Appraisement of certain semiconductor manufacturing spare parts

HQ H274086 May 12, 2016 OT:RR:CTF:VS H274086 EE CATEGORY: Valuation Brad Pruente Asseta 370 7th Street Unit 1 San Francisco, CA 94103 RE: Appraisement of certain semiconductor manufacturing spare parts Dear Mr. Pruente: This is in response to your correspondence, dated March 3, 2016, in which you request a ruling concerning the appraisement of certain semiconductor manufacturing spare parts. Your request, submitted as an electronic ruling request on January 29, 2016, was forwarded to this office from the National Commodity Specialist Division for review. Our ruling is set forth below. FACTS: You describe the pertinent facts as follows. Asseta purchases certain surplus semiconductor manufacturing spare parts from a factory in China for resale in the U.S. It is stated that in the aggregate the value is substantial, but that many individual parts will have no U.S. customer and no market value, which will not be known until Asseta has to resell them. You state that the Chinese factory has agreed to let Asseta pay for the parts as they are sold in the U.S., but that Asseta will pay a nominal price of $0.10 cents per part at the time of importation. If the part is sold in the U.S., Asseta will pay 80% of the resale price of the merchandise. Approximately 10% of the items are resold in the U.S. and the rest is scrapped. The pricing formula used to sell the parts in the U.S. consists of a base price of 50% of the factory’s original acquisition cost with potential price decreases based on negotiations with the U.S. buyer. You provide the following example: factory purchases a part for $10,000. Asseta resells it for $5,000 and pays the factory $4,000. Asseta profits $1,000. You claim that the parts, classified under subheading 8486.90, Harmonized Tariff Schedule of the United States (“HTSUS”), are duty-free; however, they may be subject to Harbor Maintenance Fees (“HMF”). As such, you would like to know the appraised value of the imported merchandise. You state that Asseta is unrelated to the Chinese factory. ISSUE: What is the correct method of appraising the merchandise? 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 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). Under 19 U.S.C. § 1401a(b)(1)(E), the proceeds of any subsequent resale, disposal, or use of the imported merchandise that accrue, directly or indirectly, to the seller will be an addition to the price actually paid or payable. As previously noted, Asseta purchases certain semiconductor manufacturing spare parts from a factory in China to resell them upon importation. If unsold, the parts are scrapped. You state that Asseta will pay the factory $0.10 per part plus 80% of the resale price upon each sale. Based on the information provided, the payments which accrue to the factory upon resale of the parts would be dutiable as proceeds and an addition to the price actually paid or payable under 19 U.S.C. § 1401a(b)(1)(E). We strongly encourage you to use Reconciliation program and flag for reconciliation the price declared at entry as provisional due to the potential of price adjustments. Thus, price adjustments, if any, should be timely made through the reconciliation process. You state that approximately 10% of the items will be sold and the remainder will be scrapped. On April 8, 2016, this office requested a copy of the contract between Asseta and the factory in China. You stated in your email response, dated April 8, 2016, that you were unable to provide a copy of the contract due to confidentiality concerns. Since we cannot review this contract, we are unable to issue a ruling concerning the merchandise which is scrapped upon importation. HOLDING: Based on the information presented, the imported merchandise which is resold upon importation shall be appraised under transaction value based on the price paid to the factory in China ($0.10) plus 80% of the resale price of the merchandise which are dutiable as proceeds and an addition to the price actually paid or payable under 19 U.S.C. § 1401a(b)(1)(E). 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 U.S. Customs and Border Protection (“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.” Sincerely, Monika R. Brenner Chief Valuation & Special Programs Branch