OT:RR:CTF:VS H291763 CMR
Office of Regulatory Audit
Rachel Jack
2220 Grandview Drive
Suite 215
Fort Mitchell, KY 41017
RE: Request for Internal Advice; Valuation of “returnable dunnage”
Dear Ms. Jack:
This is in response to the request for internal advice, dated October 31, 2017, submitted by Robert Bosch Automotive Steering, LLC. (hereinafter, Bosch), as a consequence of a Focused Assessment review by the Office of Regulatory Audit for entries of merchandise for the calendar year ending December 2014. This request is limited to a question regarding the proper valuation of reusable containers entered into the United States.
On March 29, 2018, this office received a supplemental submission from Bosch regarding the valuations of the reusable containers at issue.
FACTS:
Bosch is a supplier of automotive parts related to steering systems, columns, and pumps. In January 2017, a Focused Assessment of ZF Steering Systems LLC (now, Bosch), was completed for calendar year 2014. An issue of the valuation of reusable containers entered by Bosch was unresolved at the completion of the Focused Assessment. These reusable shipping containers include pallets, totes, and racks that are suitable for repetitive use. These containers generally re-enter the U.S. within a week from the date of exportation. When Bosch enters these reusable containers, it pays duty on them. As the containers are not entered as the result of a sale, or entered for sale, Bosch values them under the fallback method provided for in 19 U.S.C. § 1401a(f). Bosch values the containers at 50% of their original acquisition price based on the assumption that, on average, the containers are at the midpoint of their useful life.
In Bosch’s supplemental submission of March 29, 2018, Bosch proposed valuing the reusable containers at issue under the fallback method utilizing a straight-line accounting method to depreciate the value of the reusable containers over a five-year period. The depreciated value will be reviewed on an annual basis. Bosch relies upon Headquarters Ruling Letter (HQ) H288062, dated September 5, 2017, for support of its suggested method of valuing the reusable containers.
ISSUE:
Whether the methodology proposed by Bosch to value the reusable containers is acceptable under the fallback method of 19 U.S.C. § 1401a(f).
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 reusable containers were not the subject of a sale and, therefore, could not 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 reusable 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:
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 Headquarters Ruling Letter (HQ) H288062, relied upon by Bosch, this office considered a nearly identical situation as that presented here. In that decision, a company purchased intermediate bulk containers that were used to ship merchandise to foreign and domestic customers. Once emptied, containers that had been exported with merchandise were returned to the United States. As here, the containers were not entered as instruments of international traffic and were not the subject of a sale. Based upon previous rulings in which depreciation was determined to be an acceptable method of appraisement of merchandise under the fallback method, this office determined that it was acceptable to appraise the intermediate bulk containers using a five-year straight line annual average depreciation as an adjustment to the price of new containers.
In this case, Bosch had valued the containers at 50% of their original acquisition price based on the assumption that, on average, the containers are at the midpoint of their useful life. However, Bosch proposes to value the reusable containers under the fallback method utilizing a straight-line accounting method to depreciate the value of the reusable containers over a five-year period. Based upon our decision in H288062, a nearly identical situation, we find Bosch’s proposed method of valuation of the reusable containers to be acceptable.
HOLDING:
In accordance with HQ H288062, we find that valuing the reusable containers at issue under the fallback method, using a straight-line accounting method to depreciate the value of the reusable containers over a five-year period, with an annual review of the depreciated value, to be acceptable.
Sixty days from the date of this letter, Regulations and Rulings of the Office of Trade will take steps to make this decision available to CBP personnel and to the public
on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Programs Branch