Entry

  This is the second of an occasional series on informed compliance and importing. This information is provided by the U.S. Customs Service.

  All merchandise arriving in the United States must be entered in accordance with U.S. customs laws and regulations. The various types of entries and the documents required for each type of entry are discussed in the Customs publication “Importing into the United States.”

  The entry requirements for merchandise entered under the provisions of 9802.00.80 are generally the same as those for all imported merchandise. Section 481 of the Tariff Act of 1930, as amended (19 U.S.C. 1481), requires that when making entry, an importer shall present to Customs a commercial invoice that provides the following:

  •A full description of the merchandise being imported (e.g., commercial name, the grade or quality, quantities in weights and measures, etc.).

  •The details of the transaction (e.g., whether an outright purchase, consignment, intra company transfer or other type of transaction).

  •The purchase price of each item in the currency of the purchase.

  •The type of currency.

  •All charges upon the merchandise (including commissions, insurance, freight, cases, containers, coverings, and cost of packing).

  •All rebates, drawbacks and bounties, etc..

  •The circumstances surrounding the shipment of the merchandise (e.g., port of entry, the place from which shipped, the time when and the person to whom shipped, etc.).

  For additional information, importers may wish to consult the informed compliance publication titled “What Every Member of the Trade Community Should Know About: Records and Recordkeeping Requirements.”

  Additionally, for transactions for which preferential tariff treatment under 9802.00.80 is claimed, there must be filed, in accordance with section 10.24 of the Customs Regulations, a Declaration by the Foreign Assembler, executed by the person who performed the assembly operations abroad, that in substantially the following format, states: I, _______, declare that to the best of my knowledge and belief, the _______ were assembled in whole or in part from fabricated components listed and described below, which are products of the United States.

  Another filing requirement is an Endorsement by the Importer, executed by the importer, that in substantially the following format, states: I declare that to the best of my knowledge and belief, the (above), (attached) declaration, and any other information submitted herewith, or otherwise supplied or referred to, is correct in every respect and there has been compliance with all pertinent legal notes to the Harmonized Tariff Schedule of the United States (19 U.S.C. 1202).

  Normally, if the pertinent data (i.e., assembly description, list of U.S. components, their unit costs, etc.) is on file at the appropriate customs office, entry may be made by referring to this information. Specific cost data or other necessary information may be required, however, with each entry depending upon the procedure agreed to by the importer and the import specialist.

Sources of information

  The importer has the primary responsibility for supplying the information needed by Customs. Some of this information will be in the importer’s own records. In other cases, however, the importer will have to make arrangements for the foreign assembler to supply the information. In either case, the information used is that which is contained in the commercial accounts of the importer and/or assembler, and it is subject to review and audit by the Customs Service.

Updating information

  Information submitted to Customs must be both factual and current, and the importer has the responsibility to notify Customs whenever there is any significant variation from the data on file. Cost data should be updated whenever there is a significant change in basic labor costs, fringe benefits paid to assembly workers, material costs, assist costs, general expenses, or other cost factors that affect the monies paid by the importer for the imported merchandise. In addition, Customs should be informed when there is a change either in the country of origin of the components or a change in the assembly operation. In any case, updated cost data should be furnished at least every six months.

  In making entry, the importer should constantly be alert to ensure that documents submitted to Customs are complete and truthful in every respect. Serious consequences can follow inadvertent or willful distortion of facts involved in entering merchandise.

Valuation

  Many importers have the misconception that duty under 9802.00.80 is based upon the value added abroad. Instead, the law requires that the appraised value of the merchandise be determined first; only then is an allowance made for the cost or value of those components which are products of the United States and that meet all the requirements of subheading 9802.00.80 for purposes of duty assessment on the merchandise.

  For the purposes of establishing the appraised value of the merchandise imported under subheading 9802.00.80, the valuation principles of Section 402 of the Tariff Act, as amended (19 U.S.C. 1401a), and the judicial and administrative precedents concerning value apply equally to goods imported under subheading 9802.00.80 as to any other imported merchandise. Thus, 9802.00.80 merchandise may be appraised on the basis of transaction value, deductive value, computed value, or other appropriate statutory basis. The allowance for U.S.-manufactured components eligible for 9802.00.80 treatment ordinarily will be predicated on the cost of each component at the time of last purchase.

  The primary method of appraisement for imported merchandise is transaction value. The transaction value of imported merchandise is defined as the price actually paid or payable for the merchandise when sold for exportation to the United States, plus certain enumerated items. If transaction value cannot be determined, then the next statutorily acceptable basis of appraisement will be used. When imported merchandise is appraised under computed value, for example, the value includes the sum of the cost or value of the materials and the fabrication and other processing, and an amount for profit and general expenses, any assists, and packing costs. The elements of computed value are discussed below in more detail.

Material and components

  The material cost, for Customs purposes, is that cost contained in the accounts of the producer or assembler of:

  •Purchased material, including transportation and freight costs to the assembly factory.

  •If not purchased, the cost of manufacture of the material.

  If the material is supplied to the assembler at no cost or at a reduced cost, this material cost is also to be included. The cost of materials as reflected in the books of the foreign assembler will be used, provided that the cost is consistently applied and is in accordance with generally acceptable accounting principles in the country of production and in the industry concerned.

Foreign plant expenses

  Labor and Fabrication Costs – relate to both direct and indirect expenses necessary for the assembly of the imported article. These expenses, as reflected in the company’s commercial accounts, are to be considered in determining the value of the merchandise for customs purposes.

  General and Administrative Expenses – cover all other costs that are involved in the foreign operation that support the labor and fabrication operation, such as equipment, rent, electricity, and all other supportive facilities, administration, etc. These examples are not meant to be exhaustive; the cost or value of the categories that will ultimately be considered is dependent upon the manner in which they are contained in the accounts of the assembler, provided that the company’s commercial accounts are consistent with generally accepted accounting principles applied in the country of production of the imported merchandise.

Assists

  Assists are certain items and services that were furnished directly or indirectly by the importer or buyer to the assembler at less than full cost or value for use in the production of the imported article. Assists are limited to:

  •Materials, components, parts and similar items incorporated in the production of imported merchandise.

  •Tools, dies, molds, and similar items used in producing the imported

merchandise.

  •Merchandise consumed in producing the imported merchandise.

  •Engineering, development, artwork, design work, plans and sketches that are undertaken outside the United States.

Materials and components

  If materials and components are supplied free of charge to the foreign assembler, the value of this material assist will be the cost to the importer to acquire it, plus any transportation and insurance costs to ship the material to the assembly plant. If the importer or a related party produced the materials and components, the value of the assist would be the cost to manufacture the material plus the transportation costs to deliver the material to the assembler’s facility. The value of the merchandise consumed in producing the imported merchandise is determined in the same manner as the value of the materials and components.

Tools, dies, molds and similar items

  Where tools, dies, molds and similar items are used in the production of the imported merchandise, the value of the assist would be the cost to the importer to acquire it. If the importer or a related party produced the assist, the value would be the cost to manufacture the assist. Any previous use or repairs and modifications that affect its current value should be taken into consideration in arriving at the current value of the assist. The transportation costs to the assembler’s plant are also included in the assist value.

  The assist value will be apportioned over the imported merchandise in a reasonable manner and in accordance with generally accepted accounting principles.

Engineering, development, artwork, design work, plans, sketches, etc.

  These will not be treated as an assist if the service or work is:

  •Performed by a person domiciled in the United States.

  •Performed while that person is acting as an employee or agent of the buyer of the imported merchandise.

  •Incidental to other engineering, development, artwork, design work, plans or sketches undertaken within the United States.

  Finally, whether considering the value of materials, foreign plant expenses or assists, it is the facts and the evidence substantiating the claims that underlie the determination of the value or costs of these items that will be utilized for customs entry. Only after the value of all items has been determined will any applicable 9802.00.80 allowance be applied. Accordingly, it is strongly advised that the importer establish close communication and cooperation with the appropriate import specialist at the port of importation.