Assist; design

HQ H206976 August 17, 2012 OT:RR:CTF:VS H206976 KSG Robert W. Hardy President International Trade Consultants, Corp. 1647 Isabella Ct. Millersville, MD 21108 RE: Assist; design Dear Mr. Hardy: This is in response to your letter dated February 22, 2012, requesting a binding ruling in behalf of Sun Mountain Sports (“Sun”) whether certain foreign designs of logos and other artwork are considered dutiable assists. We have also considered your letter dated July 17, 2012, with photos of the storyboards and finished golf bags that were created based on the storyboards. At your request, a telephonic conference was held on July 6, 2012. FACTS: Sun Mountain Sports produces golf bags and golf attire. When designing a product, a U.S. designer communicates a design concept, either verbally, by a hand drawn sketch, or a CAD file to a foreign designer. You state that the purpose of the work of the foreign designer is to serve as inspiration. The foreign designer takes the idea from the U.S. designer and creates a storyboard. The storyboards are used by the U.S. designer who changes the shape, color and/or size of the design to create the final design. The designs will be then be provided to Chinese manufacturers for the production of the imported goods. You provided photos of several color and black and white storyboards, and the resulting two golf bags that were created. The storyboards have no measurements, codes or specifications for the colors or patterns. They contain sketches of various golf bags and several pairs of athletic shoes. ISSUE: Whether the creation of the storyboards and foreign designs described above are dutiable assists. LAW AND ANALYSIS: Imported merchandise is appraised in accordance with section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (“TAA”), codified at 19 U.S.C. 1401a and the preferred method of appraisement is transaction value. Transaction value is the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus amounts for five enumerated statutory additions, including the value apportioned as appropriate, of any assist. 19 U.S.C. 1401a(b)(1)(c). The term “price actually paid or payable” is defined as the “total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller.” 19 U.S.C. 1401a(b)(4)(A). The definition of an assist, set forth at 19 U.S.C. 1401a(h)(1)(A)(iv), includes: …any of the following 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: … (iv) Engineering, development, artwork, design work, and plans and sketches that are undertaken elsewhere than in the United States and are necessary for the production of the imported merchandise. No service or work to which subparagraph (A)(iv) applies shall be treated as an assist for purposes of this section if such service or work— is performed by an individual who is domiciled within the United States; is performed by that individual while he is acting as an employee or agent of the buyer of the imported merchandise; and is incidental to other engineering, development, artwork, design work, or plans or sketches that are undertaken within the United States. In Headquarters Ruling Letter (“HRL”) 563369, dated January 11, 2006, CBP held that a roughly-drawn sketch by a foreign designer was determined to be merely inspirational and therefore, not a dutiable assist. CBP considered whether the sketch was essential to the manufacturing process and whether the manufacturer could have produced the goods with a narrative alone. CBP found that the sketches merely facilitated the oral and narrative descriptions of the design and that the rough sketches were not unique. Similarly, in HRL 548532, dated July 16, 2004, CBP held that miniature “knitdowns” produced to illustrate a design were not dutiable assists. Employees in the U.S. received the foreign-created miniature knitdowns and used them as inspiration to create a design in the U.S. The U.S. designers then generated a hand sketch or CAD generated print color graphic of the final design specifying the colors to be used by the foreign manufacturer. The knitdowns were not copied exactly as purchased. CBP concluded that the knitdowns were not dutiable assists. CBP stated that: With respect to artwork and design work, in prior decisions, CBP has held that artwork or design work that is imported into the United States and used to inspire new or different artwork or design work is not an assist when the new work is sent to a manufacturer abroad to produce merchandise that is later imported into the United States. In this case, we find that the creation of the storyboards which start out as an idea conveyed by a U.S. designer are inspirational and do not reflect the final design of the imported golf bags. Further, the storyboards are not copied by the U.S. designers exactly as created and the storyboards do not contain any measurements, codes, or data that is used by the foreign manufacturer in the production of the final imported good. Hence, we find that the storyboards are not a dutiable assist. HOLDING: The creation of storyboards by a foreign company, as described above, is not a dutiable assist. A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy of this ruling, it should be brought to the attention of the CBP officer handling the transaction. Sincerely, Monika R. Brenner, Chief Valuation & Special Programs Branch