Importer Must Account for Origin, Sections 301 and 232 Liability, When Apportioning Assists, CBP Says

A proposed formula for apportioning the value of tooling assists to imported auto parts can’t be used by an importer because it doesn’t take into consideration the country of origin of the imported parts and so fails to account for the possibility that they could be subject to additional Section 301 and Section 232 duties, CBP said in a ruling released March 27.

Responding to a request for internal advice, CBP found importer Continental Automotive Systems “must apportion the assists provided to the foreign manufacturers for the specific product lines the assists were provided for to take into consideration the differing duty rates applicable to the imported merchandise.”

CAS had proposed the apportionment method because “the duty rates, quantities, and classifications of the imported parts vary, which makes it difficult and time-consuming to allocate the assist for the equipment on a line-by-­line basis,” CBP said in the ruling, HQ H326069, dated Jan. 24. The importer “developed a reconciliation process to allocate a value for the tooling assist to all parts that were manufactured with its assistance” based on the weighted value of the imports.

Specifically, CAS would calculate the percentage that an entry from a particular parts supplier made up out of the total imported from that parts supplier that used CAS tooling assists. It would then allocate that percentage of the total assists provided to that entry.

For example, if the parts in an entry were valued at $10,000, and the supplier exported $100,000 in parts that used CAS tooling assists over the entire year, then the percentage used for apportionment of the assists would be 10%. If the total assists provided to the supplier over the year was $20,000, then 10% of that, or $2,000, would be added as an assist to the value of the entry, making the total dutiable value $12,000.

CBP has ruled on similar issues before. It did in 2009 allow one importer to divide assists based on a percentage of total value, but “back in 2009, there were no section 232 and section 301 duties,” CBP said.

More recently, in 2021, CBP ruled that an importer “needed to apportion the assists provided to the foreign manufacturers for the specific product lines the assists were provided for to account for the differing duty rates applicable to the imported merchandise,” it said. In the case of the importer subject to the 2021 ruling, “since some of the imported articles were subject to section 232 or section 301 duties, the accuracy of the value of the tooling assist added to the price actually paid or payable under transaction value could make a significant difference in the duties owed,” CBP said.

Likewise, the calculation proposed by CAS “does not trace the countries of origin of the imported parts and whether they are subject to section 232 and section 301 duties, which could result in much higher duties,” CBP said. The proposed allocation method is not permissible under CBP regulations, and CAS “should be able to apportion each tooling assist to the product line or part level in which it is used,” the agency said.