VAL RR:CTF:VS 563461 DCC
Mr. M. Jason Cunningham
Sonnenberg & Anderson
300 South Wacker Drive
Chicago, IL 60606
Dear Mr. Cunningham:
This is in response to your letter dated December 13, 2005, requesting a ruling on behalf of the National Marrow Donor Program (‘NMDP’). Your request concerns the valuation of certain cellular-based products derived from the human blood system. Your requests concerning the classification and country of origin marking requirements will be addressed in a separate ruling letter.
FACTS:
The NMDP is a non-profit corporation that operates within the United States to identify unrelated donors of human blood products for patients with serious blood diseases who are unable to find a suitable matched family donor. These products include the following items: 1) Hematopoietic Progenitor Cells, Bone Marrow; 2) Hematopoietic Progenitor Cells, Apheresis; and 3) Therapeutic Cells, T-Cells, hereafter collectively “blood products.”
Within the United States, the NMDP collects and maintains detailed information about patients and potential donors in a computerized registry. The NMDP’s registry is the largest and most diverse in the world with more than 5.5 million potential marrow and blood cell donors. Because of the difficulty in finding a compatible donor, the NMDP participates in an international network of marrow donor organizations. Through cooperation with other foreign donor organizations, the NMDP can access HLA matching information for an additional 4.5 million potential donors.
Once the NMDP identifies a potential volunteer donor, the individual is tested for infectious diseases that could be transmitted to the patient. The NMDP, or a foreign medical facility, also performs human leukocyte antigen (‘HLA’) testing to identify the type antigens located on the surface of the donor’s white blood cells and other body tissue. The closer the donor’s and recipient's HLA antigens match, the less likely it is that the immune system cells of the donated marrow will react against a patient's body.
When a foreign donor has been selected and has agreed to donate, the blood product will be collected at a foreign medical facility. The collected material is placed in a bag, which is placed in a container and hand carried by a courier by air to a U.S. destination near the recipient. Because recipients of donated blood products are often in critical condition, and because of the perishable nature of donated blood products, it is critical that these products reach the recipient as quickly as possible once a transplant procedure has been scheduled.
NMDP pays the foreign medical facility for the cost of the extraction and shipping related expenses. Individual blood product donors, however, receive no compensation for the donated material. The cost of the extraction procedure ranges from $1,300 to $29,000 depending on the various factors including the type of blood product, the complexity of the extraction procedure, and the cost of shipping.
ISSUE:
Whether certain human blood products are subject to appraisement, and if so, under what method of valuation.
LAW AND ANALYSIS:
General Note 1 to the Harmonized Tariff Schedule of the United States (‘HTSUS’) provides that, ‘All goods provided for in this schedule and imported into the customs territory of the United States from outside thereof, and all vessel equipments, parts, materials and repairs covered by the provisions of subchapter XVIII to chapter 98 of this schedule, are subject to duty or exempt therefrom as prescribed in general notes
3 through 18, inclusive. Goods specifically exempted are listed in General Note 3(e), which states:
Exemptions. For the purposes of general note 1—
corpses, together with their coffins and accompanying flowers,
telecommunications transmissions,
records, diagrams and other data with regard to any business, engineering or exploration operation whether on paper, cards, photographs, blueprints, tapes or other media,
articles returned from space within the purview of section 484a of the Tariff Act of 1930,
articles exported from the United States which are returned within 45 days after such exportation from the United States as undeliverable and which have not left the custody of the carrier or foreign customs service, and
any aircraft part or equipment that was removed from a United States-registered aircraft while being used abroad in international traffic because of accident, breakdown, or emergency, that was returned to the United States within 45 days after removal, and that did not leave the custody of the carrier or foreign customs service while abroad,
are not goods subject to the provisions of the tariff schedule. No exportation referred to in subdivision (e) may be treated as satisfying any requirement for exportation in order to receive a benefit from, or meet an obligation to, the United States as a result of such exportation.
Furthermore, section 141.4(a), CBP Regulations (19 C.F.R. 141.4(a)), provides that, ‘All merchandise imported into the United States is required to be entered, unless specifically excepted.’
Because the imported blood products are not specifically excepted under the CBP Regulations, we find that they are subject to customs entry and appraisement requirements. CBP has consistently held that unless specifically excepted, imported goods are subject to customs entry and appraisement requirements. See Headquarters Ruling Letter (‘HRL’) 114440, dated October 1, 1998 (unendorsed bank checks were not business records within the meaning of General Note 16(c), and therefore were not exempt from the requirement of entry or the payment of duty); HRL 557732, dated March 29, 1994 (preproduction cinematic materials returned to U.S. film studio constitute business records and data associated with the business of producing animated films, and therefore are exempt from duty and entry under General Note 13(c), HTSUS); and HRL 085348, dated November 30, 1989 (system studies prepared for electrical distribution grids represent data related to an engineering operation and therefore are not goods subject to the provisions of the tariff schedule pursuant to General Note 4(c), HTSUS).
Counsel argues that because it is illegal to buy and sell human organs and tissue, it is inappropriate to assign a transaction value to these items. Counsel notes that under the Transplants Amendment Act it is a crime for any person to ‘knowingly acquire, receive, or otherwise transfer any human organ [specifically including bone marrow and other human tissue] for valuable consideration for use in human transplantation if the transfer affects interstate commerce.’ 42 U.S.C. § 274e.
The fact that Congress outlawed the buying and selling of human organs and tissue does not preclude CBP from assigning a value to these articles when they are brought into the United States. Under 19 U.S.C. 1401(c), the term ‘merchandise’ is defined to include contraband articles. Section 1401(c) states: ‘The word ‘merchandise’ means goods, wares, and chattels of every description, and includes merchandise the importation of which is prohibited, and monetary instruments as defined in section 5312 of Title 31.’ Clearly, therefore, the fact that it may be illegal to import a particular article—or to assign to it a value—does not mean that article is excepted from CBP entry and appraisement upon importation into the United States. Furthermore, the fact that there is no sales transaction does not mean an imported article is not subject to appraisement. Rather, when transaction value method of appraisement is unavailable, imported merchandise must be appraised according to one of the alternative methods of appraisement in the valuation hierarchy. See 19 U.S.C. 1401a.
The preferred method of appraising merchandise imported into the United States is the transaction value method as set forth in 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. Transaction value of imported merchandise 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. 19 U.S.C. 1401a(b). In order for imported merchandise to be appraised under the transaction value method it must be the subject of a bona fide sale between a buyer and seller, and it must be a sale for exportation to the United States.
When imported merchandise cannot be appraised on the basis of transaction value, it is appraised in accordance with the remaining methods of valuation, applied in sequential order. 19 U.S.C. 1401a(a)(1). The alternative bases of appraisement, in order of precedence, are: the transaction value of identical or similar merchandise (19 U.S.C. 1401a(c)); deductive value (19 U.S.C. 1401a(d)); computed value (19 U.S.C. 1401a(e)); and the ‘fallback’ method (19 U.S.C. 1401a(f)).
Based on the facts presented, we find that the imported blood products may not be appraised under the transaction value method. The blood products at issue are not imported pursuant to any sales agreement. Under U.S. law, human organs—including the blood products which are the subject of this ruling—may not purchased or sold for valuable consideration. See 42 U.S.C. § 274e. The foreign medical facility may, however, receive payment to cover the medical costs of extraction procedure and shipping related expenses. In the absence of any bona fide sale, the transaction value method may not be used to determine the value of the imported merchandise.
The second appraisement method in order of statutory preference is transaction value of identical and similar merchandise under section 1401a(c). This method refers to a previously accepted transaction value of identical or similar merchandise which was exported at or about the same time as the merchandise being valued. In this case, there are no sales of similar or identical merchandise. Consequently, the imported blood products may not be appraised under the transaction value of identical or similar merchandise pursuant to section 1401a(c).
The next method of appraisement in sequential order is deductive value. See 19 U.S.C. 1401a(a)(1)(D). Deductive value is based on U.S. sales of imported merchandise, less the cost or value of expenses added or processing performed after importation. Again, because the blood products are not sold after importation we find that the merchandise may not be appraised under the deductive value method.
The next method of appraisement is the computed value method. Under this method, merchandise is appraised on the basis of the material and processing costs incurred in the production of imported merchandise, plus an amount for profit and general expenses equal to that usually reflected in sales of merchandise of the same class or kind, and the value of any assists and packing costs. 19 U.S.C. 1401a(e)(1)(B). Because there is no sales transaction there is no amount for profit and the computed value method cannot be used to appraise the merchandise.
When merchandise cannot be appraised under the methods set forth in 19 U.S.C. 1401a(b)-(e), its value must be determined in accordance with the ‘fallback’ method set forth in section 402(f) of the TAA. The fallback method provides that merchandise should be appraised on the basis of a value derived from one of the prior methods reasonably adjusted to the extent necessary to arrive at a value. See 19 U.S.C. 1401a(f).
When the value of imported merchandise cannot be determined under the methods set forth in 19 U.S.C. 1401a(b)-(e), its value must be determined on the basis of a value derived from one of those methods, reasonably adjusted to the extent necessary to arrive at a value, i.e., the ‘fallback’ method. However, merchandise may not be appraised on the basis of the price in the domestic market of the country of export, the U.S. selling price of merchandise produced in the United States, minimum values, or arbitrary or fictitious values. See 19 U.S.C. 1401a(f); 19 C.F.R. 152.108.
Under section 500 of the Tariff Act of 1930, as amended, which constitutes CBP's general appraisement authority, the appraising officer may:
fix the final appraisement of merchandise by ascertaining or estimating the value thereof, under section 1401a of this title, by all reasonable ways and means in his power, any statement of cost or costs of production in any invoice, affidavit, declaration, other document to the contrary notwithstanding. . .
19 U.S.C. § 1500(a).
In this regard, the Statement of Administrative Action (‘SAA’), which forms part of the legislative history of the TAA, provides in pertinent part:
Section 500 is the general authority for Customs to appraise merchandise. It is not a separate basis of appraisement and cannot be used as such. Section 500 allows Customs to consider the best evidence available in appraising merchandise. It allows Customs to consider the contract between the buyer and seller, if available, when the information contained in the invoice is either deficient or is known to contain inaccurate figures or calculations. . . . Section 500 authorize [sic] the appraising officer to weigh the nature of the evidence before him in appraising the imported merchandise. This could be the invoice, the contract between the parties, or even the recordkeeping of either of the parties to the contract.
In those transactions where no accurate invoice or other documentation is available, and the importer is unable, or refuses, to provide such information, then reasonable ways and means will be used to determine the appropriate value, using whatever evidence is available, again within the constraints of section 402.
Statement of Administrative Action, H.R. Doc. No. 153, 96 Cong., 1st Sess., pt 2, reprinted in, Department of the Treasury, Customs Valuation under the Trade Agreements Act of 1979 (October 1981), at 67.
In the circumstances of this case, all ‘reasonable ways and means’ must be used to appraise the merchandise. To this end, we find that the appraised value of the blood products may be determined on the basis of the fee paid to the foreign medical facility for the cost of the extraction procedure. The portion of the fee paid to the foreign medical facility for the cost of the courier services constitutes the cost of international shipment, and therefore would not be included in the customs value of the imported blood products.
If the actual cost of shipment is not known at the time of entry, or requires correction after entry, NMDP should file a Supplemental Information Letter (“SIL”) prior to liquidation of the entry of merchandise. The SIL may be used to cover amendments that result in requests for refunds or the submission of additional monies owed.
HOLDING:
The imported blood products are subject to appraisement because they are not specifically excepted under section 141.4(a) of the CBP Regulations. The value of the blood products should be determined under the ‘fallback’ method, 19 U.S.C. 1401a(f), on the basis of the fee paid to the foreign medical facility for the cost of the extraction procedure. Expenses related to the international shipment of the blood products may be deducted from the entered value of the merchandise to these extent they are included in the amount paid to the foreign medical facilities.
A copy of this ruling should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch