Appraisement of Integrated Circuits; 19 U.S.C. § 1401a

HQ W548644 March 9, 2005 VAL-RR:IT:VA 548644 GG CATEGORY: Valuation Ms. Barbara Clausen Senior Regulatory Specialist FedEx Trade Networks 205 West Service Road Champlain, NY 12919 RE: Appraisement of Integrated Circuits; 19 U.S.C. § 1401a Dear Ms. Clausen: This is in response to your letter dated January 25, 2005, requesting a ruling on behalf of your client, Tundra Semiconductor Corporation (Tundra). Your request was forwarded to this office by the National Commodity Specialist Division in New York. FACTS: Tundra, a Canadian corporation, plans to engage Advanced Semiconductor Engineering, Inc. (ASE) of Taiwan to assemble integrated circuits. Tundra and ASE are not related. Under this arrangement, ASE will produce various types of integrated circuits. Each type will have a unique parts number and possibly a different purchase price. Tundra will purchase the integrated circuits from ASE, with ownership transferring to Tundra upon shipment from ASE. The integrated circuits will be shipped directly from ASE in Taiwan to ISE Labs Inc. (ISE) in California for testing. Tundra will be the importer of record. Any integrated circuits discovered through testing to be defective will be scrapped. Following testing, the integrated circuits will be placed in a warehouse and then sold by Tundra to customers in the United States, Europe, Canada and Asia. Tundra will send packing lists and commercial invoices for each of the orders to ISE, and ISE will arrange for the shipment of the integrated circuits to Tundra’s customers. Tundra requests advice on the appraisement of the integrated circuits when they are entered after arriving from Taiwan. Specifically, it wants to know whether the reported price should reflect – The invoice price from ASE to Tundra; The invoice price from ASE to Tundra plus the testing costs; or The anticipated invoice price from Tundra to its customers around the world. ISSUE: How should the imported integrated circuits be appraised? LAW AND ANALYSIS: As you know, 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 (19 U.S.C. § 1401a; TAA). The primary basis of appraisement under the TAA 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 to the extent not otherwise included. (19 U.S.C. § 1401a(b)(1)(A)-(E)). Tundra’s situation is similar to the one described in Headquarters Ruling Letter (HQ) 547594, June 27, 2000, where it was determined that single-tiered transactions between a Canadian buyer and its Far Eastern suppliers gave rise to transaction value. The focus of that ruling was on (1) whether the transactions constituted bona fide sales, and (2) whether the goods were clearly destined for exportation to the United States. In addressing the first question, CBP examined the invoices, purchase orders, letters of credit, and terms of sale and determined that bona fide sales were in fact occurring. We can make no similar analysis here because Tundra’s transactions are prospective and as such no documentation yet exists. Provided, however, that: (1) the future transactions between Tundra and ASE are arms length sales; (2) the integrated circuits are clearly destined for the United States when sold; and (3) there are no other limitations on the use of transaction value, then the integrated circuits may be appraised under transaction value using the price paid by Tundra to ASE. HOLDING: Provided that: (1) the future transactions between Tundra and ASE are arms length sales; (2) the integrated circuits are clearly destined for the United States when sold; and (3) there are no other limitations on the use of transaction value, then the integrated circuits may be appraised under transaction value using the price paid by Tundra to ASE. Sincerely, Virginia L. Brown Chief Value