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HQ 544876

September 3, 1993

CO:R:C:V 544876 ER


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.


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.


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?


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.


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.


John Durant, Director
Commercial Rulings Division

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