H339758

HQ H339758 August 30, 2024 OT:RR:CTF:VS H339758 AP CATEGORY: Valuation Matthew Clark, Director Kuehne & Nagel, Inc. 20000 S. Western Ave. Torrance, CA 90501 RE: Protein Bars; Valuation under 19 U.S.C. § 1401a; Computed Value Dear Mr. Clark: This is in response to your May 27, 2024 request for a binding ruling, on behalf of Vitaco Health (NZ) Limited (“Vitaco” or “importer”) based in New Zealand, regarding the proper appraisement for a prospective entry of high protein flavored bars. The importer has asked that certain information submitted in connection with this ruling be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information contained in the attachments to the ruling request will not be released to the public and will be withheld from published versions of this ruling. FACTS: Vitaco, a non-resident importer and manufacturer, will be importing into the United States high protein flavored bars marketed as sports nutrition foods. The importer will manufacture the protein bars in New Zealand and will ship them directly to the United States where the merchandise will stay in a third-party warehouse until a sale is made to end consumers via amazon.com. The importer will retain ownership while the protein bars are in the warehouse after importation. The importer elects to use the computed value method over deductive value, and proposes to include the following in its computed value calculation: “Standard costs” which is the calculation of the value of packing materials, production costs, component or raw materials cost, and indirect costs from its inventory management system. The importer will obtain the costs of materials from its purchases from suppliers and the purchase invoices will detail the purchase of the raw materials. Such costs will be recorded on the importer’s books and records in accordance with the Generally Accepted Accounting Principles (“GAAP”) in New Zealand. Sales, General and Administrative Expenses (“SG&A”) will include general headcount and labor costs outside of production costs. Contribution after Marketing Profit (“CAM”) is the calculation of Net Revenue less Standard Cost of Goods Sold (“COGS”) less Distribution less Marketing Costs from the importer’s books and records recorded in accordance with GAAP in New Zealand. More than a 50% of the importer’s market share on these products is in New Zealand. There are no assists to be recorded. The SG&A labor costs will include “people costs (salaries including travel) outside of production that are attributable to the sales in the US across supply chain, sales and finance teams.” The “indirect costs” under standard costs will represent an “allocation of costs other than the ‘direct’ labor on the production line, raw materials, and packaging costs. Examples of indirect costs are production line depreciation, repair and maintenance, rent, power, water, and insurance costs that are attributable to the production.” The importer will utilize U.S. Customs and Border Protection’s (“CBP”) Reconciliation Program for its final determination of the value of its entries. ISSUE: What is the proper method of appraisement for the subject protein bars? 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). For the 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. When imported merchandise cannot be appraised based on transaction value, it is appraised in accordance with the remaining methods of valuation, applied in hierarchical order. See 19 U.S.C. § 1401a(a)(1). The alternative bases 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 subject merchandise will not be sold on entry and will be stored in a warehouse. Since there is no sale for the purposes of determining transaction value, transaction value may not be used to appraise the merchandise. The next method of appraisement is the transaction value of identical or similar merchandise. See 19 U.S.C. § 1401a(c). The transaction value of identical or similar merchandise refers to a previously accepted transaction value of identical or similar merchandise that was exported at or about the same time as the merchandise being valued. No transaction values of identical or similar merchandise are available to appraise the protein bars. 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. The importer has elected the application of computed value before deductive value. Title 19 U.S.C. § 1401a(e) provides the following regarding computed value: (1) The computed value of imported merchandise is the sum of— (A) the cost or value of the materials and the fabrication and other processing of any kind employed in the production of the imported merchandise; (B) an amount for profit and general expenses equal to that usually reflected in sales of merchandise of the same class or kind as the imported merchandise that are made by the producers in the country of exportation for export to the United States; (C) any assist, if its value is not included under subparagraph (A) or (B); and (D) the packing costs. (2) For purposes of paragraph (1)— (A) the cost or value of materials under paragraph (1)(A) shall not include the amount of any internal tax imposed by the country of exportation that is directly applicable to the materials or their disposition if the tax is remitted or refunded upon the exportation of the merchandise in the production of which the materials were used; and (B) the amount for profit and general expenses under paragraph (1)(B) shall be based upon the producer’s profits and expenses, unless the producer’s profits and expenses are inconsistent with those usually reflected in sales of merchandise of the same class or kind as the imported merchandise that are made by producers in the country of exportation for export to the United States, in which case the amount under paragraph (1)(B) shall be based on the usual profit and general expenses of such producers in such sales, as determined from sufficient information. The amount for general expenses and profit is considered as a whole. Section 152.106(c) of the CBP Regulations (19 C.F.R. § 152.106(c)) provides: Profit and general expenses. The amount for profit and general expenses will be taken as a whole. If the producer’s profit figure is low and general expenses high, those figures taken together nevertheless may be consistent with those usually reflected in sales of imported merchandise of the same class or kind. The Statement of Administrative Action (“SAA”), adopted by Congress, provides that with respect to computed value: The cost or value of the materials and the fabrication and other processing of any kind employed in the production of the imported merchandise will be determined on the basis of information supplied by, or on behalf of, the producer and will be based upon the commercial accounts of the producer, if such accounts are consistent with the generally accepted accounting principles applied in the country where the goods are produced. The “amount for profit and general expenses” will be determined on the basis of information supplied by, or on behalf of, the producer and will be based upon the commercial accounts of the producer, provided that such accounts are consistent with 

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). For the 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.When imported merchandise cannot be appraised based on transaction value, it is appraised in accordance with the remaining methods of valuation, applied in hierarchical order. See 19 U.S.C. § 1401a(a)(1). The alternative bases 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 subject merchandise will not be sold on entry and will be stored in a warehouse. Since there is no sale for the purposes of determining transaction value, transaction value may not be used to appraise the merchandise.The next method of appraisement is the transaction value of identical or similar merchandise. See 19 U.S.C. § 1401a(c). The transaction value of identical or similar merchandise refers to a previously accepted transaction value of identical or similar merchandise that was exported at or about the same time as the merchandise being valued. No transaction values of identical or similar merchandise are available to appraise the protein bars.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. The importer has elected the application of computed value before deductive value. Title 19 U.S.C. § 1401a(e) provides the following regarding computed value:(1) The computed value of imported merchandise is th