RR:IT:VA W546312 RSD
Port Director
U.S. Customs Service 610 S. Canal Street Chicago, Illinois 60607
RE: Appraisement of merchandise which is consigned and is often not sold in the United States for six to nine months after importation; deductive value; 19 U.S.C. 140 la(t)
Dear Director:
This is in response to a letter dated March 12, 1996, from Daiichi Jitsugyo of America, Inc. (DJA) concerning the appraisement of injection molding machines it imports through the ports of Chicago and Dallas. Because DJA has submitted a prior disclosure to Customs in Chicago, the request is being handled as an internal advice request. A copy of the prior disclosure was enclosed with DJA's letter. We consulted with the concerned import specialist in Chicago, who indicated that he had no information regarding the transactions other than what was contained in the prior disclosure. The import specialist further requested that we handle the value question before the prior disclosure matter is resolved. In several telephone conversations, we have discussed this matter with DJA's representative from Deloitte & Touche, LLP.
FACTS:
DJA states in its letter that it is I 00% owned by Daiichi Jitsugyo Co., Ltd., (DJK) a Japanese based company. The imported machines at issue are shipped on consignment from DJK. DJK obtains the machines from Niigata, an unrelated manufacturer. The machines are not sold to DJA until after the goods are imported. In essence, when DJA finds a buyer in the United States, the goods are simultaneously sold with title passing from Niigata to DJK to DJA
The importer advises that the machines are generally sold to a company in the United States 6 to 9 months after their importation. Despite the fact that the machines were not sold to DJA at the time of exportation to the United States, the price declared to Customs was based on the price that DJA later paid to DJK for the imported merchandise. According to DJA, DJK adds a 2% commission and all actual expenses such as freight, insurance, customs duties, and customs charges to a standard price to determine the price that DJA pays DJK after the machines are sold. Once payment is made from DJA to DJK, then DJK pays Niigata.
DJA acknowledges that transaction value is not applicable because they are consigned rather than sold before being imported into the United States and asks how the machine should be appraised. In a letter dated July 11, 1996, DJA described the specific transactions surrounding two importations of the machines and provided documents from these transactions. Our analysis is based on the documents provided. In its November 6, 1995, letter requesting a ruling, DJA took the position that the imported merchandise should be appraised under 19 U.S.C. 1401a(f) based on price lists between the manufacturer and DJK as represented by the invoice prices and noted that a 2% commission it paid to DJK should be considered as a non-dutiable buying comrruss1on. However, DJA's representative has advised that it has abandoned this position.
ISSUE:
Based on the description provided, how should the imported merchandise be appraised?
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 merchandise when sold for exportation to the United States,” plus certain statutorily enumerated additions. 19 U.S.C. 1401a(b)(l). In the instant case the imported machines are not sold prior to importation. Instead, the machines are consigned to the importer who subsequently sells them to companies in the United States. Since the machines are not sold to the importer, they cannot be appraised on the basis of transaction value. e.g., Headquarters Ruling Letter (HRL) 544845, dated November 9, 1993.
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. 19 U.S .C. 1401a(a)(l). The alternative bases 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)).
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). The concerned import specialist has indicated that he is not aware of any identical merchandise, imported at or about the same time as the consigned merchandise. Moreover, we understand that the import specialist also believes that there is no imported merchandise similar to the imported machines. Accordingly, we assume for the purposes of this decision that there is no transaction value of identical or similar merchandise exported to the United States at or about the same time as the merchandise being appraised. However, if it is determined that there is, the merchandise should be appraised based on the transaction value of identical or similar merchandise under 19 U.S.C. l40la(c).
The next basis of appraisement is deductive value. 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, or before the close of the ninetieth day after the date of importation. 19 U.S.C 1401a(d)(2)(A)(i)-(ii). This price is also subject to certain enumerated deductions. 19 U.S.C. 1401a(d)(3). DJA has presented documents from two transactions, in which the machinery is consigned rather than sold before importation. The first set of documents is from a transaction involving an injection molding machine, Model No. 275 (Serial No. 35532N), which was consigned to DJA from DJK on July 27, 1994. An invoice was issued by DJK to DJA along with a packing list. The documents indicate that the injection molding machine was imported by DJA into the United States on August 2, 1994. On August 5, 1994, HY-Ten Die & Development, (HY-Ten) a U.S. customer, placed a purchase order with DJA, and DJA issued a confirmation of the sale and agreed to deliver the machine sometime in August 1994. An invoice for the purchase price was issued to HY-Ten, and HY-Ten paid that amount. Copies of the confirmation of sale, purchase order, invoice, and checks were submitted.
In cases illustrated by this preceding example, where the merchandise is sold in the United Stated within 90 days after importation, the appropriate method of appraisement would be deductive value. The basis of appraisement would be the price that the merchandise is sold for in the United States minus the applicable deductions.
However, as DJK points out, in many instances deductive value may not be used because of the length of time that passes between the time that the goods are imported and sold. The merchandise is often sold in the United States 6 to 9 months after the goods are imported. The documents from Example Number II, submitted by DJA, illustrates a case where the merchandise is not sold in the United States for more than 6 months after importation. An injection molding machine, Model No. NE 55UA (Serial No. 80392A), was consigned from DJK to DIA. An invoice was issued by DJK to DJA. The molding machine was imported by DJA into the United States on August 29, 1994. The machine was not sold until March 15, 1995, when Machinery Systems, Inc., a U.S. customer, placed a purchase order with DJA. DJA issued a confirmation of sale to Machinery Systems, Inc. and agreed to deliver the machine to Aro Plax Corporation in Monticello, Minnesota sometime in March 1995. An invoice for the purchase price was issued to Machinery Systems, Inc., which was subsequently paid. Copies of the purchase order, invoice, and checks were submitted.
Since this merchandise was sold later than ninety days after importation in its imported condition deductive value does not apply. (Merchandise that is not sold in the condition as imported and not before the close of the ninetieth day can still be appraised under deductive value, provided that the merchandise is sold before the l 80th day after importation and the importer so elects. 19 U.S.C. 1401a(d)(2)(A)(iii). This provision does not apply, because the imported merchandise was sold in its imported condition.)
If merchandise cannot be appraised under deductive value, the next basis of appraisement would be computed value. Under the computed value method, merchandise is appraised on the basis of the material and processing costs incurred in the production of 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)(l). The imported machines are manufactured by a unrelated manufacturer. The importer's representative has advised that information concerning costs is not provided to the importer. Because there is no information available on which to base computed value, this method of appraisement is also inapplicable.
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 set forth in 19 U.S.C. 140la(f). The fallback method provides that merchandise should be appraised on the basis of a value derived from one of the prior methods reasonably adjusted to the extent necessary to arrive at a value. 19 U.S.C. 1401a(f)(l).
Section 152.107(a)-(c), Customs Regulations (19 CFR 152.107), sets forth examples of acceptable appraisements using 19 U.S.C. 1401a(f). Conversely, section 152.108, Customs Regulations (19 CFR 152.108), gives examples of unacceptable bases of appraisement under 19 U.S.C. 1401a(f). As stated above, a value for 19 U.S.C. 1401a(f) appraisement purposes must be derived from 19 U.S. C. 140la(b)-(e) with reasonable adjustments. Appraising merchandise based on price lists is clearly not one of the valuation methods provided for in the statute. 19 CFR 152.107(c) indicates, however, in using a modified deductive value under 19 U.S.C. 1401a(f) that the "90 days" requirement for the sale of merchandise referred to in 19 CFR 152.105(c) may be administered flexibly. Accordingly, because the sales of the merchandise in the United States generally occur 6 to 9 months after importation, the most appropriate way to appraise the imported machinery would be to use a modified deductive value under 19 U.S.C.
1401a(f) where the time restrictions of 19 U.S.C. 1401a(d) are relaxed.
HOLDING:
Based on the facts presented and the submitted documents, assuming that it is determined that the merchandise cannot be appraised based on the transaction value of identical or similar merchandise exported at or about the time of the imported goods, the proper method of appraisement is deductive value in cases where the
imported merchandise was sold in the U.S. within 90 days after importation. Where the imported merchandise is not sold within 90 days, appraisement should be based on a modified deductive value under 19 U.S.C. 1401a(f) where the time restrictions of 19 U.S.C. 1401a(d) are relaxed.
Please provide the importer with a copy of this decision. The Office of Regulations and Rulings will take steps to make this decision available to Customs personnel via the Customs Ruling Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act, and other public access channels 60 days from the date of this decision.
Sincerely,
Acting Director,
International Trade Compliance Division