OT:RR:CTF:VS H088142 ARU
Mr. Karl F. Krueger
Radix Group International
dba DHL Global Forwarding
2660 20th Street
Port Huron, MI 48060
USA
RE: FTZ; Total Zone Value; 19 C.F.R. 146.65
Dear Mr. Krueger:
This is in response to your ruling request dated June 15, 2009, made on behalf of Trinasolar. You ask about the proper basis of appraisement for solar panels entered into the customs territory of the United States from a Foreign Trade Zone (“FTZ”). FACTS:
Trinasolar plans to import solar panels that they manufacture in China to the Port of San Francisco / Oakland. Upon arrival each shipment will be entered into an FTZ using U.S. Customs and Border Protection (“CBP”) Form 214. There is no sale to a U.S. buyer at the time of importation and no additional work will be performed on the panels while they are in the FTZ.
As the panels are sold, Trinasolar plans to withdraw them from the FTZ 1) into the customs territory of the United States with the U.S. buyer as the importer of record, or 2) to transport and export the panels if sold to a buyer in Canada or Mexico.
ISSUE:
What is the proper basis of appraisement for the merchandise when entered into the customs territory of the United States from an FTZ?
LAW AND ANALYSIS:
It is a basic principle of customs law that articles are classified and appraised on the basis of their condition at the time of importation into the United States, and not upon the basis of what their condition may become after they enter the United States. See, e.g., United States v. Citroen, 223 U.S. 407 (1911); Simod America Corp. v. United States, 872 F. 2d 1572 (Fed. Cir. 1989). An exception to this principle is the Foreign Trade Zone Act of 1934, as amended (19 U.S.C. § 81a et seq.). Under section 3(a) of the Act (19 U.S.C. § 81c(a)), foreign merchandise may be admitted into an FTZ and its classification and dutiability may be delayed until it, or merchandise resulting from its manufacture or manipulation, is entered into the customs territory of the United States.
Pursuant to Section 146.65(b)(2), Customs Regulations (19 C.F.R. § 146.65(b)(2)), the dutiable value of NPF status merchandise entered into the customs territory of the United States from an FTZ is the price actually paid or payable for the merchandise in the transaction that caused the merchandise to be admitted into the zone, plus the statutory additions enumerated in section 402(b)(1) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (19 U.S.C. § 1401a(b)(1)), less, if included, international shipment and insurance costs and U.S. inland freight costs. In the instant case, the merchandise is not admitted into the FTZ as a result of a sales transaction. Consequently, there is no price actually paid or payable upon which to base the dutiable value of the merchandise at issue.
In such instances, the Customs Regulations provide that if there is no such price actually paid or payable, or no reasonable representation of that cost or of the statutory additions, the dutiable value is based on the total zone value, i.e., the price actually paid or payable to the zone seller in the transaction that caused the merchandise to be transferred from the zone less specified costs incurred in the zone which are included in that value. See 19 C.F.R. § 146.65(b)(1) and (2). The following specified costs, if included in the total zone value, are to be excluded: the zone costs of processing or fabrication, general expenses and profit and the international shipment and insurance costs, and U.S. inland freight costs related to the merchandise transferred from the zone. See 19 C.F.R. § 146.65(b)(2).
Trinasolar will import solar panels from China, store the panels in the FTZ, and subsequently enter the solar panels into the customs territory of the United States. These sales are the transactions that cause the solar panels to be transferred from the zone for purposes of 19 C.F.R. § 146.65(b)(1). “Total zone value” should be determined in accordance with the valuation principles of 19 U.S.C. § 1401a. See 19 C.F.R. § 146.65(b)(1). The preferred method of appraisement under 19 U.S.C. § 1401a 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 certain enumerated additions to the extent they are not otherwise included in the price actually paid or payable. See 19 U.S.C. § 1401a(b)(1). The phrase “when sold for exportation to the United States” refers, in this instance, to the transaction which in accordance with 19 C.F.R § 146.65(b), caused the merchandise to be transferred from the zone. See Headquarters Ruling Letter (“HRL”) 544818, dated April 1, 1993 and HRL H010949, dated July 31, 2007 (modified by HRL H017624, dated September 28, 2007).
Based on the facts presented, we conclude that the proper basis of appraisement for the solar panels when entered into the customs territory of the United States from the FTZ is the total zone value, which is the price paid by the U.S. buyers in the transactions that cause the merchandise to be transferred from the zone, less any costs specified in 19 C.F.R. § 146.65(b)(2) that are incurred in the zone and included in that value. You state that no further processing, manufacturing, or other alternation of the solar panels will occur while it is stored in the FTZ, therefore, the only adjustments to be made to the zone value are for general expenses and profit and any costs related to international shipment and insurance costs and U.S. inland freight costs.
HOLDING:
Pursuant to 19 C.F.R. § 146.65(b)(2), the proper basis for appraisement is the total zone value, i.e., the price that the U.S. buyer pays for the merchandise in the transaction that causes the merchandise to be transferred from the FTZ, less any included zone costs of processing or fabrication, general expenses and profit and any costs related to international shipment and insurance costs and U.S. inland freight costs.
Reference to this ruling letter should be made in the entry documents filed at the time the subject goods are entered. See CBP Form 7501 – Instructions, Additional Data Elements (available online at: www.cbp.gov). If the entry summary has been filed without reference to this ruling letter, the ruling letter should be brought to the attention of the appraising officer at the port of entry.
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Programs Branch