OT:RR:CTF:VS H331375 EE
Valerie Caulfield
H.W. St. John & Company
292 North Central Ave.
Valley Stream, New York 11580
RE: Subheading 9804.00.05; Country of Origin; Appraisement
Dear Ms. Caulfield:
This is in response to your request, dated April 13, 2022, on behalf of your client
Mr. Christopher Cale, in which you request a binding ruling regarding the eligibility of a
disassembled custom wooden house kit imported from Italy for duty-free treatment
under subheading 9804.00.05, Harmonized Tariff Schedules of the United States
(“HTSUS”), the appraisement of the house kit, and its country of origin.
FACTS:
The merchandise at issue is a prefabricated house manufactured in China
primarily of wood, which was shipped unassembled to Italy where it was assembled on
site into a complete finished home and utilized for three years. Your client originally
purchased the house kit from Taizhou Eurasia Wood Industry Co., Ltd. in September
2018 and is now seeking to import the disassembled house into the United States for
reassembly in the state of New York. The disassembled wooden house kit consists of
red Russian pine wood, interlocking custom-cut pine, wood doors, wood window
frames, and window glass for each window. You claim that the house kit is eligible for
duty-free treatment under subheading 9804.00.05, HTSUS. You also inquire about the
country of origin and appraisement of the house kit.
You provided architectural schematics and photographs of the house kit including
the prefabricated components as well as the final one-bedroom house featuring a
balcony and spiral staircase.
ISSUES:
I. Whether the house kit is eligible for duty-free treatment under subheading
9804.00.05, HTSUS.
II. What is the origin of the house kit for purposes of marking and additional trade
remedy measures?
III. Whether the proposed method of appraisement of the imported house kit is
appropriate.
LAW & ANALYSIS:
Subheading 9804.00.05, HTSUS
I. Subheading 9804.00.05, HTSUS
Subheading 9804.00.05, HTSUS, provides an exemption from duty for the
following:
Articles imported by or for the account of any person arriving in the United
States from a foreign country:
Books, libraries, usual and reasonable furniture and similar household
effects, if actually used abroad by him or by him and his family not less
than one year, and not intended for any other person, or for sale.
The term “household effects” in the Oxford English Dictionary is defined as “[t]he
movable contents of a house; property relating to the running or maintenance of a
household, as furniture, domestic appliances, etc..” Based on this definition, we find
that that the house kit is not considered a household effect and therefore it is not eligible
for duty-free treatment under subheading 9804.00.05, HTSUS.
Note 4 to Chapter 94, HTSUS, provides that prefabricated buildings are
“buildings which are finished in the factory or put up as elements, entered together, to
be assembled on site, such as housing or worksite accommodation, offices, schools,
shops, sheds, garages or similar buildings.” Because the imported merchandise is a
finished, unassembled house meant to be assembled on site, it is a prefabricated
building of heading 9406. Such a house would be classifiable under subheading
9406.10.0000, HTSUS, which provides for Prefabricated buildings: Of wood.
II. Country of Origin
When determining the country of origin for purposes of applying current trade
remedies, the substantial transformation analysis is applicable. The test for determining
whether a substantial transformation will occur is whether an article emerges from a
process with a new name, character, or use different from that possessed by the article
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prior to processing. See Texas Instruments, Inc. v. United States, 69 CCPA 151 (1982).
This determination is based on the totality of the evidence. See National Hand Tool
Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). As
previously noted, the seller in China sourced the lumber from Russia, which was
machined with specific joinery in China to create structural components that were ready
to assemble to form the house. The housing components were then shipped to Italy
where they were assembled and lost their character as individual components when
they were substantially transformed into a house and utilized. We, therefore, find that
the country of origin of the house kit imported into the United States remains the country
where the housing components last underwent a substantial transformation into the
finished house, which in this case is Italy. See Headquarters Ruling Letter (“HQ”) HQ
H011186, dated September 18, 2008. In Italy, the house was used for three years
before being disassembled. The housing components do not undergo a change in
character or use as a result of the disassembly. Accordingly, we find that the country of
origin of the house kit is Italy for marking purpose and for purposes of trade remedies.
III. Method of Appraisement
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,
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 to the extent not otherwise included in the price actually paid or payable. See
19 U.S.C. § 1401a(b)(1).
The imported house kit was not sold for exportation to the United States. Your
client purchased the house kit from the seller in China. The seller shipped the house kit
from China to Italy where it was assembled and utilized. Your client intends to
disassemble the house kit and import it into the United States. Since there is no sale for
export to the United States, transaction value is not applicable. 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
next basis of appraisement is the transaction value of identical or similar merchandise;
however, there is no information regarding sales of identical or similar merchandise and
this method is therefore inapplicable. Deductive value is the next applicable method of
appraisement; but as the household kit will be imported to be reassembled in New York
to be used by your client, and as deductive value requires a sale in the United States,
this method is also not applicable. Similarly, computed value is inapplicable since there
is no information relating to the cost of production.
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 of 19 U.S.C. § 1401a(f). This method provides that merchandise should be
appraised on the basis of a value derived from one of the prior methods reasonably
adjusted to arrive at a value. However, there are certain prohibited bases of
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appraisement under 19 U.S.C. § 1401a(f). For example, merchandise may not be
appraised on the basis of the price in the domestic market of the country of export, the
selling price in the United States of merchandise produced in the U.S., minimum values,
or arbitrary or fictitious values. 19 U.S.C. § 1401a(f).
Nevertheless, under section 500 of the Tariff Act of 1930, as amended, which
sets forth 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, or other document to the contrary
notwithstanding...
19 U.S.C. § 1500(a).
In this regard, the SAA, which forms part of the legislative history of the TAA,
provides in pertinent part:
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, 96 Cong., 1st Sess., pt 2,
reprinted in, Department of the Treasury, Customs Valuation under the Trade
Agreements Act of 1979 (October 1981), at 67.
Section 152.107 of the CBP regulations (19 C.F.R. § 152.107) provides:
(a) Reasonable adjustments. If the value of imported merchandise cannot
be determined or otherwise used for the purposes of this subpart, the
imported merchandise will be appraised on the basis of a value derived
from the methods set forth in §§ 152.103 through 152.106, reasonably
adjusted to the extent necessary to arrive at a value. Only information
available in the United States will be used.
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(b) Identical merchandise or similar merchandise. The requirement that
identical merchandise, or similar merchandise, should be exported at or
about the same time of exportation as the merchandise being appraised
may be interpreted flexibly. Identical merchandise in any country other
than the country of exportation or production of the merchandise being
appraised may be the basis for customs valuation. Customs values of
identical merchandise, or similar merchandise, already determined on the
basis of deductive value or computed value may be used.
(c) Deductive value. The “90 days” requirement for the sale of
merchandise referred to in § 152.105(c) may be administered flexibly.
Your client states that the house kit at issue should be appraised based on the
depreciated value. In prior rulings, we have held that under the fallback method, the
original purchase price of the imported merchandise may be adjusted downward to
reflect depreciation for the time period the merchandise was used abroad. See HQ
H288062, dated September 5, 2017. Similarly, in this case, the method for
appraisement based on adjusting the original purchase price to reflect reasonable
depreciation for the period that the home kit was used in Italy is acceptable as a fallback
method pursuant to 19 U.S.C. § 1401a(f) provided it is in accordance with generally
accepted accounting principles (“GAAP”).
HOLDING:
The custom wooden house kit is not eligible for preferential tariff treatment under
subheading 9804.00.05, HTSUS.
The country of origin of the custom wooden house kit for purposes of marking
and trade remedies is Italy.
The custom wooden house kit may be appraised under the fallback method
pursuant to 19 U.S.C. § 1401a(f) based on adjusting the original purchase price to
reflect reasonable depreciation for the period it was used in Italy provided it is in
accordance with GAAP.
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 [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.”
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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
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