OT:RR:CTF:VS H335827 RMC
Jennifer Diaz
Diaz Trade Law, P.A.
12700 Biscayne Blvd., Suite 401
North Miami, FL 33181
RE: Valuation of Precious Metal Bars; Formula; Price Actually Paid or Payable; Transaction Value
Dear Ms. Diaz:
This is in response to your letter, dated November 20, 2023, on behalf of the importer, EMA Professional Services Corporation ("EMA"). In your letter, you request a binding ruling pursuant to 19 C.F.R. Part 177 on the valuation treatment of precious metal bars that EMA will purchase from unrelated sellers at prices ultimately determined by post-importation sampling and analysis.
FACTS:
According to the information provided, EMA will purchase and import precious metal bars consisting primarily of platinum group metals (e.g., palladium, rhodium, and platinum), also referred to as "PGM," sourced from suppliers in South Africa, the United Arab Emirates, and other countries. EMA will make entry using an initial, provisional purchase price determined by two factors: (1) the supplier's pre-importation preliminary analysis of the bars' precious metal content; and (2) the spot price on the London Commodity Market of the precious metals contained in the bars. Because EMA anticipates that the actual metal content could differ from the supplier's pre-importation preliminary analysis, it plans to carry out sampling and analysis of the bars once they arrive in the United States. On the day it receives the test results, EMA will offer the supplier a final price based on the results of this post-importation sampling and analysis and the spot price of metal on the London Commodity Market as of that date. EMA proposes to report any upward or downward price adjustment to U.S. Customs and Border Protection ("CBP") via the Automated Commercial Environment ("ACE") Reconciliation Program.
Specifically, the sample terms of sale and proposed formula submitted with the ruling request provide as follows:
. Prior to the date of shipment, [Supplier] shall prepare a pro forma invoice based on the [Supplier's] preliminary analysis of the PGM and the metals' spot price within three business days of the shipment date. Both EMA and [Supplier] agree that the pro forma invoice will be used for declaring a transaction value at the time of entry and will not be used to determine the final price PGM as stated in the Final Invoice.
. [Supplier] shall furnish EMA with a Delivery Note on the Delivery Date and Time at the Delivery Location.
. Within a minimum of 25 business days after the delivery date, EMA shall provide the final analysis of the PGM based on industry-standard methods. EMA will then contact [Supplier] to calculate the final price of the PGM based on (a) the final test results and (b) the current spot price of the metals. EMA will then prepare the Final Purchase Order based on the Final Price once determirefined by EMA and [Supplier].
. Within a minimum of 25 Business Days after the Delivery Date and Time, EMA shall pay [Supplier] the Final Invoice amount, less the Refining Fee Credit Note[1] amount into the [Supplier] nominated Account, by way of direct electronic funds transfer, free of exchange.
. The consideration payable by EMA to [Supplier] for a Sale is the amount owing as per the Final Invoice(s) less the Refining Fee Credit Notes.
. In the event that [Supplier Country] Central Bank approval is required, [Supplier] shall make such application and EMA shall render such assistance as may reasonably be required.
. EMA ensures that within a reasonable time after payment of the final invoice, EMA will provide the final price of the metals to its customs broker, which will then provide the same to [CBP] through the reconciliation program.
In your ruling request, you ask whether this pricing practice constitutes a formula such that the final purchase price will constitute the "price actually paid or payable" for purposes of the transaction value method. If EMA's pricing practice does constitute such a formula, you also request confirmation that the ACE Reconciliation Program is an appropriate method for making any price adjustments required to align the provisional price with the price determined by application of the formula.
ISSUES:
1. Whether the final price that EMA will pay to the supplier is determined according to an acceptable formula such that it constitutes the "price actually paid or payable" for purposes of the transaction value method.
2. Whether the ACE Reconciliation Program is an appropriate method for making any price adjustments required to align the provisional price with the price determined by application of the formula.
LAW AND ANALYSIS:
1. Formula for Purposes of the Price Actually Paid or Payable
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") codified at 19 U.S.C. 1401a. The preferred method of appraisement under the TAA is transaction value, defined as "the price actually paid or payable for the merchandise when sold for exportation to the United States," plus five statutorily enumerated additions. 19 U.S.C. 1401a(b)(1).
The "price actually paid or payable" is defined as the:
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).
The price actually paid or payable is considered "without regard to its method of derivation." 19 C.F.R. 152.103(a). Paragraph (a) further clarifies that the "word 'payable' refers to a situation in which the price has been agreed upon, but actual payment has not been made at the time of importation." Id. Therefore, "[the price actually paid or payable] may be the result of discounts, increases, or negotiations, or may be arrived at by the application of a formula, such as the price in effect on the date of export in the London Commodity Market." Id.
If the final sales price of imported merchandise is not ascertainable at the time of importation, the phrase "price in effect on the date of export" may be determined by application of a formula, provided that the formula is fixed at the time of importation and depends on some future event or occurrence over which neither the seller nor the buyer have any control. See, e.g., Headquarters Ruling ("HQ") H023813, dated December 1, 2008. In other words, only the methodology must be fixed at the time of importation; the actual amount can be calculated at a later date. See, e.g., HQ H288233, dated December 12, 2017. If, however, the future event is subject to the control of either the seller or the buyer, then the formula fails to establish a "price actually paid or payable" for purposes of transaction value. See, e.g., HQ 545618 dated August 23, 1996; HQ 545388, dated October 21, 1994.
For example, in HQ H133039, dated February 25, 2011, U.S. Customs and Border Protection ("CBP") held that the importer had demonstrated that a valid formula existed for its purchases of scrap gold. In that case, the importer planned to purchase broken gold jewelry from a seller in Grand Cayman, British West Indies, for purposes of refining its precious metal content. Upon receiving broken jewelry form its customers, the seller would contact the importer and offer it for purchase. The importer would advise the seller of the "spot" price it was paying that day (as determined by the Comex division of the New York Mercantile Exchange), minus its commission. If the seller agreed, it would send the gold would to the importer with an invoice listing the type of gold (e.g., 10 karat, 14 karat, etc.) as well as the approximate weight and value based on the spot price initially quoted. Once the importer received the gold, it performed a "scratch test" (a process in which acid is dropped on the gold to test its purity) and weighed the gold on a certified scale. The importer would then contact the seller and quote a final price, based on the results of the tests on the day they were performed. The seller was then free to either accept the price and complete the transaction or reject it, in which cases the importer would return the gold to Grand Cayman.
CBP noted that the requirements for establishing a valid formula had been met: the price is determined before the merchandise is imported into the United States and is based on an objective standard-namely, the price of gold on the New York Mercantile Exchange, COMEX, as of the date the buyer performs the weigh and scratch tests. Neither the buyer nor the seller had any control over this price. Accordingly, CBP held that the price that resulted from applying the formula was acceptable as the "price actually paid or payable" for the merchandise.
Here, as in HQ H133039, the importer has established a valid formula for purposes of determining the price actually paid or payable. The final price that EMA will pay is determined before the merchandise is imported and ultimately depends on an objective standard-specifically, the relevant price on the London Commodity Market on the date that EMA receives the test results. Neither EMA nor the supplier can influence or control this price. As a result, the final price is determined according to an acceptable formula such that it constitutes the "price actually paid or payable" for purposes of the transaction value method.
2. Use of Reconciliation to Report Price Adjustments
As noted in HQ H288233, dated December 12, 2017, "[a] number of mechanisms are available for an importer to submit the final values for imports." In that case, we concluded that the ACE Reconciliation Program, which allows importers to revise certain elements of an entry summary that were not determinable at the time of entry, was an appropriate way for an importer to report price adjustments required under a formula for determining the price of iron oxide pellets. In this case, although the importer is not required to participate in the Reconciliation Program, we likewise find that it would be an acceptable way to report any price adjustments required under the pricing formula discussed above.
HOLDING:
Under the facts as presented, the final price that EMA will pay to the supplier is determined according to an acceptable formula such that it constitutes the "price actually paid or payable" for purposes of the transaction value method. EMA may report any price adjustments through the ACE Reconciliation Program.
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 Customs Service 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 Brenner, Chief
Valuation and Special Programs Branch
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[1] According to counsel's description, the Refining Fee Credit Note is a specified percentage of the spot price which varies based on the type of metal being purchased and is intended to cover some of the costs associated with EMA's processing of the imported metals.