OT:RR:CTF:VS H347696 AMW
Alexander Chinoy and Cynthia Galvez
Covington & Burling LLP
One CityCenter
850 10th St., NW
Washington, DC 20001
RE: Method of appraisement for reusable transport tanks
Dear Mr. Chinoy and Ms. Galvez:
This is in response to your correspondence, dated May 1, 2025, requesting a binding ruling
on behalf of your client, [ ] (the “Requester”) regarding the method of
appraisement for reusable transport tanks to be imported to the United States. You have
requested that certain information submitted in connection with this request be treated as
confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7),
the request for confidentiality is approved. The information contained within brackets and all
attachments to this request will not be released to the public and will be withheld from published
versions of this decision.
FACTS:
The facts are based on your initial ruling request as well as follow-up information
submitted to this office on November 7, 2025. The Requester is an American biotechnology
corporation that plans to import reusable tanks for the purpose of transporting “drug substances
and medicines” internationally, but may also be shipped empty for repositioning between
locations in the United States and abroad. The subject tanks are organized into two separate
“fleets”: one owned by the Requester and a second owned by the Requester’s corporate parent, [
] (the “Parent”) which is based outside of the United States in [ ].
Because the Requester may import tanks in either fleet, however, the request pertains to tanks in
both fleets (i.e., those owned by the Requester or the Parent).
At present, the Requester rotates over 1,200 tanks through its U.S. and global facilities.
The tanks consist of three sizes: 35-liter, 120-liter, and 300-liter variants. The Requester and
Parent most recently purchased 35-liter tanks in 2013, 120-liter tanks in 2004, and 300-liter tanks
in 2015. The original purchase cost for each tank differs based on the tank’s size and material.
At present, the subject tanks are solely used to transfer substances between related parties, and
no payment is made for the tanks themselves (only the underlying material transported). Each
tank possesses a unique Tank ID number and is recorded as an asset value in the Fixed Asset
Register of either the Requester or the Parent. Each Fixed Asset Register entry contains the
following information: tank description and size, acquisition date, acquisition value,
accumulated depreciation, and net book value.
The Requester proposes appraising the customs valuation for each tank entered based on
the “annual average net book value” (the “AANBV”) of all tanks in each size range. Under this
methodology, the net value of each individual tank will first be calculated on an annual basis
utilizing a straight-line depreciation method in which the tanks are depreciated over 15 years.
Specifically, the Requester will use the following equation: tank acquisition cost – accumulated
depreciation = net book value. Although tanks older than 15 years are carried on the parties’
books as fully depreciated (i.e., fully expensed under generally accepted accounting principles
(“GAAP”)), the net book value of these tanks will be adjusted to reflect a minimum value of one
year of useful life remaining for purposes of establishing a reportable customs value. Once the
net book value for each tank has been calculated, the Requester will calculate the AANBV as
follows: total net book value for each tank size / total number of tanks for each size = AANBV.
the Requester asserts that providing the individual net book value for each tank as the customs
valuation at entry would be impractical, necessitating the Requestor to “perform a multitude of
everchanging calculations” and “provide these calculations to the exporter to prepare the invoice
for declaration upon entry for each and every entry.”
ISSUE:
Whether the methodology proposed by the Requester to value the tanks is acceptable
under the fallback method of 19 U.S.C. § 1401a(f).
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 preferred 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. 19 U.S.C. § 1401a(b)(1). If, for any reason,
sufficient information is not available with respect to the additions to the price actually paid or
payable, the transaction value of the imported merchandise is treated as one that cannot be
determined. 19 U.S.C. § 1401a(b)(1).
The term “price actually paid or payable” is defined as:
[T]he total payment (whether direct or indirect, and exclusive of any costs,
charges, or expenses incurred for transportation, insurance, and related services
incident to the international shipment of the merchandise from the country of
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exportation to the place of importation in the United States) made, or to be made,
for imported merchandise by the buyer to, or for the benefit of, the seller.
19 U.S.C. § 1401a(b)(4)(A).
When transaction value is not available as an appraisement method, the remaining
methods of appraisement set forth in 19 U.S.C. § 1401a must be considered. The alternative
methods of appraisement, in order of precedence, are: the transaction value of identical or
similar merchandise (19 U.S.C. § 1401a(c)); deductive value (19 U.S.C. § 1401a(d)); computed
value (19 U.S.C. § 1401a(e)); and the “fallback” method (19 U.S.C. § 1401a(f)).
In the instant matter, the methods of appraisement found in 19 U.S.C. § 1401a(b), (c), (d),
and (e) are not available. Transaction value under 19 U.S.C. § 1401a(b) is not available because
the tanks are not subject to a sale for export but are instead transferred between related parties.
In addition, the transaction value of identical or similar merchandise pursuant to 19 U.S.C. §
1401a(c) is not available because the Requester does not have access to the transaction value of
merchandise at the same commercial level and in substantially the same quantity as the subject
tanks. Next, deductive value pursuant to 19 U.S.C. § 1401a(d) is not available because there is
no subsequent sale of the tanks in the United States from which to deduct the required elements.
Finally, computed value pursuant to 19 U.S.C. § 1401a(e) is not available because the Requester
does not have access or insight to the manufacturing costs associated with the subject tanks.
Based on the above, we agree with the Requester that the proper method of appraisement
in this scenario is the fallback method. This method is set forth in 19 U.S.C. § 1401a(f) and
allows for merchandise to be appraised on the basis of a value derived from one of the methods
set forth in 19 U.S.C. § 1401a(b) through 1401a(e), reasonably adjusted to the extent necessary
to arrive at a value. However, certain limitations exist under this method. 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 United States,
minimum values, or arbitrary or fictitious values. 19 U.S.C. § 1401a(f); 19 CFR § 152.108.
In addition, pursuant to section 500 of the Tariff Act of 1930, as amended, which sets
forth U.S. Customs and Border Protection (“CBP”) 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:
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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.
In the present matter, the Requester seeks to base the customs valuation of the
subject tanks on the AANBV, which in part relies on a straight-line depreciation of the
items’ original purchase price. CBP has considered variations of this approach in several
past rulings, often finding it permissible when done in accordance with GAAP.
In Headquarters Ruling Letter (HQ) H288062, dated September 5, 2017, CBP
considered the customs valuation of plastic intermediate bulk containers used for the
shipment of merchandise between both foreign and U.S. customers. The bulk containers
each bore a serial number that was tied to a specific manufacturing batch. As with the
instant matter, the bulk containers were not subject to a sale and the importer was unable
to appraise the bulk containers under the methods of valuation available in 19 U.S.C. §
1401a(b) through 1401a(e). The importer instead proposed to appraise the bulk
containers “with an annual average depreciated value of the intermediate bulk
containers…[utilizing] a straight-line accounting method to depreciate the value of the
intermediate bulk containers over five years.” CBP determined that such a method was a
reasonable adjustment under the fallback method, “provided it is applied in accordance
with GAAP and approximates the actual value of the intermediate bulk containers at the
time of their exportation to the United States.” See also, HQ H291763, dated April 6,
2018 (approving the valuation of reusable containers under a fallback method using
straight-line depreciation over five years with an annual review of the appreciated value).
In HQ H259584, dated July 7, 2015, certain merchandise was imported into the
United States to support the operations of cruise ships. The merchandise was used aboard the
cruise ship and then imported without any purchase or payment transaction, sometimes for repair
purposes. The importer used a seven-year straight-line depreciation to appraise the merchandise
under the fallback method. CBP found this adjustment to the value of the imported merchandise
to be reasonable provided the importer employed this method in accordance with GAAP and
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approximated the actual value of the imported merchandise at the time of its exportation to the
United States.
In HQ 563355, dated January 18, 2006, CBP considered the valuation methodology of
test fixtures and equipment that were owned by a company, supplied to and used by a
manufacturer abroad, and then imported back to the company in the United States, without a
sale. The company owned each test fixture throughout this time period and traced it accordingly
in its asset database, which maintained the product’s acquisition cost, and current book value,
which was adjusted for depreciation on a seven-year straight-line depreciation scale. CBP found
that the method for appraisement used by the company, based on adjusting the original purchase
price to reflect reasonable depreciation for the period that the good was used, was acceptable as a
fallback method pursuant to 19 U.S.C. § 1401a(f).
In HQ 229377, dated May 30, 2003, an importer entered 24-year old merchandise that
was not sold, but provided by a related party. CBP held that the merchandise should be
appraised under the fallback method, and in accordance with GAAP, the original purchase price
should be adjusted downward to reflect reasonable depreciation for the time period that the
article was used abroad. However, the value resulting from this downward depreciation had to
approximate the actual market value of the article at the time of its exportation to the United
States.
As previously noted, you propose to use a straight-line annual average depreciation
method to depreciate the value of the subject tanks from the acquisition value reflected on the
Requester or Parent’s Fixed Asset Register over 15 years under the fallback method. Based on
the above rulings, we find that your 15-year, straight-line annual average depreciation method is
a reasonable adjustment to values derived from 19 U.S.C. § 1401a(b)-(e) under the fallback
method, provided it is applied in accordance with GAAP.
HOLDING:
Based on the facts presented, and the assumptions set forth above, the returned tanks may
be appraised using a 15-year straight line depreciation as an adjustment to the acquisition cost of
the subject tanks. 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 Customs
Service 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.”
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch
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