OT:RR:CTF:VS H085036 GG
Mr. Joel K. Simon
Simon Gluck & Kane LLP
1700 Broadway, 31st Floor
New York, New York 10019
RE: Proper Method of Appraisement of Articles Imported for Sale at Auction; 19 U.S.C. § 1401a(f)
Dear Mr. Simon:
This is in response to your request for a binding ruling, made on behalf Sotheby’s Inc. (“Sotheby’s”), regarding the proper appraisement of articles imported into the United States for sale at auction.
FACTS:
Sotheby’s is principally an auctioneer and marketing agent offering for sale at auction works of fine and decorative art. Many of Sotheby’s sales contain property imported from clients in foreign countries. In the overwhelming majority of cases, Sotheby’s serves as the importer of record. Sotheby’s previously requested and obtained a binding valuation ruling, which was issued as Headquarters Ruling Letter (“HQ”) 547381 on March 14, 2000. In that ruling, U.S. Customs and Border Protection (“CBP”) determined that with respect to items imported for sale at auction, the reserve price constituted an acceptable appraised value under the fallback method of 19 U.S.C. § 1401a(f). The reserve is the confidential threshold price below which the consignor will not sell. It was explained that the reserve price was the only mutually accepted value which reflected both the seller’s and Sotheby’s assessment of the item’s current market value, and was the only price at which the seller was obligated to sell the merchandise.
In its new ruling request, Sotheby’s requests that CBP consider its current method of valuation that is more in line with Sotheby’s current business model. One of the reasons given for its new request is that there are instances in which the reserve price has yet to be determined at the time of importation. It now proposes that CBP use the mean (or average) value of the auction estimates (“mean estimate”), which is also the value that Sotheby’s uses to insure property being offered at auction. In its opinion, the mean estimate constitutes a more accurate and proper method of valuation, and is always higher than the reserve price. If a client’s property is damaged or lost while in Sotheby’s custody or control before it is offered at auction, Sotheby’s is contractually liable to the client at the mean estimate for the property. Accordingly, Sotheby’s uses the mean estimate as the declared value for insurance purposes. The company believes that the mean auction estimate more accurately reflects what the property is likely to earn at auction and thus will result in less discrepancy between the import value and subsequent sale price.
Sotheby’s also notes that it utilizes the reconciliation program to change the entered value for those items sold at auction within 90 days. If an item is sold within 90 days from the date of entry, Sotheby’s will change the entered value based upon the sale price.
ISSUE:
Whether Sotheby’s mean estimate constitutes an acceptable appraised value of the subject items imported for sale at auction.
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).
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, the items are imported to be sold in the United States at auction. Since there is no sale for exportation to the United States in these circumstances, the transaction value 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 the fallback method, as specified by 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, the imported items consist mostly of fine arts and antiques, and thus are unique in character. As noted in HQ 547381, this would preclude the application of transaction value of identical or similar merchandise as a viable appraisement method.
The next method of appraisement is deductive value. Under this method, imported merchandise is appraised based on the unit price at which the merchandise being appraised, identical merchandise, or similar 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 deductive value method was ruled out in HQ 547381 because it was noted that most auction sales occur more than ninety days after importation. In its most recent ruling request, however, Sotheby’s brings to our attention the fact that it flags its entries for reconciliation and adjusts the entered value if the item is sold within 90 days of entry. Based on this information, items sold within 90 days of importation may be appraised under the deductive value appraisement method. See HQ 546422, dated March 23, 1999.
Those items not sold within 90 days of importation must be appraised under the next available appraisement method. The computed value method of appraisement will not apply, because it would be extremely difficult, if not impossible, to establish the value of materials, fabrication, and other processing pertaining to antiques and fine art. As computed value is inapplicable, we must resort to the fallback method of appraisement as set forth in section 402(f) of the TAA. The fallback method provides that merchandise should be appraised on the basis of a value derived from one of the previous methods described above, reasonably adjusted to the extent necessary to arrive at a value.
Section 152.107(c) of the CBP Regulations (19 CFR § 152.107(c)) allows the 90 day requirement for the sale of merchandise under deductive value to be administered flexibly under the fallback valuation method. Applied to the situation currently under scrutiny, items sold at auction more than 90 days after importation may be appraised under a modified deductive value under the fallback method. See HQ 546422, supra. In instances where items are imported for sale at auction but are ultimately not sold, appraisal under the fallback method using the suggested mean value is appropriate.
Although this ruling presents an alternative appraisement to the one prescribed in HQ 547381, we deem it unnecessary to invoke the modification procedures of 19 CFR § 177.12, because we find the decision in that case not to have been in error, and the instant decision is based on new information provided by the ruling requester.
HOLDING:
The items imported for sale at auction may be appraised under the deductive value method when sold within 90 days of importation. Articles sold more than 90 days after importation may be appraised under the fallback method using a modified deductive value. Those items imported for sale at auction, but which are ultimately not sold, may be appraised under the fallback method using the mean value proposed by Sotheby’s.
A copy of this ruling letter should be attached to the entry documents filed at the time the merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP official handling the transaction.
Sincerely,
Monika R. Brenner
Chief
Valuation and Special Programs Branch