HQ 544498: Request for Ruling on Proration of Export Preparation Costs

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 544498

                                 June 19, 1990
VAL CO:R:C:V  544498 ML

CATEGORY:  Valuation

----------------
-------------- Corporation
P.O. Box 85
---------------  67201-0085

RE:  Request for Ruling on Proration of Export Preparation Costs

Dear Mr. ------:

     This is in response to your letter of April 25, 1990,
requesting a ruling regarding the proration of export preparation
costs.  This request follows a prior ruling on February 23, 1990,
file VAL CO:R:C:V 544204 DHS, in which you were informed that a
decision as to the aforementioned issue could not be made without
the submission of additional documentation.  Having received
further explanations and information, we can now address this
issue.

FACTS:

     Production inventory was transported to the United States in
200 forty foot containers over the course of at least one year.
The shipments are said to include tooling, production inventories
and spare parts.  The preparation costs for export shipping
include nine (9) functions.  The areas covered by these costs
include the initial inspection confirmation and initial boxing in
the ---------- shop to the final packing of the goods in a rented
packing area.  You have stated that these costs were included in
the final invoice price.  ------------ invoices to ----- -------t
contain the expenses incurred in the nine functions involved in
the preparation of the tools and materials for export.  Copies of
your foreign wire transfer amounted to $2,182,362.50 for the
export preparation costs, excluding the preparation costs for the
last two container loads received the week of April 16-20, 1990.
Based on your own calculations, you feel that -------------- owes
a total of $26,817.98 to Customs for duties on export preparation
costs.

ISSUE:

     Can export preparation costs be prorated on a percentage
basis?

LAW AND ANALYSIS:

     The preferred method of appraising merchandise is
transaction value which is defined in section 402(b) of the
Tariff Act of 1930, as amended by the Trade Agreements Act of
1979 (TAA: 19 U.S.C. 1401a(b)) as the "price actually paid or
payable" for merchandise when sold for exportation to the United
States, plus certain enumerated additions.  Section 402(b)(1)(A)
of the TAA provides for the addition of "packing costs incurred
by the buyer with respect to the imported merchandise" to the
price actually paid or payable.  Section 402(h)(3) of the TAA
defines packing costs as including the costs incurred by the
buyer for all containers and coverings of whatever nature and for
the labor and materials used in packing.  There seems to be no
question that the export preparation costs are dutiable under
this provision.

     Section 500(a) of the Tariff Act of 1930, as amended (19
U.S.C. 1500(a), authorizes the appropriate Customs officer to
appraise merchandise by ascertaining or estimating the value
thereof, under section 1401a, by all reasonable way and means in
his power, any statement of cost or costs of production in any
invoice, affidavit, declaration, other document to the contrary
notwithstanding, regardless of the rate of duty.  Consequently,
it is the function of the District Director to appraise
merchandise and not Headquarters.

     Additionally, while it is unclear just how many entries are
involved, if generally accepted accounting principles are
applied, as that term is defined in the Statement of
Administrative Action, then the proration of export preparation
costs would be acceptable.

HOLDING:

     Merchandise is appraised on an entry by entry basis by the
District Director.  Based on the foregoing, the proration of
export preparation costs would be acceptable as long as it is
consistent with generally accepted accounting principles.

                                   Sincerely,


                                   John Durant, Director
                                   Commercial Rulings Division