Internal Advice Request – Treibacher Industrie AG; deductive value

HQ W548387 February 24, 2004 RR:IT:VA 548387 CRS CATEGORY: Valuation Interim Port Director Area Port of Baltimore U.S. Customs and Border Protection 40 South Gay Street, Room 110 Baltimore, MD 21202 RE: Internal Advice Request – Treibacher Industrie AG; deductive value Dear Sir: This is in reply to your memorandum of August 25, 2003, under cover of which you forwarded a request for internal advice submitted by the Law Offices of George R. Tuttle, on behalf of Treibacher Industrie AG, relative to the appraisement of ferrovanadium imported into the United States. The bracketed text appearing below will be redacted from published versions of this decision. FACTS: Treibacher, the importer of record, exports ferrovanadium (FeV) to the United States. The majority of these exports are shipped on a consignment basis; the remainder – approximately twenty percent of Treibacher’s exports, consist of direct sales to purchasers in the United States. It is estimated that there are approximately fifteen to twenty consignment shipments of FeV per year. This internal advice request concerns only the consignment shipments. The majority of Treibacher’s consignment shipments are made through the port of Baltimore. Other ports of entry include Newark, Chicago and Pittsburgh. The majority of consignments are shipped on a delivered duty paid (DDP) basis, East Liverpool, Ohio, taxes unpaid. Treibacher’s warehouse is currently located in East Liverpool. After importation, the merchandise is typically trucked from the port of entry to Treibacher’s warehouse. While there is no sale at the time the consigned FeV is imported, Treibacher issues a commercial invoice in order to declare a value for purposes of entry. The unit value of the FeV stated in the invoice is based on the prevailing market prices derived from the prices published in Ryan’s Notes, at or about the time of shipment from Austria. Ryan’s Notes is a recognized trade publication covering ferrous and non-ferrous metals. Among other things, it provides twice-weekly prices for a variety of tradable commodities. As an example of how Treibacher’s consignment entries are made, counsel enclosed a copy of the entry summary and a commercial invoice for a specific entry ([***************************]). The invoice states that the terms of sale are DDP Baltimore, and that the total DDP price of the FeV is [*************]. In addition, the following estimated charges are separately identified on the invoice: ocean freight and U.S. in-carriage; foreign inland freight from Treibach, Austria to Hamburg, Germany; and insurance FOB Hamburg. The unit price stated on the invoice is [*******] per lb. vanadium content. As noted above, the unit price is based on FeV prices from Ryan’s Notes published just prior to export. The total DDP price includes an amount for estimated customs duties as well as for harbor maintenance and merchandise processing fees (HMF and MPF). The estimated duties, HMF, MPF and non-dutiable charges were deducted from the total DDP price to arrive at the entered value of the FeV. This is the amount shown on the entry summary submitted as Exhibit 2 of the internal advice request. The imported FeV was sold after importation into the U.S. in three separate transactions to [********************************************] (the “U.S. purchaser”). The unit prices in these sales are reflected on the commercial invoices. Treibacher paid a commission to an agent in connection with two of the sales to the U.S. purchaser. While it appears that in this instance all three sales occurred before the close of the ninetieth day after importation, counsel notes that on occasion sales will occur after the close of the ninetieth day after importation. In support of the internal advice request, counsel submitted documentation from an actual entry of FeV. The information submitted includes: the commercial invoice and entry summary; an issue of Ryan’s Note’s; a spreadsheet illustrating how the value of FeV covered by the representative entry would be determined under the deductive value method; invoices pertaining to the sale of the imported FeV to the U.S. purchaser; invoices from shippers showing the cost of ocean freight and foreign inland freight; documentation pertaining to the commission paid to the U.S. agent; and a credit note pertaining to amounts paid for the storage, handling and transport charges incurred in the sale to the U.S. purchaser. Counsel for Treibacher considers transaction value to be inapplicable inasmuch as there was no sale at the time of importation. Further, counsel states that Treibacher has no information regarding transaction values of identical or similar merchandise. Counsel therefore takes the position that deductive value is the appropriate basis of appraisement in this instance and, to this end, has provided information for a representative entry on how deductive value would be determined. ISSUE: The issue presented is whether merchandise imported into the United States by Treibacher and sold on a consignment basis is properly appraised under the deductive value method. LAW AND ANALYSIS: Merchandise imported into the United States is appraised for customs purposes 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 primary 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 thereto the extent not otherwise included. 19 U.S.C. § 1401a(b)(1). Transaction value is not acceptable if the buyer and seller are related and the relationship influences the price actually paid or payable. 19 U.S.C. § 1401a(b)(2). Inasmuch as the transaction value method requires a sale for exportation to the United States, there must exist a bona fide sale between the buyer and seller in order for goods to be appraised accordingly. In the instant case, Treibacher imports ferrovanadium, stores the merchandise in its warehouse and sells it on a consignment basis. Since there is no sale for exportation to the United States in these circumstances, the transaction method is inapplicable. 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 section 402(f) of the TAA. 19 U.S.C. § 1401a(a)(1). Under section 402(f), merchandise is to be appraised on the basis of a value that is derived from one of the other methods of valuation with such reasonable adjustments as are necessary to arrive at a value. For example, the “ninety days” requirement for purposes of deductive value may be administered flexibly. In the particular circumstances of this case, unless your office has information to the contrary, there would appear to be no information on sales of identical or similar merchandise. The next method of appraisement is deductive value. Under this method, imported merchandise is appraised based on the price at which the merchandise is sold in the United States in its condition as imported, in its greatest aggregate quantity, at or about the time of importation. 19 U.S.C. § 1401a(d)(2)(A)(i). If the merchandise is sold in the United States in its condition as imported but not at or about the time of importation, then deductive value is based on the price at which the merchandise is sold in the greatest aggregate quantity before the close of the ninetieth day after importation. 19 U.S.C. § 1401a(d)(2)(A)(ii). The unit price at which merchandise is sold in the greatest aggregate quantity is the unit price at which it is sold to unrelated persons at the first commercial level after importation. 19 U.S.C. § 1401a(d)(2)(B). Section 402(d) of the TAA provides in pertinent part that the unit price is to reduced by amounts equal to the following: (i) any commission usually paid or agreed to be paid, or the addition usually made for profit and general expenses, in connection with sales in the United States of imported merchandise that is of the same class or kind, regardless of the country of exportation, as the merchandise concerned; (ii) the actual costs and associated costs of transportation and insurance incurred with respect to international shipments of the merchandise concerned from the country of exportation to the United States; (iii) the usual costs and associated costs of transportation and insurance with respect to shipments of such merchandise from the place of importation to the place of delivery in the United States, if such costs are not included as a general expense under clause (i); (iv) the customs duties and other federal taxes currently payable on the merchandise concerned by reason of its importation, and any Federal excise tax on, or measured by the value of, such merchandise for which vendors in the United States are ordinarily liable…. 19 U.S.C. § 1401a(d)(3)(A)(i)-(iv). The information submitted by counsel supports the use of the deductive value method to appraise FeV imported by Treibacher. Accordingly, if imported FeV is sold before the close of the ninetieth day after importation it should be appraised under section 402(d) of the TAA. In the event that sales of FeV occur after the close the close of the ninetieth day after importation, the merchandise should be appraised under a modified deductive value pursuant to section 402(f) of the TAA. In accordance with section 402(d)(3)(A), the price determined under section 402(d)(2)(a) should be reduced by amounts equal to actual transportation costs, customs duties, insurance, etc. In addition, the price should be reduced by the amount of the commission paid to the agent. You have asked whether the commercial invoice submitted with the entry is acceptable for purposes of 19 C.F.R. § 141.86 inasmuch as the FeV is shipped otherwise than in pursuance of a purchase or an agreement to purchase. In this instance, we consider the invoice submitted to be consistent with the requirements of 19 C.F.R. § 141.86(a)(6). Treibacher may submit similar commercial invoices and deposit duties in the same manner as was done on the representative entry. You have also asked whether entries of FeV under consignment shipments should be held open until Treibacher submits the information necessary for U.S. Customs and Border Protection to fix the final appraisement of the imported FeV in accordance with the principles of the deductive value method. In this regard, however, we would suggest that Treibacher’s consignment shipments are ideally suited for reconciliation and would recommend that Treibacher consider using this procedure in future transactions of this type. HOLDING: In conformity with the foregoing, ferrovanadium imported by Treibacher is properly appraised under the deductive value method in accordance with section 402(d) of the TAA. If the merchandise is not sold before the close of the ninetieth day after the close of importation, it may be appraised under a modified deductive value in accordance with section 402(f) of the TAA. This decision should be mailed to the internal advice applicant no later than sixty days from the date of this letter. On that date, the Office of Regulations and Rulings will make the decision available to CBP personnel and to the public via the CBP Home Page on the World Wide Web at www.cbp.gov, through the Freedom of Information Act, and by other methods of public distribution. Virginia L. Brown Chief, Value Branch