HQ 544083: Response to Internal Advice No. 66/87

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                                  HQ 544083

                                   August 16, 1988

          CLA-2 CO:R:C:V   544083 EK

          CATEGORY:  Valuation

          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