Request for Value Ruling; Academy, Ltd.

HQ W548667 October 5, 2005 RR:IT:VA 548667 EK Adrienne Braumiller Braumiller Schulz & Co., LLP 234 Whitetail Crossing Oswego, Illinois 60543 RE: Request for Value Ruling; Academy, Ltd. Dear Ms. Braumiller: This is response to your letter of May 2, 2005, regarding the proper value of shoe mold assists. We regret the delay in responding. FACTS: Your client, Academy, Ltd. (Academy), intends to purchase two metal molds from China through Linear International, Inc. (Linear), a U.S. global sourcing group. A Taiwanese trading company, Rest Assured Group Ltd. (Rest Assured), will be handling all accounts payable in the transaction. There are two molds that will be used to produce shoe outsoles for export to the United States. Long Meng Co., (LM) a Chinese mold manufacturer, will produce the molds. Academy will then supply these molds directly to Fushun Molding Co., Ltd. (Fushun), a separate Chinese outsole maker, free of charge for use in the production of three different shoe styles for Academy. LM will transport the molds to Fushun, free of charge. Fushun will then ship the outsoles to Winner Shoe Co., Ltd. (Winner), a Chinese shoe factory, in order to fully assemble the shoes. Academy will store the molds for use at Fushun’s facility for 18 months until Academy has paid for the molds in full pursuant to a payment plan. In addition, you indicate that once Academy has paid for the molds in full, Academy will transfer the molds to a different foreign factory, free of charge, for use in connection with the production of additional outsoles for export to the United States. ISSUE: What is the proper method of appraising the imported merchandise? LAW AND ANALYSIS: The primary basis of appraisement of imported merchandise is transaction value pursuant to section 402(b) of the TAA, which is defined as the “price actually paid or payable for merchandise when sold for exportation to the United States,” plus five enumerated additions. In order for transaction value to be used as a method of appraisement, it is essential that a “sale” between the parties is available. Without a sale for exportation to the United States, transaction value must be eliminated as a means of appraisement. It appears as though in your factual scenario, there exists a sale for exportation to the United States. Academy purchases the finished shoes from Rest Assured, and that price forms the basis of transaction value. Please note that no documents to substantiate the sale have been submitted. We assume the existence of a sale for purposes of this ruling request. Assists are defined in section 402(h)(1)(A) as: “ . . . any of the following if supplied directly or indirectly, and free of charge or at a reduced cost, . . . tools, dies, molds, and similar items used in the production of the imported merchandise . . .” . We agree with your conclusion that the molds are assists, and the value of such must be added to the price actually paid or payable in the determination of transaction value. As you have indicated, the value of the “molds” is the cost of acquisition, pursuant to 19 CFR 152.103(b)(3)(d)(2), plus transportation costs. In addition, we agree with your conclusion regarding the depreciation of molds that have been previously used, then transported to a new factory. Pursuant to 19 CFR 152.103(b)(3)(d)(2), states: “ . . . if the assist has been used previously by the buyer, regardless of whether it had been acquired or produced by him, the original cost of acquisition or production would be adjusted downward to reflect its use before its value could be determined . . . ” . The downward adjustment reflecting prior use must be in accordance with generally accepted accounting principles. As you have indicated, in determining the value of the mold assist, transportation costs to the place of production are included. HOLDING: Assuming the use of transaction value in the valuation of the imported merchandise, the value of the mold assist must be added to the price actually paid or payable. In determining the value of the assist that has been previously utilized and depreciated downward in accordance with generally accepted accounting principles, the depreciation is taken into account in determining the value of the assist. In both situations, the cost of transportation is included. Please note that 19 CFR § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.” Sincerely, Monika Brenner, Chief Value Branch