also include transportation costs to
the place of production. Id. Consequently, the costs to
transport the subject banding to China would also be included in
the value of the assist.
9802.00.80
Subheading 9802.00.80, 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.
All three requirements of subheading 9802.00.80, HTSUS, must
be satisfied before a component may receive a duty allowance. An
article entered under this tariff provision is subject to duty
upon the full appraised value of the imported assembled article,
less the cost or value of the U.S. components assembled therein,
upon compliance with the documentation requirements of section
10.24, Customs Regulations (19 CFR 10.24).
Section 10.16(a), Customs Regulations (19 CFR 10.16(a)),
provides that the assembly operation performed abroad may consist
of any method used to join or fit together solid components, such
as welding, soldering, riveting, force fitting, gluing,
laminating, sewing, or the use of fasteners. Operations
incidental to the assembly process are not considered further
fabrication operations, as they are of a minor nature and cannot
always be provided for in advance of the assembly operations.
However, any significant process, operation or treatment whose
primary purpose is the fabrication, completion, physical or
chemical improvement of a component precludes the application of
the exemption under HTSUS subheading 9802.00.80 to that
component. See 19 CFR 10.16(c).
Section 10.16(b)(3), Customs Regulations (19 CFR
10.16(b)(3)), provides that the "[a]pplication of preservative
paint or coating, including preservative metallic coating,
lubricants, or protective encapsulation" is an example of an
operation which is incidental to the assembly process. In
addition, according to 19 CFR 10.16(b)(6), "cutting to length of
wire, thread, tape, foil, and similar products exported in
continuous length" is operation incidental to assembly.
In this case, spot-welding the banding to the bathroom
accessory products clearly is an acceptable assembly operation
pursuant to 19 CFR 10.16(a). Moreover, we find that the foreign
operations consisting of cutting the rolls of banding to length
and painting the metalwork components (presumably including the
banding component) for the purpose of protecting the steel from
rusting during the ocean shipment back to the U.S. are incidental
to the assembly process pursuant to 19 CFR 10.16(b). Therefore,
an allowance in duty may be made under subheading 9802.00.80,
HTSUS, for the cost or value of the U.S.-origin banding
components when they are returned as part of the bathroom
accessory products, upon compliance with the documentation
requirements of 19 CFR 10.24.
Section 10.17, Customs Regulations (19 CFR 10.17), provides,
in pertinent part, as follows:
The 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.
Thus, while the value of the banding assist (to be added to the
price actually paid or payable to obtain the full appraised value
of the imported products) includes its cost of production plus
transportation costs to China, the value of the banding component
to be deducted under subheading 9802.00.80, HTSUS, consists of
its value at the time of its exportation from the U.S.
Therefore, the cost of transporting the banding from the U.S.
port of exportation to the Chinese facility would be part of the
value of the imported assembled articles upon which duty would be
assessed.
HOLDING:
Based upon the information you have submitted, the
decorative metal banding which Karew provides to the Chinese
seller free of charge is an assist whose value must be added to
the price actually paid or payable for the imported assembled
merchandise. However, an allowance in duty may be made under
subheading 9802.00.80, HTSUS, for the cost or value of the
banding component when it is returned as part of the assembled
bathroom accessory products, upon compliance with the
documentation requirements of 19 CFR 10.24.
A copy of this ruling letter should be attached to the entry
documents filed at the time the goods are entered. If the
documents have been filed without a copy, this ruling should be
brought to the attention of the Customs officer handling the
transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division