Application for Further Review of Protest 3126-10-100003; Valuation of a Well Release Device

HQ H285629 December 15, 2017 OT:RR:CTF:VS H285629 CMR CATEGORY: Valuation U.S. Customs and Border Protection Attn: Karen Beaudin 605 W. 4th Ave. Suite 230 Anchorage, AK 99501 RE: Application for Further Review of Protest 3126-10-100003; Valuation of a Well Release Device Dear Port Director: This is in response to the Application for Further Review (AFR) of Protest 3126-10-100003, filed by Givens & Johnston, on behalf of their client, Welltec Inc., against your decision to liquidate an entry of a Welltec Release Device and assess duties based upon the value declared at entry. The protest also involved the classification of the merchandise, but counsel for the importer has advised this office that the classification is no longer at issue. Therefore, we will only address the valuation matter. We note the protest was timely filed, and the AFR was properly approved. FACTS: Your port liquidated an entry of a Welltec Release Device (hereinafter, Device) as entered by the importer. The importer now claims that the value declared at entry was incorrect. In the protest, it is stated that the entered value was “a very ‘optimistic’ replacement value that was used in Welltec’s own internal accounting.” It was a value that was to serve: as a starting point in negotiations for compensation in the event a device was lost or damaged while in service. The replacement value factored in estimated compensation for the maximum value of lost opportunities and other considerations . . . . The pro forma invoice presented in the entry package identifies the Device, provides its value and indicates that the value is for insurance purposes only. Further, the invoice states: “No commercial values, not for resale. For internal use only.” It also indicates that the item will be returned to Denmark after use. In the protest, it is asserted that as the value declared at entry took into consideration factors not properly included in determining the value of the merchandise for Customs purposes, the value was incorrect. Protestant states that the Device was imported as part of an intra-company transfer and was not the subject of a sale. Thus, it claims transaction value under 19 U.S.C. § 1401a(b) cannot be used to appraise the merchandise. Further, as there are no transactions, of any kind, of identical or similar articles, the article’s value cannot be determined based upon the transaction value of identical or similar articles, i.e. 19 U.S.C. § 1401a(c). The Device is not sold in the United States, and therefore, deductive value, as set forth in U.S.C. § 1401a(d), is inapplicable. The protestant asserts that when a new Device is imported, appraisement based upon computed value, U.S.C. § 1401a(e), is appropriate. However, when the Device is used, protestant asserts it should be appraised under the fallback method of appraisement, i.e. U.S.C. § 1401a(f). In support of the use of the computed value, counsel for the importer submitted a report by Deloitte wherein the auditing company commented on the computed value method undertaken by Welltec A/S, the manufacturer of the Device and parent of Welltec Inc. In the report, Deloitte commented that they found the method described in a memorandum entitled “Customs value for Well Tractors and tools” and the calculations of customs value “in concordance with the guidelines implemented by the Agreement on the Implementation of Article VII of the General Agreement on Tariffs and Trade (GATT).” This office requested a copy of the referenced memorandum. However, we never received it. In addition, we did not receive responses to a number of questions we put to counsel. ISSUE: Whether the protestant has submitted sufficient information regarding the value of the imported Welltec Release Device to allow the protest, and reappraise 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 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 certain statutory additions. 19 U.S.C. § 1401a(b)(1). When transaction value appraisement is not possible, such as in this case where there was an intra-company transfer of merchandise which is not the subject of a sale between one related party to another, we must go through the hierarchy of the statute, i.e, 19 U.S.C. § 1401a, to determine the proper method of appraisement. Counsel for Welltec submits that there are no sales of identical or similar merchandise upon which to base appraisement under 19 U.S.C. § 1401a(c). The Device was manufactured by Welltec A/S for the exclusive use of its related parties in providing services. Therefore, there are no sales of the article to other parties. While Welltec has competitor companies, we have no knowledge of any similar devices, if any exist, exported to the U.S. at or about the time that the Device was exported to the U.S. Therefore we agree with counsel that appraisement cannot be made under 19 U.S.C. § 1401a(c). Nor can the deductive value method under 19 U.S.C. § 1401a(d) be utilized as the imported device is not subject to a sale in the U.S. Counsel proposes that the Device be appraised based upon computed value, i.e. 19 U.S.C. § 1401a(e). However, the information provided in the protest submission was insufficient. In response to our requests for additional information, counsel has failed to provide anything further. Without the ability to appraise the Device on any of the methods enunciated in 19 U.S.C. § 1401a(b) through § 1401a(e), we are left with 19 U.S.C. § 1401a(f), known as the “fallback” method. The fallback method provides that merchandise should be appraised on the basis of a value derived from one of the prior valuation methods reasonably adjusted to the extent necessary to arrive at a value. See 19 U.S.C. 1401a(f) and 19 CFR 152.107. However, it may not be appraised, inter alia, 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 capricious values. 19 U.S.C. 1401a(f); 19 CFR 152.108. Under section 500 of the Tariff Act of 1930, as amended, 19 U.S.C. 1500(a) which constitutes CBP’S 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, other document to the contrary notwithstanding . . . .” The Statement of Administrative Action (SAA) which forms part of the legislative history of the TAA, provides in pertinent part: Section 500 is the general authority for Customs to appraise merchandise. It is not a separate basis of appraisement and cannot be used as such. 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, 96th Cong., 1st Sess. at 2. Although we understand that Welltec believes it over-valued the Device at the time of entry, it valued the Device based on a value contained in Welltec’s own internal accounting ledger. Our requests for additional information have gone unanswered. Therefore, we see no basis upon which to reappraise the merchandise and undo the value claimed by Welltec at the time of entry. HOLDING: Based on the above discussion, the protest is denied. In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the Protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on the CBP website at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division