RR:CTF:VS H004684 TPB
Mr. David R. McCauley CIE Manager
bebe studio, inc.
400 Valley Dr.
Brisbane, CA 94005
RE: Valuation of Assembled Merchandise Assists Dear Mr. McCauley:
This is in reference to your letter to the Director, National Commodity Specialist Division, New York, dated November 15, 2006 on behalf of bebe studio, inc. (hereinafter importer) requesting a ruling for the valuation of certain garments assembled in China. Specifically you ask whether, with the proper documentation, the importer would be able to claim an entered value of these garments based on the assembly costs by the overseas factory without including the value of fabric provided by the importer.
For the reasons set forth below, the importer may not claim an entered value as the cost of making and trimming by the overseas factory without also claiming the value of any assists.
FACTS:
The merchandise at issue includes ladies knit "cardigans," "tops," "pants," and "shorts." You indicate that the importer would purchase bulk fabric produced in the United States (U.S.) 1. The importer would then work with factories in China to develop prototypes of said garments. The importer would ultimately issue purchase orders for the bulk garments to the same factories that developed the prototypes. The bulk fabric would then be sent to the factory in China
1 The importer would retain ownership of the fabric throughout the production cycle.
(yardage would be based on the order quantity) and the factory would cut, sew and provide buttons, zippers, labels and other trims to the garments. After packing, the garments would be shipped to the U.S.
ISSUE:
What is the proper method of appraising the value of the goods imported from China?
LAW AND ANALYSIS:
Merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA) (19 U.S.C. § 1401a) . The preferred basis of appraisement under the TAA is transaction value, defined as the "price actually paid or payable for the merchandise when sold for exportation to the United States," plus five enumerated additions including the value, apportioned as appropriate, of any assist. 19 U.S.C. § 1401a(b)(1). In order for imported merchandise to be appraised under the transaction value method it must be the subject of a bona fide sale between a buyer and seller, and it must be a sale for exportation to the United States.
Concerning the assembly operation described in the facts above, 19
C.F.R. § 152.103(a)(3) reads, in pertinent part:
(3) Assembled merchandise. The price actually paid or payable may represent an amount for the assembly of imported merchandise in which the seller has no interest other than as the assembler. The price actually paid or payable in that case will be calculated by the addition of the value of the components and required adjustments to form the basis for the transaction value.
Example 1. The importer previously has supplied an unrelated foreign assembler with fabricated components ready for assembly having a value or cost at the assembler's plant of $1.00 per unit. The importer pays the assembler 50[cent] per unit for the assembly. The transaction value for the assembled unit is $1.50.
The scenario described by the importer in the case presently before us appears to fall within the scope of the above example. Providing materials, components, parts or design work undertaken elsewhere than in the U.S. is considered an "assist," which is one of the aforementioned five enumerated statutory additions. An "assist" is defined in 19 U.S.C. § 1401a(h) as follows:
(1)(A) The term "assist" means any of the following if supplied directly or indirectly, and free of charge or at reduced cost, by the
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buyer of imported merchandise for use in connection with the production or the sale for export to the United States of the merchandise:
Materials, components, parts, and similar items incorporated in the imported merchandise.
Tools, dies, molds, and similar items used in the production of the imported merchandise.
Merchandise consumed in the production of the imported merchandise.
Engineering, development, artwork, 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.
Based on the information provided by the importer, the subject merchandise may be appraised under the transaction value method based on the cost of assembly charged by the Chinese manufacturer. In addition, the value of any assists, such as the fabric, provided for the manufacturer must be added to the price actually paid or payable, as well as the costs of shipping these assists
to the factory in China. We further note that the addition for the value of the assists must include the value of any design work such as sketches and plans if produced outside of the U.S.
HOLDING:
For the reasons set forth above, the valuation of the garments shall be determined by their transaction value. This value shall be calculated by the amount paid or payable for the merchandise when sold for exportation to the
U.S. plus the value of any assists.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch
cc: Port Director, San Francisco