OT:RR:CTF:VS H291690 JMV
Mr. Stephen M. Zelman
Stephen M. Zelman & Associates
60 Sutton Place South, 6th Floor
New York, NY 10022
RE: Valuation of Unwrought Gold and Silver Dore and Bullion
Dear Mr. Zelman:
This is in reply to your letter dated October 18, 2017, on behalf of Republic Metals Corporation (“RMC”), in which you requested a ruling, pursuant to 19 C.F.R. Part 177, regarding an acceptable appraisement of gold or silver bullion or dore imported for assaying and refining.
FACTS:
RMC is a U.S. company that assays and refines precious metals. RMC intends to import unwrought gold and silver dore and bullion from unrelated suppliers in numerous countries and through various U.S. ports of entry. The metal is not to be exported to or imported by RMC pursuant to any purchase contract but pursuant to a service agreement which provides that RMC is to assay and refine the metals. The final disposition and price of the metal is to be determined as described below.
At the time of exportation to the United States, the amount of gold or silver in a shipment (the Troy ounce content) can only be estimated by the shipper. Because of this, it is exported under a shipping invoice which sets forth the value of the metal based on the shipper’s best estimate of the number of Troy ounces of pure gold or silver in a shipment of bullion or dore, multiplied by the gold or silver Troy ounce price on the date of exportation, generally per the London Commodities Exchange (the “London Fix”). Although the estimates are expected to be close to actuals, the actual metal content in a shipment will determined based on an assay to be performed by RMC. RMC intends to enter into CBP’s “ACE Reconciliation Prototype” and seeks a ruling as to the method for determining reconciled values within the time required for the filing of the reconciliation entry.
Shortly after importation, RMC re-melts the metal, homogenizes it so that the gold or silver content is uniform, and extracts and assays a representative sample. This assay determines the exact percentage of and the Troy ounce amount of the precious metal in the shipment. The metal may then be refined by RMC to obtain a desired level of purity.
The following are descriptions of the situations under which the gold and silver are to be handled after importation:
FUTURE SALE: Under this plan, the shipper and RMC will have agreed, prior to exportation, that RMC is to import, assay and, generally, refine the gold or silver. The actual amount of the metal in the shipment, as determined by RMC assay, is booked by RMC as a Troy ounce (and not monetarily denominated) credit to the shipper in a corporate “payable” account maintained by RMC (with a debit for RMC’s charge for its assay and refining.) At any time, with no time limit within which it must do so, the shipper may request that the gold or silver be sold on its behalf, based on the current price at that time on the London Fix, the Zurich Commodities Market (the “Zurich Fix”) or another recognized commodities market. The London Fix is the value most commonly used for the sales price in these instances. At that time, RMC may have the option to purchase the gold or silver itself at the market price, or RMC will sell the metal on the shipper’s behalf to a third party or on a particular national commodities exchange. At such time, RMC accordingly debits the shipper’s Troy ounce “payable” account, with the proceeds going to the shipper. In these instances, RMC is not committed to purchase the gold or silver.
METAL RETURN: In many instances, shippers may ship the gold or silver to RMC for assay and refining services only. Gold or silver in the amount contained in the import shipment, as determined by RMC’s assay, is then returned to the shipper and no sale of the precious metal occurs. For example, if an RMC assay determines that a shipment contained 50 ounces of pure gold, RMC would ship 50 ounces of pure gold back to the supplier, charging only for its services. The returned metal would not necessarily be the same metal that was imported, and the gold and silver may be interchanged.
TOLL REFINING: In this case, which often involves mining companies, the gold or silver will be shipped by the mines to RMC for assay and refining services only. RMC will then transfer credits of the amount of metal in the shipment, less RMC’s charge for assay and refining, to a Troy ounce (not a dollar or other currency denominated) account maintained by the shippers in a bullion bank. Again, this is an instance where no sale of the metal occurs.
COMBINATION OF METHODS: There are situations where a portion of a shipment will be sold by RMC on the shippers’ behalf at some indeterminate time after importation. The sale may be to RMC itself or to third parties at the market price on the date the shipper specifies (“future sale”) with the balance returned to the shipper (“metal return”) or credited to its bullion account (“toll refining”).
ISSUE:
What is the correct method of appraisement of the imported gold and silver bullion and dore?
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”) (19 U.S.C. §1401a). 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. 19 U.S.C. §1401a(b)(1).
In order for transaction value to be used as a method of appraisement, there must have been a “sale” between the parties. In VWP of America, Inc. v. United States, 175 F.3d 1327 (Fed.Cir. 1999), the Court of Appeals for the Federal Circuit found that the term “sold” for purposes of 19 U.S.C. §1401a(b)(1) means a transfer of title from one party to another for consideration (citing J.L. Wood v. United States, 62 CCPA, 25, 33, C.A.D. 1139, 505 F.2d 1400, 1406 (1974)). Without a sale for exportation to the United States, transaction value must be eliminated as a means of appraisement.
In this case, RMC claims there is no “sale” for exportation between RMC and the shippers because the goods will have been imported for refining and assay by RMC under a service, and not a sales, agreement. Several factors may indicate whether a bona fide sale occurs between a potential buyer and seller of imported merchandise. In determining whether property or ownership has been transferred, CBP considers whether the potential buyer has assumed the risk of loss and acquired title to the imported merchandise. CBP may examine whether the potential buyer paid for the goods and whether, in general, the roles of the parties and circumstances of the transaction indicate that the parties are functioning as buyer and seller. See HRL 547197, dated August 22, 2000; and HRL 546602, dated January 29, 1997.
Here, if title passes to RMC, it passes after importation. The fact that title to merchandise passes after importation, by itself, does not disqualify a sale from being a sale for exportation, where all other factors lead to the conclusion that there is a sale. See HRL H012659, dated November 14, 2007; HRL 547168, dated April 12, 1999; and HRL 544314, dated April 15, 1991. However, we find that no such factors exist in the circumstances described to indicate that a sale will occur. We note no documentation, such as purchase orders or invoices, has been provided for our review, and you have not identified a definite buyer in the United States. Additionally, while a formula in a contract may be acceptable under transaction value if the formula is based on a future event over which neither the seller nor the buyer has any control, you indicate that no formula exists here because the parties have no set date upon which a sale may occur. Moreover, CBP has also found that sales for exportation did not exist where title to the imported merchandise passed after importation if buyers were not obligated to purchase the merchandise, as is the case here. See HRL 548574, supra; HRL 548236, dated March 27, 2003; and HRL 548273, dated April 17, 2003. Therefore, we find no sale will occur between the parties and transaction value cannot be used as the basis of appraisement.
When imported merchandise cannot be appraised on the basis of transaction value, it is 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.
The transaction value of identical or similar merchandise
The transaction value of identical or similar merchandise is based on previously accepted 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 the merchandise being appraised. See 19 U.S.C. § 1401a(c). Here, you suggest that CBP use the London Fix price on the date of exportation multiplied by the gold or silver content as determined by the RMC assay as the transaction value of identical merchandise. However, CBP has found that spot prices should not be used as the transaction value of identical or similar merchandise.
In HRL 230108, dated May 4, 2006, each entry was appraised by the Daily Spot Market Prices provided by the American IC Exchange. CBP found that appraising imported goods via spot market prices is inappropriate because, under 19 U.S.C. § 1401a(c), merchandise “must have been sold for export to the United States, and have been exported to the United States, at or about the same time as the merchandise being appraised.” CBP further stated that merchandise is not considered identical or similar unless it was produced in the same country as the merchandise being appraised. CBP found that the record did not support a finding that merchandise listed on the American IC Exchange met these requirements and, therefore, the spot prices listed on the American IC Exchange was not an appropriate value for the transaction value of identical or similar merchandise.
Similarly, nothing in the record in this case indicates that the London Fix price value of silver or gold is the value of merchandise actually being sold for export to the United States at or about the same time and from the same country. Accordingly, the London Fix price cannot be used as the transaction value of identical or similar merchandise.
Deductive and computed value
The next two valuation methodologies do not apply either. Deductive value requires a sale in the United States within 90 days (or in certain cases, 180 days) of importation. However, the metals at issue may not be sold within such time, if at all. Computed value also does not apply here. Under the computed value method, merchandise is appraised on the basis of the material and the processing costs incurred in the production of imported merchandise, plus an amount for profit and general expenses, usually equal to sales of merchandise of the same class or kind made by the producers in the exporting country for export to the United States, and the value of any assists and packing costs. See 19 U.S.C. § 1401a(e). RMC claims that computed value also does not apply because the value of precious metals is not based upon computed value cost elements. We find that computed value is inapplicable as the basis of appraisement because no information on the manufacturers or their production costs, profit, or general expenses was submitted. RMC also did not provide any information regarding the profit and general expenses of producers that export the same class or kind of product to the United States. Without information on the profit and general expenses of producers in the exporting country of the same class or kind of product at issue, the computed value method is unavailable as an appraisement method.
Fallback method
If the value of imported merchandise cannot be determined under these methods, value should be determined in accordance with section 402(f) of the TAA, known as the “fallback method.” 19 U.S.C. §1401a(a)(1). Under the “fallback method,” you argue that it would be reasonable and proper to determine dutiable value on the basis of the actual gold or silver content in the imported shipments, per RMC’s assay, multiplied by the price of gold or silver as determined by the London Fix at the opening of trading on the day a shipment is exported.
In Headquarters Ruling Letter (“HRL”) H056445, dated July 24, 2009, CBP endorsed a similar “fallback method” for appraising articles of precious metals that were subject to an assay subsequent to importation but not immediately purchased, if at all, by the importer. There, customers in Canada would mail in gold, silver and platinum jewelry to the U.S. company Cash4Gold (“C4G”), who would then weigh and assay the jewelry for the precious metal content. C4G determined a price that it would pay for the articles, and quoted this price to the customer. The customer could either accept the price or reject the offer. If the customer rejected the offer, C4G would return the item to the customer. Since the jewelry was not being exported for sale, transaction value was not an appropriate basis of appraisal. CBP found that an appropriate basis of appraisal was the quoted price C4G sent its customers even though that price would not be determined until after importation.
Here, RMC serves a similar function as C4G and a similar basis of appraisal would be appropriate. RMC refines and assays the gold and silver it imports and sometimes buys the metals from the shipper. If and when RMC or a third party does buy the metals, the price paid will be the price listed on a commodities market, primarily the London Fix price. Therefore, it is reasonable that the value be based on the London Fix price, the price that RMC or a third party may eventually pay for the metals.
Further, CBP has previously accepted values under the “fallback method” that are based on a commodities market price. In HRL H055410, dated January 11, 2010, CBP considered the valuation of silver nitrate crystal in a solid block form in the shape of the container in which it was held. The consistency of the product was claimed to render it damaged with no market in the United States without further processing. The merchandise was processed for the recovery of silver, which would eventually be used to produce silver oxide. We ruled that since the value of the imported silver nitrate could not be determined on the basis of the intrinsic silver value, the value should be determined in accordance with the New York Spot price of silver, plus the cost of production of silver nitrate in the United Kingdom. However, since silver nitrate was imported in a defective form, we further held that the cost of recovery of silver in the United States could be deducted from the value of the merchandise. See also HRL 230108 (finding that spot prices listed on the American IC Exchange was an appropriate value under the “fallback method”).
Here, because the gold and silver are refined by the RMC in the United States, the market value of the metals is a reasonable basis of appraisal. As gold and silver have a readily determinable value per Troy ounce as of the date of exportation, appraisement in all cases should be the London Fix price on the date of export multiplied by the actual Troy ounce content of precious metal in the shipment as determined by the assay conducted by RMC after importation. Value may be based off estimates at importation and reconciled after RMC assays the metals and the actual Troy ounce content is known.
HOLDING:
As set forth above, the subject merchandise may be appraised under the “fallback” method based on the “London Fix” price on the date of export multiplied by the actual Troy ounce content of precious metal in the shipment as determined by the assay conducted by RMC after importation.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach 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 CBP 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 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 CBP officer handling the transaction
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch