OT:RR:CTF:VS H324385 AP
Helen M. Cousineau, Managing Director
Kirti Jadeja, Senior Manager
Deloitte Tax LLP, Global Tax Advisory
111 S. Wacker Drive
Chicago, IL 60606
RE: Powdered Yogurt Products; Valuation under 19 U.S.C. § 1401a; Computed Value
Dear Ms. Cousineau and Ms. Jadeja:
This is in response to your March 28, 2022 request for a binding ruling, on behalf of your client [X] (“importer”) based in [X] (“Country A”), regarding the proper appraisement for a prospective entry of powdered yogurt products.
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 in italics will not be released to the public and will be withheld from published versions of this ruling.
FACTS:
The importer manufactures make-at-home powdered yogurt products and non-electric yogurt makers and plans to import these products into the United States. The importer participates in the U.S. Customs and Border Protection (“CBP”) Reconciliation Program and will be acting as a non-resident importer.
The instant powdered yogurt products come in various flavors and will be used by the final U.S. consumers to produce their own yogurt for consumption. The products contain milk powder, culture, sugar, and flavoring, packaged into individual sachets. None of the ingredients will be sourced from the United States. The milk powder will be sourced from the importer’s parent company in Country A. The powdered yogurt products will be imported into the United States as sachets packed in “bulk” cartons. Some of the U.S. shipments may include non-electric plastic yogurt makers and plastic jars. The content of individual shipments may vary and could include bulk shipments of multiple sachets per carton.
The powdered products will be imported for storage at a third-party warehouse operated by an unrelated party. The individual sachets will be packaged into kits at the warehouse for resale to domestic U.S. consumers through online shopping sites. The kits will not always include the yogurt maker and plastic jar. Depending on demand, the kits will consist of multiple sachets of one flavor or multiple flavors of powdered yogurt with or without the yogurt maker and jars.
The importer’s inventory system will account for the “live” cost of all components when purchased and the cost will be added to the system. When a new quantity of inputs are purchased with a different price, this will get added into the calculation of the production run. Every new cost for purchased products will result in a new adjusted average cost of production.
ISSUE:
What is the proper method of appraisement for the subject powdered yogurt products imported with or without the non-electric yogurt makers and plastic jars as described?
LAW AND ANALYSIS:
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. See 19 U.S.C. § 1401a(b). In order for imported merchandise to be appraised using the transaction value method, it must be the subject of a bona fide sale between a buyer and seller, and the sale must be 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 hierarchical order. See 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)).
The subject merchandise will not be sold on entry and will be stored in a warehouse. There is no sale for the purposes of determining transaction value. As a result, transaction value may not be used to appraise the merchandise.
The second method of appraisement is the transaction value of identical or similar merchandise. See 19 U.S.C. § 1401a(c). The transaction value of identical or similar merchandise refers to a previously accepted transaction value of identical or similar merchandise that was exported at or about the same time as the merchandise being valued. Here, there are no transaction values of identical or similar merchandise available to appraise the imported merchandise.
If transaction value and transaction value of identical or similar merchandise cannot be determined, then the customs value will be based upon deductive value, unless the importer has elected computed value. The importer has elected the application of computed value before deductive value. The importer proposes to include in its computed value calculation the value of materials, fabrication, and indirect costs from its inventory management system; the amounts for profit and general expenses from its books and records recorded in accordance with Generally Accepted Accounting Principles (“GAAP”) in Country A and the amounts for foreign inland freight from the factory to the foreign port of export; and packing costs, included as a product cost in its inventory management system. There will be no separate assist-related costs as all such costs will be accounted for in the value of materials, fabrication, and indirect costs.
Title 19 U.S.C. § 1401a(e) provides the following regarding computed value:
(1) The computed value of imported merchandise is the sum of— (A) the cost or value of the materials and the fabrication and other processing of any kind employed in the production of the imported merchandise; (B) an amount for profit and general expenses equal to that usually reflected in sales of merchandise of the same class or kind as the imported merchandise that are made by the producers in the country of exportation for export to the United States; (C) any assist, if its value is not included under subparagraph (A) or (B); and (D) the packing costs.
(2) For purposes of paragraph (1)— (A) the cost or value of materials under paragraph (1)(A) shall not include the amount of any internal tax imposed by the country of exportation that is directly applicable to the materials or their disposition if the tax is remitted or refunded upon the exportation of the merchandise in the production of which the materials were used; and (B) the amount for profit and general expenses under paragraph (1)(B) shall be based upon the producer’s profits and expenses, unless the producer’s profits and expenses are inconsistent with those usually reflected in sales of merchandise of the same class or kind as the imported merchandise that are made by producers in the country of exportation for export to the United States, in which case the amount under paragraph (1)(B) shall be based on the usual profit and general expenses of such producers in such sales, as determined from sufficient information.
The importer will include its production costs (i.e., the costs of raw materials, wages, utilities, machinery depreciation, premises, and rent) to produce the powdered yogurt products. The importer will obtain the costs of materials and fabrication from its inventory management system. The inventory management system will include the average purchase price or production cost for all components at any point in time. Such costs will be recorded on the importer’s books and records in accordance with GAAP in Country A.
The importer will use its own profit and general expense figures on its global sales. As the final amounts for expenses will not be readily available until the end of a specific year, the importer will use previous year actual costs to determine the appropriate cost for each shipment and will adjust the value for each subsequent shipment. The importer will include foreign inland charges from its dock to the foreign port of export.
Since all costs will be accounted for under the costs of materials and fabrication, no assists will be involved or separately required as additions in the calculation of the computed value. All packing costs will be included in the importer’s bill of materials of the product, including costs of sachets and cartons for shipment. The importer will include all costs related to preparing the products for shipment to the U.S. as included in the inventory management system.
Nonetheless, this is a prospective ruling request, and the importer did not provide any of the documents substantiating the costs and the relevant profit concerning the imported powdered yogurt products. Because we do not have any documentation supporting appraisement of the merchandise under computed value, we cannot definitively rule that the goods should be appraised under computed value. We can only note that based upon the facts which the importer has provided to us, it is likely that appraisement under computed value is proper.
Title 19, C.F.R. § 141.88 states:
When the Center director determines that information as to computed value is necessary in the appraisement of any class or kind of merchandise, he shall so notify the importer, and thereafter invoices of such merchandise shall contain a verified statement by the manufacturer or producer of computed value as defined in § 402(e) Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (19 U.S.C. 1401a(e)).
Thus, the importer must be prepared to provide to CBP upon request the documentation, which supports the computed value method of appraisement.
HOLDING:
Based on the facts submitted, the subject powdered yogurt products should be appraised under computed value pursuant to 19 U.S.C. § 1401a(e), provided the importer is prepared to present CBP with documentation to support appraisement under this appraisement 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 [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,
Monika R. Brenner, Chief
Valuation and Special Programs Branch