HQ 544876: Application For Further Review of Protest No. xxxxxxxxxxxxxx, concerning the Appraisement of Wearing Apparel; Assists.

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 544876
                        September 3, 1993

CO:R:C:V  544876 ER

CATEGORY:  Valuation

District Director
Boston District

RE:  Application For Further Review of Protest No.
     xxxxxxxxxxxxxx, concerning the Appraisement of Wearing
     Apparel; Assists.

Dear Sir:

     This protest was filed by counsel on behalf of
xxxxxxxxxxxxxxxxxxxxxxxx (hereinafter referred to as "importer")
against your determination that certain materials used in the
fabrication of wearing apparel constitute dutiable assists.  This
matter involves importations that occurred over a period of
several years.  We regret the delay in responding.

FACTS:

     The importer supplied buttons to its Indian manufacturers
through its buying agent in Taiwan.  Under this arrangement, at
the importer's expense, the agent obtained buttons in Taiwan or
other places and sent them to the manufacturers in India for use
on garments manufactured with the importer's label.

     On November 14, 1990, the importer made a prior disclosure
to the District Director of Customs at Boston pursuant to 19 USC
1592(c)(4) and 19 CFR 162.74.  The disclosure concerned the
buttons and other items which are not the subject of this
protest.  In the prior disclosure, the importer described the
buttons as "assists", but later decided otherwise, deducting from
its payment to Customs those duties previously assessed on the
buttons as dutiable assists.  By letter dated March 12, 1991, the
District Director rejected the importer's change of position and
issued a demand in the amount of $xxxxxxxxxx, plus interest, for
the buttons.

     In the memorandum accompanying the protest, the importer
argues that the buttons are not assists because there was no
agreement with the manufacturers to furnish the buttons free of
charge or at a reduced rate.  It was apparently the agent's
responsibility, at the importer's expense, to supply the
manufacturers with buttons and to seek reimbursement form them,
such reimbursement to be subsequently remitted to the importer. 
The agent failed to recoup and/or remit the monies to the
importer for a period of several years, which omission went
undetected by the importer prior to November 1990, at which time
the omission was discovered while the importer was reviewing its
files in connection with the prior disclosure action.  The
manufacturers subsequently refused to reimburse the importer for
the cost of the buttons.  The importer is presently exercising
its contractual right to reimbursement by holding its agent
responsible for the unremitted monies, whether or not the agent
is able to collect from the manufacturers.  The agent is paying
the importer through a series of monthly credits.

     In response to Customs' request, the importer was unable to
produce any documents evidencing an expectation of reimbursement
for the buttons or an agreement between the parties to that
effect.

ISSUE:

     Whether materials furnished by an importer's buying agent,
at the importer's expense, to a manufacturer are dutiable assists
where the manufacturer refuses a demand to pay for the materials
and the importer, instead, obtains compensation from the agent in
the form of monthly credits?

LAW AND ANALYSIS:

     There is no dispute that transaction value, pursuant to
section 402(b) of the TAriff Act of 1930, as amended by the Trade
Agreements Act of 1979 (TAA), is applicable.  Transaction value
is defined by TAA section 402(b)(1) as "the price actually paid
or payable for the merchandise when sold for exportation to the
United State..." plus certain additions specified in 402(b)(1)(A)
through (E), one of which is the value, apportioned as
appropriate, of any assist.

     Section 402(h)(1)(A) provides that the term "assist"
includes materials incorporated in the imported merchandise "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."  The importer agrees that "the buttons ...
[are] an assist if they were provided free of charge or at a
reduced cost."  (Protestant's Memorandum, Attachment 1,
unnumbered page 3).

     The importer is correct that the agreement between the
parties is important, but is wrong in its assertion that such an
agreement is the only pertinent issue to be examined. 
(Protestant's Memorandum, Attachment 1, unnumbered page 4).  No
written agreement between the parties or other documentation has
been procured evidencing the manufacturers' obligation or consent
to pay for the buttons.  That the importer is enforcing its
contractual right to demand payment from its agent, to compensate
the importer for the cost of the buttons, is not relevant here
because those payments did not and do not affect the price paid
for the imported merchandise.  
     
     Even if the existence of an agreement between the two
parties could be established, where, as here, the manufacturer
subsequently refuses to pay for the buttons in violation of the
agreement, the buttons would be dutiable as assists to the extent
to which they were not included in the price of the imported
merchandise.  This is consistent with the language in section
152.103(c), Customs Regulations (19 CFR 152.103(c):  "Additions
to the price actually paid or payable will be made only if there
is sufficient information to establish the accuracy of the
additions and the extent to which they are not included in the
price."  There is no disagreement between Customs and the
importer regarding the cost of the buttons supplied. (See,
Customs Protest and Summons Information Report, Part D).  Nor
does the importer deny that the materials were supplied by the
importer through its agent at no charge to the manufacturer.  The
importer has not presented any evidence or argued that the cost
of the buttons was included in the price of the wearing apparel,
nor has the importer established that the reimbursements
subsequently made to the importer by its agent affected the price
paid for the imported wearing apparel.  The unmistakable
conclusion, therefore, is that the buttons are dutiable assists.

HOLDING:

     Buttons supplied free of charge to manufacturers of wearing
apparel in India, through the importer's buying agent and at the
importer's expense, are dutiable assists.  Consistent with the
decision set forth above, you are hereby directed to deny the
subject protest.  A copy of this decision should be attached to
the Customs Form 19 and mailed to the protestant as part of the
notice of action on the protest.

                                   Sincerely,



                                   John Durant, Director
                                   Commercial Rulings Division