OT:RR:CTF:VS H233019 FP
Ms. Jennifer Díaz
Becker & Poliakoff
121 Alhambra Plaza, 10th Floor
Miami, Florida 33134
Re: Proper Method of Appraisement of Antique Articles; 19 U.S.C. § 1401a(b)(1) and (f)
Dear Ms. Díaz:
This is in response to your request for a binding ruling dated August 31, 2012, on behalf of Lorin & Son, LLC (“L&S”), regarding the proper appraisement of antique articles imported into the United States. L&S proposes to use the declared insurance value as its appraised value for customs entry. We have based this determination on the information provided with your request and electronic correspondence dated September 30, 2013. We regret the delay in responding.
FACTS:
L&S is an antique dealer located in the United States that purchases items for resale. We are told that L&S routinely purchases antiques from other dealers, auctions houses and estate sales, or receives them under consignment from individuals, in the U.S. and abroad. L&S travels to antique trade shows in the U.S. and Hong Kong, where the antiques are resold. If they are not sold at a trade show, these articles are re-imported into the U.S.
You state that there is no confirmed buyer when the antiques are imported, or re-imported, into the U.S., and that articles re-imported are typically not sold within 90 days, but rather it may be many months or years before an article is ever sold at another trade show. Further, you mention that all imported antiques are extremely unique and likely irreplaceable.
To summarize, the instant case presents three different variants of importation, in which L&S serves as importer of record. Articles are either:
(1) purchased abroad by L&S and imported into the U.S.;
(2) held and imported under trust or consignment to be sold in the U.S.; or
(3) previously imported articles re-imported to the U.S. after being exported for sale outside the U.S., but for which a foreign sale did not materialize.
A copy of L&S’s insurance policy was provided with your request to show how L&S insures the property of its consignment clients. The policy states that the covered value of L&S-owned property is “the Selling Price Less 20% or Cost Plus 30%, whichever is greater at the time of loss”. Property of clients held in trust or consignment by L&S is valued at the ‘net’ consignment amount stated in the consignment agreement between L&S and the owner of the property, plus 10%. The policy further states that the ‘net’ amount is what L&S is responsible for. See page 6 of the StarNet Insurance Company policy agreement provided with the ruling request.
ISSUE:
Whether insurance value under the fallback method of 19 U.S.C. § 1401a(f) is the appropriate method of appraisement of the subject imported antiques.
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 when not otherwise included. 19 U.S.C. § 1401a(b)(1).
For customs purposes, the word "sale" generally is defined as a transfer of ownership in property from one party to another for a price or other consideration. J.L. Wood v. United States, 62 CCPA 25, C.A.D. 1139 (1974). Inasmuch as the transaction value method requires a sale for exportation to the United States, a bona fide sale must exist between the buyer and seller in order for goods to be appraised accordingly.
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.
You claim to have examined each method of appraisement and argue that transaction value, transaction value of identical or similar merchandise, deductive value and computed value are all inapplicable to L&S’s antique importations. Consequently, L&S has to resort to the fallback method and proposes to use the insurance value of the imported articles. In its opinion, the insurance value constitutes a more accurate and proper method of valuation. If a client’s antiques are damaged or lost while in L&S’s custody or control before they are sold at a trade show, L&S is contractually liable to the consignor for the insurance value of the property.
You cite Headquarters Ruling Letter (HRL) H085036, dated December 18, 2009, issued to Sotheby's Auctioneers, to support your client's request to use the fallback methodology. In reviewing the facts, Sotheby's importations were all stated to be consignments. Your request, however, indicates that L&S "routinely purchases antiques at auction, on consignment, at estate sales, and the like in the U.S. and in Hong Kong."
Accordingly, from the information provided, an importation of articles described in category 1 above (purchased and imported by L&S), constitutes a sale for exportation to the United States and should be appraised using the transaction value method, assuming there is a bona fide sale for exportation to the U.S.
For importation of articles described in categories 2 (consignment) and 3 (re-importations) above, there is no sale for exportation to the United States in those circumstances, thus the transaction value method is inapplicable. In the particular circumstances of this case, the imported items consist mostly of fine arts and antiques. CBP has previously considered fine arts and antiques to be unique in character, as noted in HRL 547381, dated March 14, 2000. This precludes 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). Therefore, articles sold in the U.S. within 90 days of importation should be appraised under the deductive value appraisement method. See HRL 546422, dated March 23, 1999. We encourage your client to flag its entries for reconciliation and adjust the entered value if the item is sold within 90 days of entry. See HRL H085036, supra.
Those items not sold within 90 days of importation must be appraised under the next available appraisement method. As you correctly note, 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. See HRL 547381, supra. 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 more than 90 days after importation may be appraised under a modified deductive value under the fallback method. See HRL 546442, supra.
In instances where items are imported, but are ultimately not sold, appraisal under the fallback method using the proposed insurance value is appropriate.
HOLDING:
Articles in category 1 above (purchased and imported by L&S) should be appraised using the transaction value method, assuming there is a bona fide sale for exportation to the U.S.
Articles in described in categories 2 (consignment) and 3 (re-importations) may be appraised under the deductive value method when sold within 90 days of importation. If sold more than 90 days after importation, they may be appraised under the fallback method using a modified deductive value. Imported articles in these two categories, which are ultimately not sold in the U.S., may be appraised under the fallback method using the insurance value proposed by L&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