OT:RR:CFT:VS H044417 RSD
Mr. Preston Hughes, III
Manager Import/Export Compliance
Cessna
P.O. Box 7706
Wichita, Kansas 67277-7706
RE: Tooling and Fixtures used in producing an airplane; Assists; Price actually paid or payable; 19 U.S.C. 1401a(h)(1)(A)
Dear Mr. Hughes:
This is in response to your correspondence of November 6, 2008, concerning whether certain tooling and fixtures supplied to a Chinese airplane manufacturer would constitute assists. A copy of portions of the sales contract between the buyer and the seller was submitted for our consideration.
FACTS:
The Cessna Aircraft Company (Cessna) has contracted with a company in China, Shenyang Aircraft Company (SAC), to produce a small single engine propeller airplane known as the Cessna Model 162, Skycatcher. SAC will fabricate tooling and fixtures for use in the production of parts and for the assembly of the airplane. However, Cessna will specifically pay for and own the tools and fixtures produced by SAC. The Cessna finance department will recognize the tools and fixtures specifically paid for and owned by Cessna as part of its inventory. Cessna will pay for the tools separately from the payment it makes to SAC for the production of the imported airplane. The Cessna-owned tools and fixtures will, effectively, be shipped in place for SAC to utilize free of charge in producing the airplane.
Paragraph of 6.3 of the submitted sales contract between Cessna and SAC conveys ownership of the tooling, special dies, jigs, fixtures, equipment, patterns, drawings, process plans, quality specifications and other manufacturing data designed, developed, qualified, or manufactured by the Buyer, and delivered to the Seller, or manufactured by Seller and specifically paid for by the Buyer to the Buyer. In other words, such items shall be the property of the Buyer. In addition, under the contract the Seller also agrees to maintain the tooling in good condition at no additional cost to the Buyer. This is reiterated in Section B of paragraph 9.2 of the sales contract, which indicates that conveyance of ownership of the tools produced by the Seller and specifically paid for by the Buyer, is given to the Buyer. The paragraph states that all special dies, tools, jigs, fixtures, equipment, patterns, drawings, other manufacturing data, (including all copies of reprints thereof), and any and all material furnished by the Buyer, and subject to removal at the Buyer’s request, shall be used only in filling orders from the Buyer. Transfer of ownership of the tools will occur when Cessna verifies that the first article produced by or assembled on each tool conforms to Cessna’s quality and technical requirements. At that time, the tools will be identified as Cessna’s property and the payment for them will be authorized.
You maintain that the tools constitute assists because Cessna owns the tools and is making them available to SAC free of charge to the foreign manufacturer who will be using them to produce the airplane that Cessna will import into the United States.
ISSUE:
Whether the tools and fixtures produced by SAC and paid for and owned by Cessna are dutiable assists in the transaction value–appraisement of the single engine propeller airplane imported from China for sale into the United States.
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 (19 U.S.C. § 1401a). The preferred method of appraisement is transaction value, which is defined as the "price actually paid or payable for the merchandise when sold for exportation to the United States," plus certain enumerated additions, including “the value, apportioned as appropriate, of any assist.” 19 U.S.C. § 1401a(b)(1)(C). For the purpose of this ruling we assume that transaction value is the proper basis of appraisement.
19 U.S.C. § 1401a(h)(1)(A) provides as follows:
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 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, 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.
If the Cessna owned tooling and fixtures used by SAC to produce the imported airplane constitute dutiable assists, it is pursuant to 19 U.S.C. § 1401a(h)(1)(A)(ii), as “[t]ools, dies, molds and similar items used in the production of the imported merchandise.”
In your submission, you indicate that you believe that because Cessna owns the tooling and is making it available to SAC free of charge for use in producing the airplane that Cessna will import for sale in the United States, they constitute assists. However, we note that according to your submission, Cessna will pay SAC to fabricate the tooling, but it will not supply SAC with the actual tools. Therefore, before determining whether the tools are assists, which is one of the enumerated statutory additions, we must first determine whether the payment for the tooling should be considered as part of the price actually paid or payable for the imported merchandise.
The "price actually paid or payable" is defined in 19 U.S.C. §1401a(b)(4)(A) as the "total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise...) made, or to be made, for the imported merchandise by the buyer to, or for the benefit of, the seller." Several court cases have addressed the meaning of the term "price actually paid or payable." In Generra Sportswear Co. v. United States, 8 CAFC 132, 905 F.2d 377 (1990), the court considered whether quota charges paid to the seller on behalf of the buyer were part of the price actually paid or payable for the imported goods. In reversing the decision of the lower \
court, the appellate court held that the term "total payment" is all inclusive and that "as long as the quota payment was made to the seller in exchange for merchandise sold for export to the United States, the payment properly may be included in transaction value, even if the payment represents something other than the per se value of the goods." The court also explained that it did not intend that Customs engage in extensive fact finding to determine whether separate charges, all resulting in payments to the seller in connection with the purchase of imported merchandise, were for the merchandise or something else. Based upon the Court’s decision in Generra Sportswear Co., CBP presumes that all payments made to the seller, or a party related to the seller, by the buyer are part of the price actually paid or payable. See also Tikal Distributing Corp. v. United States, 24 Ct. In’tl Trade 149 (2000), 93 F.Supp.2d at 1271, aff”d, N0.-1342 (Fed. Cir. April 5, 2001) (decision without published opinion).
It has been Customs and Border Protection’s (CBP) position that a payment of money from the buyer to the foreign manufacturer does not constitute an assist within the meaning of §402(h)(1)(A). In HQ 544381, dated November 25, 1991, we stated that with regard to payments for tooling, CBP has held that payments made by the buyer to the seller to produce or buy such items as tools and molds (which, if provided by the buyer, would constitute assists) necessary to produce the subject merchandise, are part of the price actually paid or payable for the imported merchandise.
In Headquarters Ruling Letter (HQ) 545771, dated March 27, 1998, the buyer was to pay the seller for the cost of a mold. CBP held that since the payment for the mold was made to the seller, there was a rebuttable presumption that the payment was part of the price actually paid or payable for the imported merchandise. In other words, the payment was not an assist, but rather it was dutiable as part of the price actually paid or payable to the seller as a direct payment for the mold.
Similarly, in this case, even though Cessna will own the tools, because Cessna is paying the foreign manufacturer to produce the tools and fixtures rather than supplying the actual tools and fixtures to the foreign manufacturer, they do not constitute assists. Nevertheless, because Cessna is making payments to the foreign seller for the tools and fixtures, these payments would still be considered dutiable as part of the price actually paid or payable to the seller as direct payments to the seller.
HOLDING:
Because Cessna will not be supplying the tools and fixtures to the foreign manufacturer, but will instead be making payments to SAC to produce the tools and fixtures, the tools and fixtures do not constitute assists under 19 U.S.C.
U.S.C. § 1401a(h)(1)(A). However, Cessna’s payments to SAC to produce the tooling and fixtures are still dutiable as part of the price actually paid or payable for the imported merchandise.
This analysis is based solely on your description and a sample agreement attached to the November 6, 2008 submission. Any determination whether the tools and fixtures constitute dutiable assists will depend on the totality of the evidence for the particular transaction. The actual determination will be made by the appraising officer at the applicable port of entry based upon the totality of the evidence, including the entry documentation submitted.
A copy of this ruling letter should be attached to the entry documents filed at the time the subject goods are entered. If the entry documents have already been filed this ruling letter should be brought to the attention of the field office where the documents were filed.
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Programs Branch