H308722

HQ H308722 April 17, 2020 OT:RR:CTF:VS H308722 AP CATEGORY: Valuation Jesse Weisman, Chief Executive Officer JW Customs Brokers LLC 8200 Hampson St., Suite 225 New Orleans, LA 70118 Re: Semi-finished copper and copper alloy products imported under consignment; Method of Appraisement Dear Mr. Weisman: This is in response to your request for a binding ruling, dated February 6, 2020, regarding the proper appraisement of semi-finished copper and copper alloy products imported under consignment. FACTS: Tecnofil SA (“Tecnofil”) and its U.S. customer, both unrelated parties, intend to enter into a consignment inventory management system agreement. Tecnofil, the supplier and non-resident importer, will export semi-finished copper and copper alloy products to the United States from Peru. The U.S. customer will serve as the ultimate purchaser. The exports will be shipped on a consignment basis to minimize the U.S. customer’s inventory while ensuring replenishment of the merchandise on a timely basis. The goods will be exclusively sold to Tecnofil’s U.S. customer. Tecnofil will assume title and risk of loss of goods from its production plant in Peru up until Tecnofil’s customer takes physical possession of the goods at its U.S. plant. Tecnofil will be responsible for all freight and insurance charges and other costs, expenses, fees, duties, imposts, value-added taxes and charges arising from the shipment of the goods up to the point and time of delivery. The terms of delivery of the goods into the consigned property are Delivery at Place (“DAP”) U.S. customer’s factory, in accordance with Incoterms 2010. Tecnofil will ship the goods to a Tecnofil-selected and controlled third-party warehouse within close proximity of its customer’s U.S. plant. Tecnofil will be responsible to build and maintain at least five weeks of inventory based on a non-binding consumption forecast provided by its U.S. customer. At the third-party warehouse, the goods will be stocked and staged for future delivery to Tecnofil’s U.S. customer. The goods will remain in inventory for an average of 35 days and no longer than 90 days. When Tecnofil’s U.S. customer requires a delivery, the customer will send a purchase order to Tecnofil, who will then produce a commercial invoice confirming the purchase order. Tecnofil will arrange for delivery of the goods from the warehouse to the customer’s U.S. plant. Payment terms between Tecnofil and the customer will be set at net 75 days commencing from the date of the customer’s receipt of Tecnofil’s commercial invoice. The price of the goods will be determined based on two parts – metal price and fabrication adder – which will not be subject to retroactive change subsequent to the issuance of a bill of lading date. The sales price of the goods subsequent to their importation will be identical to their appraisement as declared on Tecnofil’s valuation worksheet/pro forma invoice/affidavit for their importation. Under part one, metal price, the basis for the calculation of the metal price will be the master bill of lading date furnished by the carrier transporting the goods from Peru to the U.S. This date would usually coincide with the sail date of the vessel from Tecnofil’s principal port of export in Peru. The metal price will be equal to the London Metal Exchange’s average official cash settlement price in USD/metric ton of copper the month prior to the month indicated on the bill of lading date. You advise that if the bill of lading date was January 22, 2020, the metal price will be the December 2019 London Metal Exchange’s average official cash settlement price of copper. Under part two, fabrication adder, the metal price will be calculated based on the master bill of lading date furnished by the carrier transporting the goods from Peru to the U.S. The fabrication adder price will be a USD/pound figure that is fixed for a one-year term from January to December, and will be revised on a yearly basis. Upon expiration of a term, the fabrication adder price will be subject to change and any change will remain in effect for another one-year term. Upon importation into the U.S., Tecnofil will submit an importer security filing through its customs broker. When the shipment departs Peru, Tecnofil will produce an ocean bill of lading, a packing list, and a signed affidavit/pro forma invoice/valuation worksheet. Tecnofil will provide detailed recordkeeping of the operation to reconcile import shipments into the warehouse and warehouse deliveries to its customer. The recordkeeping will be tracked at the unique product code level and data will be made available to U.S. Customs and Border Protection (“CBP”). You propose to use the fallback method of appraisement for the semi-finished copper and copper alloy products that will be imported under consignment. ISSUE: What is the proper method of appraisement for certain imported semi-finished copper and copper alloy products purchased on a consignment basis as described above? 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 under the transaction value method, it must be the subject of a bona fide sale between a buyer and seller, and it must be a sale for exportation to the United States. The shipments at issue are consignment shipments. The goods are shipped and entered into the United States based on an understanding that they will be bought when needed, but they have not been bought, or sold, for export to the United States at the time of entry. Since the merchandise will be entered into the U.S. under consignment, there is no sale for the purposes of determining transaction value and transaction value cannot be used as a method of appraisement. When imported merchandise cannot be appraised on the basis of transaction value, it is appraised in accordance with the remaining methods of valuation, applied in hierarchical order. 19 U.S.C. § 1401a(a)(1). The alternative basis of appraisement, in order of precedence, are: the transaction value of identical or similar merchandise (19 U.S.C. § 1401a(c)); deductive value (19 U.S.C. § 1401a(d)); computed value (19 U.S.C. § 1401a(e)); and the fallback method (19 U.S.C. § 1401a(f)). The transaction value of identical or similar merchandise is based on sales, at the same commercial level and in substantially the same quantity of merchandise exported to the United States at or about the same time as the good being appraised. See 19 C.F.R. § 1401a(c). Since no sales of identical or similar merchandise exist, then transaction value of identical or similar merchandise would not be the appropriate basis of appraisement. If transaction value and transaction value of identical or similar merchandise cannot be determined, then the customs value will be based upon deductive value, unless the importer has elected computed value. Nothing in the submitted ruling request demonstrates that the importer has elected the application of computed value before deductive value. Deductive value is a method of appraisement most often used in cases of goods imported on consignment to be sold after importation. Under the deductive value method, merchandise is appraised on the basis of the price at which it is sold in the U.S. to an unrelated party in its condition as imported and in the greatest aggregate quantity either at or about the time of importation. See 19 U.S.C. § 1401a(d)(2)(A)(i). If the merchandise is sold in the U.S. 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 90th day after importation. See 19 U.S.C. § 1401a(d)(2)(A)(ii). Here, the goods will remain in inventory for an average o

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 under the transaction value method, it must be the subject of a bona fide sale between a buyer and seller, and it must be a sale for exportation to the United States. The shipments at issue are consignment shipments. The goods are shipped and entered into the United States based on an understanding that they will be bought when needed, but they have not been bought, or sold, for export to the United States at the time of entry. Since the merchandise will be entered into the U.S. under consignment, there is no sale for the purposes of determining transaction value and transaction value cannot be used as a method of appraisement.When imported merchandise cannot be appraised on the basis of transaction value, it is appraised in accordance with the remaining methods of valuation, applied in hierarchical order. 19 U.S.C. § 1401a(a)(1). The alternative basis of appraisement, in order of precedence, are: the transaction value of identical or similar merchandise (19 U.S.C. § 1401a(c)); deductive value (19 U.S.C. § 1401a(d)); computed value (19 U.S.C. § 1401a(e)); and the fallback method (19 U.S.C. § 1401a(f)). The transaction value of identical or similar merchandise is based on sales, at the same commercial level and in substantially the same quantity of merchandise exported to the United States at or about the same time as the good being appraised. See 19 C.F.R. § 1401a(c). Since no sales of identical or similar merchandise exist, then transaction value of identical or similar merchandise would not be the appropriate basis of appraisement.If transaction value and transaction value of identical or similar merchandise cannot be determined, then the customs value will be based upon deductive value, u