HQ 544216: Dutiability of certain costs as assists

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 544216

                                   August 17, 1988

          CLA-2 CO:R:C:V:  544216 DHS

          CATEGORY:  Valuation

          William F. Joffroy, Jr.
          William F. Joffroy, Inc.
          P.O. Box 698
          Nogales, Arizona 85628-0698

          RE: Dutiability of certain costs as assists

          Dear Mr. Joffroy:

                This is in response to your letter of July 19, 1988,
          requesting a ruling as to whether certain costs will be
          considered by Customs as dutiable assists pursuant to section
          402(h) of the Tariff Act of 1930, as amended by the Trade
          Agreements Act of 1979 (TAA; 19 U.S.C. 1401a).

          FACTS:

                You indicate that your client will be assembling certain
          electrical connectors in Mexico and importing them into the
          United States under item 807.00, Tariff Schedules of the United
          States (TSUS).

                You state that many fixed assets that are purchased in the
          United States by the importer are to be provided to the Mexican
          assembly operation for use in the shipping/receiving department,
          the general offices, the employees' workstations and for the
          purpose of supplying air to the plant.  You indicate that this
          equipment is not to be used in the production of the merchandise
          to be imported into the United States.

                You state that the importer has assigned one of its United
          States employees to be the general manager of the assembly plant
          in Mexico for the purpose of managing and directing the overall
          operations.  He will be compensated from the importer in the
          United States, but will reside in Mexico.

          ISSUES:

                Whether equipment, supplied free of charge by the importer,
          which is not used in the production of the imported merchandise,
          is considered an assist.

                Whether compensation to be paid to a general manager by the
          importer for services performed at a foreign assembly plant
          constitute an assist.











                                        - 2 -

          LAW AND ANALYSIS:

                The definition of an assist, as set forth in section
          402(h)(1)(A) of the Tariff Act is:

                    ...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 United States of the merchandise:

                      (i)   Materials, components, parts, and similar
                            items incorporated in the imported
                            merchandise.
                      (ii)  Tools, dies, molds and similar items
                            used in the production of the imported
                            merchandise.
                      (iii) Merchandise consumed in the production of
                            the imported merchandise.
                      (iv)  Engineering, development, art work, design
                            work, and plans and sketches that are
                            undertaken elsewhere than in the United
                            States and are necessary for the
                            production of the imported merchandise.


                You inquire as to the dutiability of equipment consisting
          of air compressors, various scales, forklift trucks, carts,
          containers, tape dispensers, dock levelers, pallet truck, dock
          seal, dock loading lite, JIB lift, personal computers, office
          equipment and copiers, board marker, matrix printer, eye wash
          station, work benches and stools, plugs and socket air drops. You
          state that this equipment will not be utilized in the production
          of the imported merchandise but in the operation of other areas
          of the assembly plant.

                In Customs Headquarters Ruling Letter 542122, dated
          September 4, 1980 (TAA No. 4), we held that general purpose
          equipment, such as sewing machines, ovens, drill presses, etc.,
          furnished free of charge or at a reduced cost and used abroad in
          the production of merchandise imported into the United States, is
          dutiable under section 402(h)(1)(A)(ii).  However, in Customs
          Headquarters Ruling Letter 542302, dated February 27, 1981 (TAA
          No. 18), Customs concluded that air conditioning equipment, a
          power transformer, telephone switching equipment and emergency
          generators did not fall within the definition of an assist, since
          they were not used in the production of the merchandise.















                                        - 3 -

                Since the equipment listed above is not used in the
          production of the imported merchandise but is used to operate the
          other areas of the assembly plant, the equipment is not an assist
          within the meaning of section 402(h)(1)(A) of the Tariff Act.

                With respect to the management services described above, it
          has consistently been the position of the Customs Service that
          management services of this type are not considered assists.
          See, TAA Nos. 4, 20, 46 and Headquarters Ruling Nos. 543820 dated
          December 22, 1986, and 543877 dated March 17, 1987.

          HOLDING:

                In reference to the case before us, we conclude in
          accordance with the holdings of the cases cited above that the
          equipment does not fall within the definition of an assist, since
          it is not used in the production of the merchandise.  Further, we
          conclude that the salary paid to the U.S. employed manager, who
          is residing in Mexico, is not an assist.  Please note that no
          information has been provided and this ruling does not address
          the issue of the applicability of transaction value as a method
          of appraisement.



                                        Sincerely,




                                        John Durant, Director
                                        Commercial Rulings Division