Transaction value; assists; employee housing and compensation; assembly operations; 9802.00.80, HTS.

HQ 545117 October 30, 1992 VAL-CO:R:C:V 545117 GG CATEGORY: Valuation David S. Simpson, Jr. Vice President William F. Joffroy, Inc. P.O. Box 698 Nogales Foreign Trade Zone Nogales, Arizona 85628-0698 RE: Transaction value; assists; employee housing and compensation; assembly operations; 9802.00.80, HTS. Dear Mr. Simpson: This is in response to your ruling request, dated September 15, 1992, made on behalf of your client, AMP Incorporated. Our decision follows. FACTS: AMP Incorporated ("AMP"), of Harrisburg, Pennsylvania, provides raw materials and components for electrical connectors to an assembly facility in Mexico. AMP pays the assembler for the assembly of the connectors in Mexico. AMP, the importer of record, imports the connectors under subheading 9802.00.80, Harmonized Tariff Schedule of the United States. The merchandise is appraised under transaction value. A semi-annual report is presented to U.S. Customs, which summarizes all costs and assists, and includes any required adjustments. AMP has assigned several of its U.S. employees to the Mexican production facility. The U.S. employees are responsible for directing and managing the overall operation of the plant. They do not work directly in the manufacturing process. AMP has also purchased three homes in Mexico from a Mexican owned and operated business. The homes were paid for entirely by AMP, and will be capitalized on that company's books and depreciated over a period of twenty years. Title to the homes will be held in trust on behalf of AMP Incorporated by BANCOMER S.A., located in Ciudad Juarez, Chihuahua, Mexico. The U.S. employees of AMP assigned to Mexico will occupy the homes along with their families. All compensation for the above- referenced U.S. employees will be paid directly and entirely by AMP. 2 ISSUES: 1) Whether the price of the homes built in Mexico and purchased by AMP to house employee expatriates, constitutes an assist; 2) Whether the compensation paid by AMP to the U.S. employees, temporarily residing in Mexico, for services performed at the assembly plant is an assist. LAW AND ANALYSIS: The merchandise imported by AMP is being appraised under transaction value. Transaction value 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 the merchandise when sold for exportation to the United States", plus amounts for packing costs, selling commissions incurred by the buyer, the value of any assist, royalty and license fees, and proceeds of a subsequent resale or use that accrue to the seller. An "assist" means any of the following if supplied directly or indirectly and free of charge or at a reduced cost, by the buyer of imported merchandise for use in connection with the production or 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. Section 402(h)(1)(A) TAA; 19 C.F.R. §152.102(a)(1) Thus, to qualify as an assist, an item must not only be provided by the buyer directly or indirectly, free of charge or at a reduced cost, but also must fall within the item description and be used in the prescribed manner. A house falls within none of the definitions of an assist. For example, it is not a material, component, part or similar item incorporated in the imported merchandise; a tool, die, mold or similar item used in the production of the imported merchandise; or engineering, development, artwork, design work,, or plans or sketches undertaken elsewhere than in the United States that are necessary for the production of the imported merchandise. A house also does not qualify as merchandise consumed in the production of the imported merchandise. Therefore, a house provided as a residence for U.S. workers living abroad is not an assist. 3 Customs has previously determined, in TAA No. 20 (HRL 542412, dated March 27, 1981) and TAA No. 46 (HRL 542696, dated February 22, 1982), that salaries paid by the importer to its U.S. employees working abroad in an assembly plant as production managers, general managers, quality control managers, production engineers, and production foremen, are not assists. Therefore, the compensation paid by AMP to its U.S. employees who direct and manage the overall operation of the assembly plant, also are not assists. The fact that these employees reside in Mexico will not alter this conclusion, unless the nature of their work involves engineering, development, artwork, and plans and sketches that are necessary for the production of the imported merchandise. In such a situation, the cost of the work performed would be considered a dutiable assist. See HRL 542498, dated June 16, 1981; HRL 544337, dated April 9, 1990; Section 402(h)(1)(B), TAA. HOLDING: 1) The price of the houses built in Mexico and purchased by AMP for employee expatriates, does not constitute an assist; 2) The compensation paid by AMP to the U.S employees, temporarily residing in Mexico, for services performed at the assembly plant is not an assist. Sincerely, John Durant Director, Commercial Rulings Division