OT:RR:CTF:VS H288062 EE
Jason Griffith
JSR Micro, Inc.
1280 N Mathilda Avenue
Sunnyvale, CA 94089
RE: Appraisement of used intermediate bulk containers returned to the United States
Dear Mr. Griffith:
This is in response to your letter, dated June 21, 2017, in which you request a ruling concerning the appraisement of certain used intermediate bulk containers that are returned to the United States.
FACTS:
You state that JSR Micro, Inc. (“JSR Micro”) purchases 1000-liter plastic intermediate bulk containers from U.S. importers. The intermediate bulk containers are then filled with product that is shipped to both foreign and domestic customers. Once the product is emptied, the intermediate bulk containers are then returned to the United States for re-use by JSR Micro. Up to 40 intermediate bulk containers may be returned to the United States at one time. You state that each intermediate bulk container bears a serial number that is specific to a manufacturing batch, which is traceable through export commercial documents.
You propose to use the fallback method of appraisement with an annual average depreciated value of the intermediate bulk containers. You propose to utilize a straight-line accounting method to depreciate the value of the intermediate bulk containers over five years. You state that the average depreciated value will be reviewed on an annual basis by JSR Micro for use of declared value to CBP upon return of the intermediate bulk container. JSR Micro will monitor the average depreciated value over the usefulness life of the intermediate bulk containers to ensure a fair market value is declared.
You state that the intermediate bulk containers are eligible for duty-free treatment under subheading 9801.00.10, Harmonized Tariff Schedule of the United States (“HTSUS”). However, you have not asked us to consider this issue.
ISSUE:
What is the correct method of appraising the returned intermediate bulk containers?
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 preferred method of appraisement is transaction value, which is defined as “the price actually paid or payable for the merchandise when sold for exportation to the United States,” plus amounts for certain statutorily enumerated additions to the extent not otherwise included in the price actually paid or payable. 19 U.S.C. § 1401a(b)(1). If, for any reason, sufficient information is not available with respect to the additions to the price actually paid or payable, the transaction value of the imported merchandise is treated as one that cannot be determined. 19 U.S.C. § 1401a(b)(1).
The term “price actually paid or payable” is defined as:
[T]he 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).
In the instant case, the returned intermediate bulk containers are 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). 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 methods 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 the fall back method, as specified by section 402(f) of the TAA. 19 U.S.C. § 1401a(a)(1).
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 any other goods entering the United States at or about the same time that are identical or similar to the intermediate bulk containers at issue, the transaction value of identical or similar merchandise is not applicable.
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). Since the merchandise is not sold in the United States, 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 of appraisement is also inapplicable.
Because the value of imported merchandise cannot be determined under the methods set forth in 19 U.S.C. § 1401a(b)-(e), it may be appraised on the basis of a value derived from one of those 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). For example, merchandise may not be appraised on the basis of the price in the domestic market of the country of export, the selling price in the United States of merchandise produced in the United States, minimum values, or arbitrary or fictitious values. 19 U.S.C. § 1401a(f).
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 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.
Section 152.107 of the CBP regulations (19 C.F.R. § 152.107) provides: (a) Reasonable adjustments. If the value of imported merchandise cannot be determined or otherwise used for the purposes of this subpart, the imported merchandise will be appraised on the basis of a value derived from the methods set forth in §§ 152.103 through 152.106, reasonably adjusted to the extent necessary to arrive at a value. Only information available in the United States will be used. (b) Identical merchandise or similar merchandise. The requirement that identical merchandise, or similar merchandise, should be exported at or about the same time of exportation as the merchandise being appraised may be interpreted flexibly. Identical merchandise in any country other than the country of exportation or production of the merchandise being appraised may be the basis for customs valuation. Customs values of identical merchandise, or similar merchandise, already determined on the basis of deductive value or computed value may be used.
(c) Deductive value. The “90 days” requirement for the sale of merchandise referred to in § 152.105(c) may be administered flexibly.
In HQ H259584, dated July 7, 2015, certain merchandise was imported into the
United States to support the operations of cruise ships. The merchandise was used aboard the cruise ship and then imported without any purchase or payment transaction, sometimes for repair purposes. The importer used a seven-year straight-line depreciation to appraise the merchandise under the fallback method. CBP found this adjustment to the value of the imported merchandise to be reasonable provided the importer employed this method in accordance with generally accepted accounting principles (“GAAP”) and approximated the actual value of the imported merchandise at the time of its exportation to the United States.
In HQ 563355, dated January 18, 2006, CBP considered the valuation methodology of test fixtures and equipment that were owned by a company, supplied to and used by a manufacturer abroad, and then imported back to the company in the United States, without a sale. The company owned each test fixture throughout this time period and traced it accordingly in its asset database, which maintained the product’s acquisition cost, and current book value, which was adjusted for depreciation on a seven-year straight-line depreciation scale. CBP found that the method for appraisement used by the company, based on adjusting the original purchase price to reflect reasonable depreciation for the period that the good was used, was acceptable as a fallback method pursuant to 19 U.S.C. § 1401a(f).
In HQ 229377, dated May 30, 2003, an importer entered 24-year old merchandise that was not sold, but provided by a related party. CBP held that the merchandise should be appraised under the fallback method, and in accordance with GAAP, the original purchase price should be adjusted downward to reflect reasonable depreciation for the time period that the article was used abroad. However, the value resulting from this downward depreciation had to approximate the actual market value of the article at the time of its exportation to the United States. See also HQ 543450, dated June 25, 1985, noting that capital assets being depreciated over their useful lives, and although they may be considered expenses by GAAP, are not necessarily assets with a zero book value for CBP valuation purposes that require determining whether any book value remains for that asset.
As previously noted, you propose to use a straight-line annual average depreciation accounting method to depreciate the value of the intermediate bulk containers from the prices shown on a valid price list over five years under the fallback method. Based on the above rulings, we find that your five-year straight-line annual average depreciation method is a reasonable adjustment to values derived from 19 U.S.C. § 1401a(b)-(e) under the fallback method, provided it is applied in accordance with GAAP and approximates the actual value of the intermediate bulk containers at the time of their exportation to the United States.
HOLDING:
Based on the facts presented, and the assumptions set forth above, the returned intermediate bulk containers may be appraised using a five-year straight line annual average depreciation as an adjustment to the prices for new goods shown on a valid price list for new goods under the fallback method.
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.”
A copy of this ruling letter 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,
Robert Dinerstein, Acting Chief
Valuation & Special Programs Branch