OT:RR:CTF:VS H262963 EE
April J. Collier
Pacific Customs Brokers Inc.
1400 A Street
Blaine, WA 98230
RE: Appraisement of merchandise imported for recycling and fiber reclamation in the United States
Dear Ms. Collier:
This is in response to your letter, dated February 17, 2015, and additional information you submitted on March 19, 2015, on behalf of your client Debrand Services Inc. (“Debrand”), in which you request a ruling concerning the appraisement of certain rejected or recalled textile apparel.
You have asked that certain information submitted in connection with this ruling request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information contained within brackets and all attachments to this ruling request, forwarded to our office, will not be released to the public and will be withheld from published versions of this ruling.
FACTS:
You state that Debrand, located in Canada, is the importer of record. Debrand takes legal ownership of rejected or recalled textile apparel, previously owned by [X] (“Company A”), strictly for the purposes of importing the products into the U.S. for fiber reclamation/recycling. Company A will not charge, nor will Debrand pay, for the materials themselves. Payment from Company A to Debrand in the amount of $[X] per pound of product is for providing the services of recycling and fiber reclamation, which must take place outside of Canada in order for Company A to declare duty drawback on the goods from Canada.
Upon importation to the U.S., the merchandise will be sent directly to a firm in Arizona, [X] (Company B), which is under contract with Debrand to appropriately process all materials to prepare for recycling and fiber reclamation. Company B will dismantle, shred, crush, rip or destroy all goods received in order to ensure brand protection. Company B then uses as much of the destroyed materials as possible in producing entirely new products including various types of insulation and mattresses.
You state that there is no payment between the parties for the merchandise. Company B does not pay for the receipt of the materials. Debrand pays Company B a service fee of $[X] per ton of clean non-baled textiles and $[X] per ton of contaminated non-baled textiles which is determined by the cost to destroy the imported goods and recycle the materials. You claim that this is not a resale price for the goods after importation to the U.S.
You state that the intent of the agreements is to protect the Company A brand and to ensure that the products are recycled, and do not enter the waste stream by dumping the materials into landfills or other methods of non-reuse. You state that the goods are neither saleable nor salvageable in their imported condition, and both Company A and Debrand are resolved that these goods neither have an opportunity to reach the marketplace nor that the fibers be needlessly wasted by disposal when those fibers are entirely fit for repurpose, though the current technology of recycling these fibers is complex and costly to execute. You claim that the merchandise should be appraised under the fallback method using a realistic scrap value of $[X] per pound.
You provided a copy Master Service Agreement between Debrand and Company A, and the current Business Service Agreement between Debrand and Company B.
ISSUE:
What is the correct method of appraising the merchandise?
LAW AND ANALYSIS:
Merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. § 1401a). The primary method of appraisement is transaction value, defined as “the price actually paid or payable for the merchandise when sold for exportation to the United States” plus the value of certain statutorily enumerated additions thereto. 19 U.S.C. § 1401a(b)(1).
When imported merchandise cannot be appraised on the basis of transaction value, it is to be appraised in accordance with the remaining methods of valuation, applied in sequential order. The alternative bases of appraisement, in order of precedence, are: the transaction value of identical merchandise; the transaction value of similar merchandise; deductive value; and computed value. If the value of imported merchandise cannot be determined under these methods, it is to be determined in accordance with section 402(f) of the TAA, known as the “fallback method.” 19 U.S.C. § 1401a(f).
In the instant case, the imported merchandise is not the subject of a sale and therefore cannot be appraised under the transaction value method set forth in 19 U.S.C. § 1401a(b). The transaction value of identical or similar merchandise is based on sales, at the same commercial level and in substantially the same quantity, of merchandise exported to the United States at or about the same time as that being appraised. 19 U.S.C. § 1401a(c). Since we have not been provided any information concerning the transaction value of identical or similar merchandise, we are not able to value the imported merchandise under this method of appraisement.
Under the deductive value method, imported merchandise is appraised on the basis of the price at which it or identical or similar merchandise is sold in the United States in its condition as imported and in the greatest aggregate quantity either at or about the time of importation, or before the close of the 90th day after the date of importation. 19 U.S.C. § 1401a(d)(2)(A)(i)-(ii). This price is subject to certain enumerated deductions. 19 U.S.C. § 1401a(d)(3). In the instant situation, the merchandise is not sold in its condition as imported. Merchandise that is not sold in its condition as imported can still be appraised under deductive value, however, provided the importer so elects. 19 U.S.C. § 1401a(d)(2)(A)(iii). Since Debrand has not made such an election, the imported merchandise cannot be appraised on the basis of the deductive value method.
Under the computed value method, merchandise is appraised on the basis of the material and processing costs incurred in the production of the 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). Since there is no information on which to base computed value, this method is also inapplicable.
19 U.S.C. § 1401a(f)(1) provides that imported merchandise is to be appraised on the basis of a method derived from one of the methods set forth in 19 U.S.C. § 1401a(b)-(e), such methods reasonably adjusted to the extent necessary to arrive at a value. However, there are certain prohibited bases of appraisement under 19 U.S.C. § 1401a(f), including the selling price of merchandise produced in the United States, minimum values and arbitrary or fictitious values. 19 U.S.C. § 1401a(f)(2).
Nevertheless, under section 500 of the Tariff Act of 1930, as amended, which sets forth U.S. Customs and Border Protection (“CBP”) 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, or 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 allows Customs to consider the best evidence available in appraising merchandise ... [It] 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.
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. Accordingly, if the value of imported merchandise cannot be determined on the basis of a method derived from 19 U.S.C. § 1401a(b)-(e), we find that the value of the imported merchandise may be determined under the fallback method provided for in 19 U.S.C. § 1401a(f), using all reasonable ways and means, so long as the method is not specifically precluded under 19 U.S.C. § 1401a(f)(2).
CBP has previously found that merchandise entering the U.S. for purposes of recycling should be appraised under the fallback method using the fee paid to take possession of the merchandise. See Headquarters Ruling Letter (“HQ”) H130310, dated November 18, 2010. Similarly, CBP has previously found that for waste being imported to be disposed of, for which a fee was paid to the U.S. company responsible for disposing of the waste, the fee being paid for disposal was an appropriate value for the waste. See HQ 545017, dated August 19, 1994; HQ 547147, dated March 23, 1999; and HQ H019073, dated November 2, 2007. In HQ 545017, petroleum waste oil was imported into the U.S. from Canada for disposal. The Canadian company paid the U.S. company to dispose of the waste oil. The Canadian exporter argued that the waste oil should be appraised at a nominal value. However, CBP found that it was not unreasonable for the waste oil to be valued at the fee paid for disposal and the company did not provide any documentation to show otherwise. In HQ 547147, Waste Management, Inc. (“WMI”) was importing solid waste into the U.S. for disposal, and attempted to distinguish HQ 545017. WMI argued that the waste itself had no value, and that the fee was paid for disposal of the waste in the U.S. after importation, not the waste itself. CBP found that the fallback method using the disposal fee was reasonable and that the disposal fee was “the only available information which [could] be quantitatively documented.” HQ 547147. Similarly, in HQ H019073, soil contaminated with depleted uranium was being imported from Kuwait for disposal in Idaho. The soil was not sold and had no commercial value. CBP held the disposal fee received by the facility in Idaho was a reasonable fallback method to value the soil.
As in the above cases, the imported merchandise is not being sold to Debrand. Rather, Debrand pays a fee for recycling and fiber reclamation services. You state that the goods are neither saleable nor salvageable in their imported condition. The Master Service Agreement and the Business Service Agreement both provide that the products will not be resold in their original form. In accordance with the cited rulings, we find that the imported merchandise may be appraised under the fallback method using the fee of $[X] or $[X] per ton paid from Debrand to Company B to destroy the imported goods and recycle the materials.
HOLDING:
Based on the information presented, the imported merchandise shall be appraised under the fallback method using the fee paid to Company B for recycling and fiber reclamation.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
Sincerely,
Monika R. Brenner
Chief
Valuation & Special Programs Branch