OT:RR:CTF:VS H251594 KSG
Vincent Enea
Trade Compliance Manager
Dallas Automotive, Inc.
900 Nolen Drive, Suite 100
Grapevine, TX 76051
RE: Appraisement of used turbine engines and parts; Subheading 9801.00.10, HTSUS
Dear Mr. Enea:
This in in response to your request for a binding ruling regarding the appraisement of used turbine engines and turbine engine components and the applicability of subheading 9801.00.10 of the Harmonized Tariff Schedule of the United States (“HTSUS”).
FACTS:
Dallas Airmotive (“DA”) is a company whose primary business is to repair and provide overhaul support to turbine engines and their components.
DA imports both foreign and U.S.-origin engines for overhaul or repair and component parts of the engines. The origin of the parts is unknown. For the U.S.-origin engines, there is a manufacturer’s affidavit stating that the engines are of U.S. origin.
There is no sale involved for the used engines and parts. You propose to appraise the used engines and parts by starting with the value of the refurbished engine or part, and subtract the value of the repair.
ISSUES:
What is the proper appraisement of the used parts and engines imported for overhaul or repair?
Whether the imported parts which are disassembled from U.S.-origin engines are eligible for subheading 9801.00.10, HTSUS, treatment.
LAW AND ANALYSIS:
Valuation
The preferred method of appraising merchandise imported into the United States is the transaction value method as set forth in section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (“TAA”), codified at 19 U.S.C. 1401a. 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. Since there is no sale in this case, transaction value cannot be used as a method of appraisement.
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 good being appraised. See 19 CFR 1401a(c). Since there is no sale, this basis of appraisement cannot be used.
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, or before the close of the 90th day after the date of importation. See 19 U.S.C. 1401a(d)(2)(A)(i)-(ii). Because the imported goods are not being resold in the United States, they cannot be appraised under the deductive value method.
The next method of appraisement is the computed value method. Under this method, merchandise is appraised on the basis of the materials and processing costs incurred in the production of 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. See 19 U.S.C. 1401a(e)(1). Since the original cost information is no longer available, there is insufficient information available to appraise the merchandise pursuant to the computed value method.
When merchandise cannot be appraised under the methods set forth in 19 U.S.C. 1401a(b)-(e), its value is to be determined in accordance with the “fallback” method 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 prior methods reasonably adjusted to the extent necessary to arrive at a value. See 19 U.S.C. 1401a(f) and 19 CFR 152.107. However, it may not be appraised, inter alia, on the basis of the price in the domestic market of the country of export, the selling price in the U.S. of merchandise produced in the U.S., minimum values, or arbitrary or capricious values. 19 U.S.C. 1401a(f);
19 CFR 152.108.
Under section 500 of the Tariff Act of 1930, as amended, 19 U.S.C. 1500(a) which constitutes CBP’S 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, other document to the contrary notwithstanding…”
The Statement of Administrative Action (SAA) which forms part of the legislative history of the TAA, provides in pertinent part:
Section 500 is the general authority for Customs to appraise merchandise.
It is not a separate basis of appraisement and cannot be used as such. Section 500 allows Customs to consider the best evidence available in appraising merchandise. It allows Customs to consider the contract between the buyer and seller, if available, when the information contained in the invoice is either deficient or is known to contain inaccurate figures or calculations….Section 500 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.
In those transactions where no accurate invoice or other documentation is available, and the importer is unable, or refuses, to provide such information, then reasonable ways and means will be used to determine the appropriate value, using whatever evidence is available, again within the constraints of section 402.
Statement of Administrative Action, H.R. Doc. No. 153, 96th Cong., 1st Sess. at 2.
CBP has issued several rulings on the subject of imported used articles to be repaired in the U.S. In each case, the value was determined using the fallback method derived from a prior method, e.g. transaction value or computed value with reasonable adjustments to take into account the fact that the imported goods were imported to be repaired and were used goods.
For example, in Headquarters Ruling Letter (HRL) 548688, dated October 20, 2005, CBP allowed an importer to appraise imported power supplies in need of repair or recalibration, by determining the current standard cost of new units, based on the cost of the parts, labor and other expenses associated with producing new units (as the company could not determine the original selling price), and then subtracting the average cost of repair. The average cost of repair was determined by totaling the actual repair cost of each unit for a given period and dividing this by the number of units repaired during the period.
In HRL 547877, dated January 23, 2002, CBP held that for equipment returned to the U.S. for repair, two deductions from the new sales price list were permitted: one for the repair and one for depreciation. The current list price was annually established by the company for each part which could be affected based on quantities ordered. Two factors were applied: one if a returned part was defective, and the other if the product was initially sold at discount and to account for depreciation.
In HRL 563470, dated June 12, 2006, CBP allowed an importer’s appraisement for goods needing repair using the current list price and deducting for depreciation and the cost of repairs.
In the particular circumstances of this case, all “reasonable ways and means” must be used to appraise the merchandise, subject to the prohibitions in 19 U.S.C 1401a(f). As in the cases cited above, the original price is not known, so another reasonable method must be employed to appraise the goods. Further, a reasonable deduction to account for the fact that the goods are defective and in need of repair was allowed in the above cases. Accordingly, pursuant to 19 U.S.C. 1401a(f), the method of appraisement proposed, to use
the value of the refurbished part or engine and deduct for the value of the repair, is a reasonable way and means to appraise the used engines and parts.
Subheading 9801.00.10, HTSUS
Subheading 9801.00.10, HTSUS, provides that products of the United States when returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad can be entered duty free provided the documentary requirements of 19 CFR 10.1 are satisfied.
CBP has previously ruled in HRL 563353, dated December 1, 2005, that parts removed from aircraft engines that were returned to the U.S. for repair or replacement were eligible for duty-free treatment under subheading 9801.00.10, HTSUS. CBP ruled in HRL 563353 that imported aircraft engine parts were not advanced in value or improved in condition abroad when they were disassembled. Since the aircraft engines had been assembled in the U.S., the parts were considered to be of U.S.-origin and eligible for duty-free treatment pursuant to subheading 9801.00.10, HTSUS, assuming that the documentary requirements of 19 CFR 10.1 were satisfied. We find that this case is on point and that the used parts disassembled from U.S.-origin turbine engines are eligible for duty-free treatment pursuant to subheading 9801.00.10, HTSUS, provided the documentation requirements are satisfied.
HOLDING:
Pursuant to 19 U.S.C. 1401a(f), the method of appraisement proposed, to calculate the value of the refurbished engine or part and to subtract an amount to account for the value of the repair, is a reasonable way and means to appraise the used engines and parts.
Used parts disassembled from U.S.-origin turbine engines are eligible for duty-free treatment pursuant to subheading 9801.00.10, HTSUS, assuming the documentary requirements are met.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy of this ruling, it should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Programs Branch