OT:RR:CTF:VS H130310 BGK
Mr. Russ Mahon
P.O. Box 1210
3039 Home Rd.
Powell, Ohio 43065
RE: Appraisement of Krypton-85 imported for recycling in the United States
Dear Mr. Mahon:
This is in response to your request for a binding ruling pursuant to 19 C.F.R. Part 177, dated October 15, 2010, concerning the proper valuation of Krypton-85 (Kr-85) being imported into the United States to be recycled.
FACTS:
Qual-X is a company based in the U.S. that, among other things, takes possession of devices containing used Kr-85, removes the Kr-85 from the devices, and recycles the Kr-85 for other uses. Qual-X’s customers pay Qual-X to take possession of the Kr-85.
The devices containing the Kr-85 upon importation are known as “sealed sources.” They are metal capsules about one inch in diameter that contain about one cubic centimeter of Kr-85. The devices are designed such that the Kr-85 cannot be removed without destroying the capsule. The devices have no commercial value, and there is a cost to dispose of them.
The Kr-85 within the devices has commercial value after it has been removed. Qual-X reuses the Kr-85 for non-destructive testing of turbine engine parts and in the manufacture of glass ampoules which are shipped to various customers worldwide for use as laboratory calibration standards, and for bulk supply delivery devices in lighting manufacturing.
In the case at issue, the shipment would come from Chiyoda Technol or the Japan Research Industries Association (JRIA) in Japan.
ISSUE:
What is the correct method of appraising the Kr-85?
LAW AND ANALYSIS:
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 method of appraisement is transaction value, defined as “the price actually paid or payable for the merchandise when sold for exportation to the United States” plus the value of certain statutorily enumerated additions thereto. 19 U.S.C. § 1401a(b)(1).
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 bases 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, known as the “fallback method.” 19 U.S.C. § 1401a(a)(1).
In the instant case, the imported merchandise is not the subject of a sale and therefore cannot be appraised under the transaction value method set forth in section 402(b) of the TAA. 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 that being appraised. 19 U.S.C. § 1401a(c). We would assume there is no merchandise similar or identical to the imported Kr-85. Accordingly, the Kr-85 cannot be appraised on the basis of the transaction value of similar or identical merchandise.
Under the deductive value method, merchandise is appraised on the basis of the price at which it is sold in the U.S. in its condition as imported and in the greatest aggregate quantity either at or about the time of importation. 19 U.S.C. § 1401a(d)(2). This price is also subject to certain enumerated deductions. 19 U.S.C. § 1401a(d)(3). In the instant situation, the Kr-85 is not sold in its condition as imported. Merchandise that is not sold in its condition as imported can still be appraised under deductive value, however, provided the importer so elects. 19 U.S.C. § 1401a(d)(2)(A)(iii). In this case, the importer has not made such an election. As a result, the imported Kr-85 cannot be appraised on the basis of the deductive value method.
Under the computed value method, merchandise is appraised on the basis of the material and processing costs incurred in the production of the imported merchandise, plus an amount for profit and general expenses equal to that usually reflected in sales of merchandise of the same class or kind, and the value of any assists and packing costs. 19 U.S.C. § 1401a(e)(1). Since there is no information on which to base computed value, this method is also inapplicable.
Section 402(f) of the TAA provides that imported merchandise is to be appraised on the basis of a method derived from one of the methods set forth in sections 402(b) – (e), such methods reasonably adjusted to the extent necessary to arrive at a value. However, there are certain prohibited bases of appraisement under 402(f), including the selling price of merchandise produced in the United States, minimum values and arbitrary or fictitious values. 19 U.S.C. § 1401a(f)(2).
Nevertheless, under section 500 of the Tariff Act of 1930, as amended, which sets forth Customs’ general appraisement authority, the appraising officer may:
Fix the final appraisement of merchandise by ascertaining or estimating the value thereof, under section 1401a of this title, by all reasonable ways and means in his power, any statement of cost or costs of production in any invoice, affidavit, declaration, or other document to the contrary notwithstanding. . ..
19 U.S.C. § 1500(a).
In this regard, the Statement of Administrative Action (SAA), which forms part of the legislative history of the TAA, provides in pertinent part:
Section 500 allows Customs to consider the best evidence available in appraising merchandise . . .. [It] authorize (sic) the appraising officer to weigh the nature of the evidence before him in appraising the imported merchandise. This could be the invoice, the contract between the parties, or even the recordkeeping of either of the parties to the contract.
Statement of Administrative Action, H.R. Doc. No. 153, 96 Cong., 1st Sess., pt 2, reprinted in, Department of the Treasury, Customs Valuation under the Trade Agreements Act of 1979 (October 1981), at 67. Accordingly, if the value of imported merchandise cannot be determined on the basis of a method derived from sections 402(b)-(e), it is our position that the value of the imported Kr-85 that is the subject of the instant protest may be determined under the fallback method provided for in section 402(f) of the TAA, using all reasonable ways and means, so long as the method is not specifically precluded under section 402(f)(2)(D).
Customs has previously found that for waste being imported to be disposed of, for which a fee was paid to the U.S. company responsible for disposing of the waste, the fee being paid for disposal was an appropriate value for the waste. See Headquarters Letter Ruling (HRL) 545017, dated August 19, 1994; HRL 547147, dated March 23, 1999; and HRL H019073, dated November 2, 2007. In HRL 545017, petroleum waste oil was imported into the U.S. from Canada for disposal. The Canadian company paid the U.S. company to dispose of the waste oil. The Canadian exporter argued that the waste oil should be appraised at a nominal value. However, Customs found that it was not unreasonable for the waste oil to be valued at the fee paid for disposal and the company did not provide any documentation to show otherwise. In HRL 547147, Waste Management, Inc. (WMI) was importing solid waste into the U.S. for disposal, and attempted to distinguish HRL 545017. WMI argued that the waste itself had no value, and that the fee was paid for disposal of the waste in the U.S. after importation, not the waste itself. Customs found that the fallback method using the disposal fee was reasonable and that the disposal fee was “the only available information which [could] be quantitatively documented.” HRL 547147. Similarly, in HRL H019073, soil contaminated with depleted uranium was being imported from Kuwait for disposal in Idaho. The soil was not sold and had no commercial value. Customs held the disposal fee received by the facility in Idaho was a reasonable fallback method to value the soil.
As in the above cases, the Kr-85 is not being sold to Qual-X; Qual-X is being paid a fee to take possession of the Kr-85 and dispose of the capsules and recycle the Kr-85. The Kr-85 has no commercial value until the U.S. operations to remove it from the capsule occur. The capsules have no commercial value and require disposal. Although, unlike the above cases, the Kr-85 is recycled instead of disposed of, it does not hold this value upon importation. The ability to recycle the Kr-85 is a result of U.S. operations and the disposal of the capsule.
Therefore, we find it would be appropriate to value the imported Kr-85 under the fallback valuation method using the fee paid to take possession of the Kr-85.
HOLDING:
The imported Kr-85 shall be appraised under the fallback method using the fee paid to take possession.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs official handling the transaction.
Sincerely,
Monika R. Brenner
Chief, Valuation and Special Programs Branch