10. Inspection and packing. Eighty units out of a lot of 1000 In addition to the above description of the manufacturing operation, your letter provided a constructed value statement concerning the costs incurred in connection with the production of the thermal relay circuit breakers. These costs consist of the following for each unit: (1) $.169550 attributable to United States materials, (2) $.103664 attributable to the value of Haitian labor, and (3) $.008476 attributable to other value. Based on these figures the total value for each unit is $.281690 of which 36.80 percent consists of value added in Haiti. You state that all products manufactured by your firm in Haiti are imported directly into the Customs territory of the United States and are entered under item 685.90, Tariff Schedules of the United States (TSUS), with duty paid only on the value added in Haiti under the provisions of item 807.00, TSUS. You further point out that the portion of the value of materials produced in the United States which may be counted for purposes of the 35 percent value-content requirement under the CBI (in this case the full allowable 15 percent of the appraised value of the imported article since the value of the United States materials exceeds 15 percent of that appraised value) together with the value added in Haiti exceed 50 percent of the total value of the finished article and thus easily meet the 35 percent value-content requirement. Finally, you are of the opinion that the assembly of the merchandise in question in Haiti involves extensive procedures involving many steps and thus results in a new or different article of commerce by means of a process which represents more than a "simple combining" operation within the meaning of section 213(a) (2) (A) of the CBI statute (19 U.S.C. 2703(a)(2)(A)). Accordingly, you believe that both the economic benefit derived by Haiti and the nature of the operations performed in Haiti cause the subject merchandise to fall within the spirit and intent of the CBI. We would first like to point out that under the CBI statute duty-free treatment is contingent upon a finding both that the imported article is the growth, product, or manufacture of a CBI beneficiary country and that the 35 percent value-content requirement has been met; therefore, the mere fact that the underlying purpose behind the CBI statute appears to be met by adding value so as to comply with the 35 percent value-content requirement is not sufficient in itself to result in an article entitled to duty-free treatment under the CBI. This being said, we are in agreement with your view that the processing operations performed in Haiti represent more than a simple combining operation within the meaning of the CBI statute. In this regard, a review of the legislative history relating to the CBI reveals that the limitation on simple combining (e.g. assembly) operations was inserted to ensure that certain types of operations providing little economic benefit to the beneficiary country would not result in a product of that country; on the other hand, the legislative history clearly indicates that this limitation should not be applied to meaningful assembly operations. We believe that the specific assembly operation in the present case, which involves ten major steps and a larger number of smaller steps requiring significant manual manipulation, attention to detail, and quality control, is clearly a meaningful or sufficiently complex assembly operation so as to result in a product of a beneficiary country for purposes of the CBI. As concerns the 35 percent value-content requirement, we believe that the value figures which you submitted demonstrate that this requirement would be met, provided that the stated cost of the completed thermal relay circuit breaker represents an acceptable basis for appraisement of the merchandise. You may wish to note in this regard that any costs for packing materials and transportation incurred in bringing the United States materials and components to the assembly plant in Haiti are to be included as part of the cost or value of the United States materials rather than as "other" costs as set forth on the constructed value statement submitted with your letter; however, this would not appear to affect the question of compliance with the 35 percent value requirement. Based on the above, and since you indicate that the thermal relay circuit breakers would be imported directly from Haiti into the Customs territory of the United States, we are of the opinion that they would be entitled to duty-free treatment provided that there is compliance with the documentary requirements set forth in the CBI implementing regulations. Sincerely, John P. Simpson March 4, 1986 WYNDHAM HOTELS A tribute to the art of accommodation. Mr. Joseph K. Dowley Chief Council Committee on Ways & Means U.S. House of Representatives 1105 Longworth House Office Bldg. Washington, D.C. 20515 RE: Hearing on CARIBBEAN BASIN INITIATIVE Dear Mr. Dowley: The Wyndham Hotel Company wishes to express its support for providing convention deductions for Americans who attend business conventions in the Bahamas. At present, the Bahamas is eligible for Americans to obtain tax convention deductions since it has not concluded an exchange of information agreement with the U.S. The Wyndham Hotel Company currently has interest in and operates three major hotels located in the Bahamas. The Bahamas has cooperated recently with the U.S. in the enforcement area. On March 6, 1985, the Governments of the U.S. and the Bahamas concluded an agreement on the interdiction of narcotics trafficking. In particular, on April 19, 1985, the U.S. and the Bahamian law enforcement officials conducted an unprecedented joint operation over 30 Bahamian islands and along 150 miles of the Florida coast during a two-week period. As a result, they seized sizable quantities of narcotics and made 58 arrests on drug-related charges. The Bahamas and the U.S. governments have held negotiations and made substantial progress on the conclusion of a Convention for Mutual Assistance in Criminal Matters and have exchanged a draft of an extradition convention. In view of the foregoing, we suggest that your Committee support the inclusion of the Bahamas in S. 1718 and H.R. 3242. These bills, if amended to include the Bahamas, would allow the Bahamas, as well as Bermuda, to qualify for convention tax deductions if the President certifies that (1) it is in the national security interests of the U.S. that the Bahamas be included in the definition of the North American area for purposes of convention deductions, and (2) the administration and enforcement of U.S. tax laws is not materially impeded by the Bahamas' information exchange policies. Enactment of such legislation would further cooperation in enforcement betweeen the two countries and simultaneously assist the CBI. Best regards, Honda how Harlan R. Crow 60-662 (1184) |