OT:RR:CTF:VS H343575 JH
Misty Gibbins
Pacific Customs Brokers Inc.
2150 Peace Portal Dr.
Suite 101
Blaine, WA 98230-9192
RE: Valuation of Recycled Clothing
Dear Ms. Gibbins:
This is in response to your correspondence dated December 5, 2024, in which you request
a ruling on behalf of your client, Debrand Services Inc. (“Debrand”), a Canadian-based
company. Your request concerns the valuation of bales of rejected, shredded, and worn
garments (“bales”) which are destined for the United States (“U.S.”) for recycling.
FACTS:
According to your submission, Debrand will be the importer of record into the United
States for the bales. Debrand legally acquires discarded, rejected, shredded, and worn garments
which are then sort, processed, and compressed into bales for export to the United States. Once
imported, the U.S. recycler downcycles the bales to be utilized in various applications, including
shoddy fiber production, punching bag filling, insulation, mattress material, and pet bedding.
Debrand does not sell the goods, but rather pays unrelated U.S. fiber reclamation companies a
fee per pound or ton depending on whether the goods are considered clean recycling or
contaminated recycling. Further, you state that according to the contract between Debrand and
the U.S. companies, none of the garments may be sold after importation, and that all brand
names must be removed from the textiles.
ISSUE:
What is the correct method of appraising the recycled clothing?
LAW & 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 (19 U.S.C. § 1401a;
TAA). 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
amounts for certain statutorily enumerated additions to the extent not otherwise included in the
price actually paid or payable. 19 U.S.C. § 1401a(b)(1).
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 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. If the value of imported merchandise cannot be determined under these
methods, it is to be determined in accordance with section 402(f) of the TAA, known as the
“fallback method.” 19 U.S.C. § 1401a(f).
In the instant case, the imported merchandise is not the subject of a sale and therefore
cannot be appraised under the transaction value method set forth in section 402(b) of the TAA.
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 being appraised. 19 U.S.C. § 1401a(c). Since we have
not been provided any information concerning the transaction value of identical or similar
merchandise, we are not able to value the imported merchandise under this method of
appraisement.
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. 19 U.S.C. § 1401a(d)(2). This price is also subject to
certain enumerated deductions. 19 U.S.C. 1401a(d)(3). In the instant case, the imported
merchandise is not sold in its condition as imported. Merchandise that is not sold in its condition
as imported can still be appraised under deductive value, however, provided the importer so
elects. 19 U.S.C. § 1401a(d)(2)(A)(iii). In this case, Debrand has not made such an election. As
a result, the imported merchandise cannot be appraised on the basis of the deductive value
method.
Under the computed value method, merchandise is appraised on the basis of the material
and processing costs incurred in the production of the 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. 19 U.S.C. § 1401a(e)(1). Since
there is no information on which to base computed value, this method is also inapplicable.
Section 402(f) of the TAA provides that imported merchandise is to be appraised on the
basis of a method derived from one of the methods set forth in sections 402(b) – (e), such
methods reasonably adjusted to the extent necessary to arrive at a value. However, there are
certain prohibited bases of appraisement under 402(f), including the selling price of merchandise
produced in the United States, minimum values and arbitrary or fictitious values. 19 U.S.C. §
1401a(f)(2).
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 Statement of Administrative Action (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] 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.
Statement of Administrative Action, H.R. Doc. No. 153, 96 Cong., 1 st Sess., pt. 2,
reprinted in, Department of the Treasury, Customs Valuation under the Trade Agreements Act of
1979 (October 1981), at 67. Accordingly, if the value of imported merchandise cannot be
determined on the basis of a method derived from sections 402(b)-(e), we find that the value of
the imported merchandise may be determined under the fallback method provided for in section
402(f) of the TAA, using all reasonable ways and means, so long as the method is not
specifically precluded under 19 U.S.C. § 1401a(f)(2).
CBP has previously found that merchandise entering the U.S. for purposes of recycling
should be appraised under the fallback method using the fee paid to take possession of the
merchandise. See Headquarters Ruling Letter (“HQ”) H130310, dated November 18, 2010; and
HQ H262963, dated March 3, 2016. Similarly, CBP has previously found that for waste being
imported to be disposed of, for which a fee was paid to the U.S. company responsible for
disposing of the waste, the fee being paid for disposal was an appropriate value for the waste.
See HQ 545017, dated August 19, 1994; HQ 547147, dated March 23, 1999; and HQ H019073,
dated November 2, 2007. In HQ 545017, petroleum waste oil was imported into the U.S. from
Canada for disposal. The Canadian company paid the U.S. company to dispose of the waste oil.
The Canadian exporter argued that the waste oil should be appraised at a nominal value.
However, CBP found that it was not unreasonable for the waste oil to be valued at the fee paid
for disposal and the company did not provide any documentation to show otherwise. In HQ
547147, Waste Management, Inc. (“WMI”) imported solid waste into the U.S. for disposal, and
attempted to distinguish HQ 545017. WMI argued that the waste itself had no value, and that the
fee was paid for disposing the waste in the U.S. after importation, not the waste itself. CBP
found that the fallback method using the disposal fee was reasonable and that the disposal fee
was “the only available information which [could] be quantitatively documented.” HQ 547147.
Similarly, in HQ H019073, soil contaminated with depleted uranium was imported from Kuwait
for disposal in Idaho. The soil was not sold and had no commercial value. CBP held the
disposal fee received by the facility in Idaho was a reasonable fallback method to value the soil.
Here, as in the above cases, the imported merchandise is not being sold to the U.S.
recycler. Rather, the U.S. recyclers are being paid a fee to take possession of the bales into the
U.S. and to downcycle them for specified applications. Also, the contract provides that the
products may not be sold in their original form.
Although, unlike the cases cited, the subject clothing is recycled instead of disposed of, it
is not in its recycled state at the time of importation. Therefore, in accordance with the cited
rulings, we find that the imported merchandise may be appraised under the fallback method
using the fee paid by Debrand to the U.S. recyclers to process the imported goods and repurpose
the material.
However, for purposes of valuation under the fallback method, as it is claimed that the
clothing has no commercial value, and is not legally saleable in their imported condition, the
importer should be prepared, if requested, to support such claims by providing further evidence,
as requested by the Apparel, Footwear, and Textiles, Center of Excellence and Expertise to
establish that the merchandise is indeed defective or damaged and has no commercial value.
Such information may be, but is not limited to, the submission of specifications, quality control
reports, internal and external correspondence addressing the relevant merchandise, photographs,
samples, and/or any other documentation that individually or cumulatively establishes the
condition of the merchandise at the time of importation.
HOLDING:
Based on the information presented, the imported merchandise shall be appraised under
the fallback method using the fee paid to the U.S. recyclers to take possession of the clothing for
recycling.
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