Recyclable Material; Valuation

HQ H320747 July 20, 2022 OT:RR:CTF:VS H320747 AP CATEGORY: Valuation John B. Totaro, Jr. Neville Peterson LLP 1310 L Street, N.W., Suite 300 Washington, D.C. 20005 RE: Recyclable Material; Valuation Dear Mr. Totaro: This is in response to your September 1, 2021 submission, on behalf of [X] (the “importer”), concerning the valuation of [X] (“recyclable material”). The importer has asked that certain information submitted in connection with this ruling be treated as confidential. Inasmuch as this confidentiality request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), it is approved. The information contained within brackets in italics in this ruling or in the attachments to the ruling request, forwarded to our office, will not be released to the public and will be withheld from published versions of this ruling letter. FACTS: The importer imports the subject recyclable material to recycle and extract three types of metals ([X], [X] and [X]. Pursuant to a contract between the importer and [X] (“supplier A”), the final per-unit price between the parties is determined by application of a formula based on the market values of the three different metals contained in the recyclable material, determined at a set date after their receipt at the importer’s facility in the United States minus the per-unit processing fee that the importer charges supplier A to recycle the extracted metals. The pricing methodology with [X] (“supplier B”) has the same structure as the pricing methodology in the importer’s contract with supplier A. Due to fluctuations in the three market values referenced in this formula, and depending on the metals content of each shipment, the value of the processing fee may exceed the value of the metals for a particular shipment, resulting in a negative final price for that shipment. In Headquarters Ruling Letter (“HQ”) H287920 dated Aug. 31, 2018, which was issued to the same importer and involved similar recyclable material, U.S. Customs and Border Protection (“CBP”) considered this situation. The entries covered by HQ H287920 are final and the appropriate estimated value to declare in negative value circumstances is no longer an active issue. The importer continues to import multiple shipments of similar recyclable material from suppliers A and B every week. You describe these imports as bona fide sales for export. Due to the minor differences in the levels of the metals contained in each shipment of the recyclable material, no two shipments are “identical in all respects” under 19 U.S.C. § 1401a(h)(2). You request that for shipments of the recyclable material for which the importer’s contractual pricing formula yields a negative value, the transaction value of similar merchandise or the fallback value derived therefrom should be used to appraise the merchandise. ISSUE: How should the instant recyclable material be appraised when the contractual pricing formulas yield negative values? 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. Due to the fluctuation in the market values of the three different metals and depending on the metals content of each shipment, the value of the processing fee may exceed the value of the metals for a particular shipment, resulting in a negative final price for that shipment. Under these circumstances, you acknowledge that transaction value is not available for reconciliation of the entries. In HQ H287920, CBP concluded that, “the Importer should declare the estimated value of the recyclable material based on the processing fee that the Importer charges Suppliers A and B to recover the metals until such time the Importer is able to apply its formula to derive a positive value. If the application of the formula does not result in a positive final value of the imported merchandise under reconciliation, the recyclable material should be appraised under the fallback method based on the processing fee.” The reasoning was that using the processing fee was a derivation of the transaction value formula and what remained when the market value of the recycled material was less than the processing fee. Going forward, you still propose to value the imported recyclable material as a result of refining operations performed in the United States to extract the metals. The price actually paid or payable is unknown at the time of entry. The recyclable materials have no use other than to extract the metal content and the value of the recyclable materials is the result of the operations performed in the United States to remove the metals. You indicate that there is still a possibility that the market value of the recycled metal could be less than the processing fee. CBP assumes that in a majority of entries, the valuation would be positive, as long-term negative values should not be financially sustainable. You also indicate that similar merchandise is exported to the United States at or about the same time that the instant merchandise is exported to the United States, and we agree that for a non-perishable product like the recyclable material for entries in which market conditions result in a negative value, the “at or about the same time” requirement under 19 U.S.C. § 1401a(c) and 19 C.F.R. § 152.104(a)(2) needs to be interpreted flexibly. Therefore, we proceed down the hierarchy to transaction value of identical or similar merchandise, which refers to previously accepted value of identical or similar merchandise that was exported to the United States at or about the same time, at the same commercial level, and in substantially the same quantity as the merchandise being appraised. Since transaction value of identical merchandise is unavailable, we will look at transaction value of similar merchandise. The term “similar merchandise” is defined in 19 U.S.C. § 1401a(h)(3) as: (A) merchandise that— (i) was produced in the same country and by the same person as the merchandise being appraised, (ii) is like the merchandise being appraised in characteristics and component material, and (iii) is commercially interchangeable with the merchandise being appraised; or (B)if merchandise meeting the requirements under subparagraph (A) cannot be found … , merchandise that— (i) was produced in the same country as, but not produced by the same person as, the merchandise being appraised, and (ii) meets the requirement set forth in subparagraph (A)(ii) and (iii). If the importer imports similar recyclable material with the same weight and similar metal content into the United States from foreign suppliers, which is appraised under transaction value, recyclable material from the same country could be appraised under 19 U.S.C. § 1401a(c) using those previously accepted transaction values. Pursuant to Treasury Decision (“T.D.”) 91-15, dated Mar. 29, 1991, the information necessary for the determination of the transaction value of similar merchandise could be made on the basis of information provided by the importer or already available to CBP. Thus, provided the importer can establish that the transaction value of similar recyclable material of the same weight and similar metal content as set forth in 19 U.S.C. § 1401a(h)(3) may serve as the basis for appraising the recyclable material, namely by showing that the products are commercially interchangeable, have the same weight and similar composition, and involve the same country and time of export, CBP can appraise the merchandise on the basis of transaction value of similar merchandise, subject to adjustments for commercial level or quantity if supported by sufficient documentation. HOLDING: The recyclable material can be appraised based on the transaction value of similar recyclable material pursuant to 19 U.S.C. §§ 1401a(c) and (h)(3). 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