CLA-2- OT:RR:CTF:VS H133039 JLG
Peter A. Quinter, Esq.
Becker & Poliakoff
3111 Stirling Road
Fort Lauderdale, FL 33312
RE: Valuation of scrap gold exported from the Cayman Islands to the United States for future payment by the importer; 19 U.S.C. 1401a(f); 19 C.F.R. 145.11
Dear Mr. Quinter:
This is in reference to your letter dated July 27, 2010, submitted on behalf of your client, Gainesville Coins, Inc. (hereinafter “GC”), requesting a binding ruling regarding the appropriate valuation method for imported scrap gold. Additional information relevant to this matter was provided by GC in emails dated October 20, 2010, October 26, 2010, December 6, 2010, and December 8, 2010.
FACTS:
The buyer, GC, is a coin and bullion wholesaler located in Lutz, Florida, which intends on purchasing scrap gold consisting of broken rings, chains, and earrings, ranging between 8-18 karats, from Cayman Gold Exchange (hereinafter “Cayman”), a company located in Grand Cayman, British West Indies. You state that the scrap gold jewelry will be purchased solely for the purpose of refining its precious metal content and is not for resale by GC.
According to the record, GC and Cayman decide upfront that the price GC will pay for the scrap gold sold by Cayman will be a percentage of the “spot price” of the gold, i.e. the current price at which a troy ounce of gold can be bought or sold on the Comex division of the New York Mercantile Exchange, in effect on the date GC performs the weigh and scratch tests.
Specifically, you state that upon obtaining broken gold jewelry from its customers, Cayman will contact GC, via telephone, proposing to sell a certain amount of scrap gold, and GC will advise Cayman of the spot price, less its commission, that it is paying on the particular day that Cayman has contacted GC. If Cayman agrees to the price GC offers, it will send the scrap gold to GC, via UPS or courier, with an invoice which states the type of gold (e.g. 10 karat, 14 karat, or 18 karat etc.), as well as, the approximate weight and value of the scrap based upon the spot price initially quoted by GC.
Once GC receives the merchandise, it will perform a scratch test (a process where acid is dropped on the gold to test the purity of the gold), and weigh the scrap gold on a Florida state certified scale to determine the amount of gold ounces present. You further contend that after the preliminary weigh and scratch tests are completed, GC will contact Cayman, via telephone, and quote a new price based upon the weight of the gold, as determined by GC, and the spot price as of the date that GC weighed the gold and performed the scratch test. This is the final price GC will offer for the scrap, and at this time Cayman can accept the price offered by GC or rescind the agreement by rejecting GC’s offer. You maintain that this is the last opportunity Cayman has to reject the price and have its scrap gold returned.
We note that after Cayman has accepted the final price offered by GC, GC will have the scrap sent to a U.S. refining company to be assayed (the process of determining the specific amount of precious metal content contained in an article), and the refining company will issue a refining statement indicating the actual metal content of the scrap gold and the amount it intends to pay for the specific lot at issue. Once GC obtains the refining statement, it will wire payment to Cayman, which is based on the gold content indicated on the refining statement and the spot price in effect on the date of the weigh and scratch tests, and send Cayman the purchase order via mail. You state that after the merchandise is imported, the entire process – the scratch and weigh tests, the assaying process, and the wire transfer -- will take place in a few days.
All scrap gold will be insured before it is shipped to GC in the U.S., and the merchandise will be entered through the port of Tampa. You further advise that the entry forms will contain the weight and type/karat grade of the scrap gold, as well as, any additional information deemed necessary or recommended by CBP.
ISSUE:
What is the correct method of appraising the scrap gold sold by Cayman Gold Exchange to Gainesville Coins?
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 (TAA; codified at 19 U.S.C. § 1401a). The primary method 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 in respect of certain statutorily enumerated additions. The term "price actually paid or payable" means the total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller. 19 U.S.C. § 1401a(b)(4). See Generra Sportswear Co. v. United States, 905 F.2d 377 (Fed. Cir. 1990).
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. In the instant case, the scrap gold will be exported from the Cayman Islands to the United States; however, the gold must be tested in the U.S. to determine the exact amount the importer will pay. In instances where the “price actually paid or payable” is not known or ascertainable at the time of importation, transaction value is still appropriate provided that prior to importation, a formula exists such that a final price can be determined at a later time on the basis of some future event or occurrence over which neither the seller nor the buyer has any control. See HQ 545622 (April 28, 1994); See HQ 544364 (October 9, 1990).
Moreover, Title 19 C.F.R. § 152.103(a)(1) states that in determining transaction value, the price actually paid or payable may be arrived at by the application of a formula, such as the price in effect on the date of export in the London Commodity Market.
The present case satisfies these requirements. The price GC will pay Cayman for the scrap gold is determined before the merchandise is imported into the United States, and is based upon the price of gold on the New York Mercantile Exchange, COMEX, as of the date GC performs the weigh and scratch tests. Accordingly, the formula established by the parties is arrived at by an objective standard over which neither the buyer nor seller has control.
In respect of the entry documentation, it is our position that the spot price initially quoted to Cayman, before the scrap has been exported, is the value that should be included on any Customs declaration forms. We realize that the price of gold on the COMEX division fluctuates daily, and that after the scrap gold is tested, the gold content will possibly differ from the amount initially indicated by Cayman, thereby changing the value of the merchandise. If this occurs, the value of the merchandise must be revised and the information declared to CBP in a timely manner.
Furthermore, if there are entries with a value of less than $2,000, they are subject to the informal entry process described in 19 C.F.R. § 143.21-28, and will be liquidated on the date that payment of duties are due on the entry. See 19 CFR § 159.10(a)(1). Therefore, if the appraising officer determines that the value declared at entry, i.e. the spot price, constitutes an acceptable value for purposes of section 402(f), the merchandise may be appraised, and the entry liquidated on that basis.
HOLDING:
In conformity with the foregoing, the agreement arrived at by the parties constitutes a formula under 19 C.F.R. §152.103(a)(1), and the imported scrap gold shall be appraised under the transaction value method. If the initial price GC offers Cayman changes after the scrap gold has been assayed, the valuation information should be revised on the entry forms in a timely manner.
Please note that 19 C.F.R. § 177.9(b)(1) provides the following:
Each ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.
A copy of this ruling letter should be attached to the entry document filed at the time this merchandise is entered. If the documents have been field without a copy, this ruling should be brought to the attention of the Customs official.
Sincerely,
Monika R. Brenner
Chief, Valuation and Special Programs Branch