HQ 544862: Internal Advice Request; Profits and General Expenses under TAA 402(e)(1)(B) and 402(e)(2)(B)

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 544862
                            January 3, 1994

VAL CO:R:C:V  544862 ILK

CATEGORY: Valuation

District Director
Laredo, Texas

RE:   Internal Advice Request; Profits and General Expenses under
      TAA  402(e)(1)(B) and  402(e)(2)(B)

Dear Sir:

      This is in response to your request for internal advice dated
November 20, 1991 regarding the inclusion of a foreign assembler's
general expenses in the computed value of merchandise under  402(e)
of the Tariff Act of 1930, as amended by the Trade Agreements Act
of 1979 (TAA, 19 U.S.C. 1401a(e)), which expenses occur after the
goods are packed and ready for shipment to the U.S.  We regret the
delay in responding.

      You have provided a list of expenses which were included in
a foreign assembler's/manufacturer's general expenses as
represented on a Customs Form 247.  These expenses are identified
as:  salaries, salaries-overtime, freight, office supplies, office
equipment, printed forms, export expenses, bond expenses,
miscellaneous purchase services, vehicles, meals, non-deductible
and import taxes.  It is the importer's position that under  402
(e) of the TAA, these expenses are non-dutiable because the
expenses apply mostly to export activities which the importer
claims occur after the goods are packed and ready for shipment to
the U.S.

      The computed value of imported merchandise is defined in
 402(e) of the TAA and includes:

      (B) an amount for profit and general expenses equal to
      that usually reflected in sales of merchandise of the
      same class or kind as the imported merchandise that are
      made by the producers in the country of exportation for
      export to the United States;

Section 402(e) states:

      (2) For purposes of paragraph (1)-

      ...

      (B) the amount for profit and general expenses under
      paragraph (1)(B) shall be based upon the producer's
      profits and expenses, unless the producer's profits and
      expenses are inconsistent with those usually reflected
      in sales of merchandise that are made by producers in the
      country of exportation for export to the United States,
      in which case the amount under paragraph (1)(B) shall be
      based on the usual profit and general expenses of such
      producers in such sales, as determined from sufficient
      information. (emphasis added)

      The Statement of Administrative Action provides that with
respect to computed value:

      The "amount for profit and general expenses" will be
      determined on the basis of information supplied by, or
      on behalf of, the producer and will be based upon the
      commercial accounts of the producer, provided that such
      accounts are consistent with the generally accepted
      accounting principles applied in the country where the
      goods are produced and unless the figures provided are
      inconsistent with those usually reflected in sales, of
      merchandise of the same class or kind as the imported
      merchandise, that are made by producers in the country
      of exportation for export to the United States. (Statute)

      In Headquarters Ruling Letter (HRL) 544344 dated November 14,
1990, we ruled that the seller's prepaid transportation costs and
expenses directly related to transporting the finished product from
the loading dock of the Mexican plant to the U.S. border and
carried on the books of the producer are general expenses and as
such they fall within  402(e)(2)(B) of the TAA and are therefore
included in the computed value of the imported merchandise.

      In addition, it must be taken into consideration that the
amount for profit and general expenses is taken as a whole. 
Customs Regulations 152.106(c) (19 CFR 152.106(c)) provide as
follows:

           Profit and general expenses.  The amount for profit
      and general expenses will be taken as a whole.  If the
      producer's profit figure is low and general expenses
      high, those figures taken together nevertheless may be
      consistent with those usually reflected in sales of
      merchandise of the same class or kind.

Interpretative note 2 to the regulation states that:

      If the producer's own figures for profit and general
      expenses are not consistent with those usually reflected
      in sales of merchandise of the same class or kind as the
      merchandise being valued which are made in the country
      of exportation for export to the United States, the
      amount for profit and general expenses will be based upon
      reliable and quantifiable information other than that
      supplied by or on behalf of the producer of the
      merchandise.

      Accordingly, regardless of what type of general expenses the
foreign assembler/manufacturer has, they need to be viewed with the
profit as a whole, in order to determine whether they are
inconsistent with those usually reflected in sales of merchandise
of the same class or kind.  Thus, all of the foreign
assembler/manufacturer's general expenses are to be included in
calculating the "amount for profit and general expenses," unless
the amount for profit and general expenses is found to be
inconsistent with the amount for profit and general expenses
usually reflected in sales of merchandise of the same class or
kind. 

      If the foreign assembler's profit and general expenses are
not consistent with those usually reflected in sales of merchandise
of the same class or kind as the imported merchandise, that are
made by producers in the country of exportation for export to the
United States, then we must examine other reliable and quantifiable
information regarding what is the usual profit and general expenses
of such producers.  In this case, there is no evidence that the
"amount for profit and general expenses" that is derived from the
figures on the foreign producer's books is inconsistent with the
amount equal to that usually reflected in sales of merchandise of
the same class or kind as the imported merchandise.  Thus, Customs
can properly use the figures supplied by the assembler.

      The Office of Regulations and Rulings will take steps to make
this decision available to Customs personnel via the Customs
Rulings Module in ACS and the public via the Diskette Subscription
Service, Lexis, Freedom of Information Act and other public access
channels 60 days from the date of this decision.

                                      Sincerely,



                                      John Durant, Director