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HQ 546735





June 19, 1997

RR:IT:VA 546735 er
CATEGORY: VALUATION

Mr. Dean Domonoske
Shearight Pty Ltd.
P.O. Box 60
Canley Vale NSW 2166
Australia

RE: Request for Ruling regarding Cutting Tools from Australia; 19 U.S.C. 1401a(e); Computed Value.

Dear Mr. Domonoske:

This is in response to your most recent correspondence dated May 4, 1997, in which you request a ruling regarding the appraised value of certain cutting tools to be imported into the United States.

FACTS:

You state that you manufacture a cutting tool in Australia, classified under subheading 8205.59.5510, Harmonized Tariff Schedule of the United States. Your formed your company, Shearight Pty Ltd., Australia, in April 1997 for the purpose of manufacturing cutters. You state that you are the sole owner of all the cutting tool inventory. You intend to relocate to the United States in 1998, bringing all cutting tool inventory with you; hence, the merchandise will not be imported into the United States pursuant to a sale for exportation.

You provided us with the figures that you claim represent the direct manufacturing costs for assembled and unassembled cutting tools, export packed. You state that you have records to support the claimed direct manufacturing costs for this imported merchandise.

You state that after you have relocated to the United States, the registered office for your company will continue to be “Robert Fedrigo & Co., Chartered Accountant, Fairfield NSW”. This office will continue to maintain all financial and statutory records for your company.

You have also asked for a determination regarding the classification and duty rate for unassembled cutters. We have forwarded this request to the proper branch for separate reply.

ISSUE:

What is the correct method of appraisement for the imported merchandise?

LAW AND ANALYSIS:

From your submission, it appears that you do not intend to incorporate in the United States. If you do not so intend, then you should know that section 141.18 of the Customs Regulations (19 CFR 141.18) provides the following with regard to the right of nonresident corporations to enter merchandise into the United States:

A nonresident corporation (i.e., one which is not incorporated within the Customs territory of the United States or in the Virgin Islands of the United States) shall not enter merchandise for consumption unless it:

(a) Has a resident agent in the State where the port of entry is located who is authorized to accept service of process against such corporation; and (b) Files a bond on Customs Form 301, containing the bond conditions set forth in section 113.62 of this chapter having a resident corporate surety to secure the payment of any increased and additional duties which may be found due.

With regard to the appraisement of imported merchandise, such appraisement is made 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). 19 U.S.C. 1401a(a) through (f) set forth the hierarchy of methods to be applied when appraising imported merchandise. The preferred basis 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, to the extent not already included, certain statutorily enumerated additions. 19 U.S.C. 1401a(b)(1)(B).

As discussed in previous correspondence to you, in order for merchandise to be appraised under transaction value, there must be a sale for exportation to the United States. According to your submission, the importation of the subject merchandise will not be effected pursuant to a sale for exportation. Rather, you state that you own the merchandise and will simply be transferring the merchandise to the United States upon your relocation here. Accordingly, the merchandise may not be appraised under transaction value.

If transaction value does not exist, then the merchandise must be appraised in accordance with one of the remaining methods of valuation, applied in sequential order. 19 U.S.C. 1401a(a)(1). The alternative bases of appraisement, in order of precedence, are: the transaction value of identical or the transaction value of 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)). At the time of entry, an importer may elect to reverse the order of appraisement under deductive and computed value. See, 19 U.S.C. 1401a(a)(2) and 19 CFR 152.101(c).

For purposes of this decision, we have assumed that appraisement based upon transaction value of identical or similar merchandise (19 U.S.C. 1401a(c)) is not available. You have provided figures that you claim represent the cost of manufacturing the assembled and unassembled merchandise, export packed. Providing you elect to exercise the option to reverse the order of appraisement under deductive value and computed value and providing you can provide Customs with the documentary evidence you claim supports these figures, it is possible that the merchandise may be appraised under computed value.

19 U.S.C. 1401a(e) provides the following regarding computed value:

(1) The computed value of imported merchandise is the sum of -- (A) the cost or value of the materials and the fabrication and other processing of any kind employed in the production of the imported merchandise; (B) an amount for profit and general expenses equal to that usually reflected in sales of merchandise of the same class or kind as the imported merchandise that are made by the producers in the country of exportation for export to the United States; (C) any assist, if its value is not included under subparagraph (A) or (B); and (D) the packing costs.

(2) For purposes of paragraph (1) --
(A) the cost or value of materials under paragraph (1)(A) shall not include the amount of any internal tax imposed by the country of exportation that is directly applicable to the materials or their disposition if the tax is remitted or refunded upon the exportation of the merchandise in the production of which the materials were used; and (B) the amount for profits and general expenses under paragraph (1)(B) shall be based upon the producer’s profits and expenses, unless the producer’s profits and expenses are inconsistent with those usually reflected in sales of merchandise of the same class or kind as the imported merchandise that are made by producers in the country of exportation for export to the United States, in which case the amount under paragraph (1)(B) shall be based on the usual profit and general expenses of such producers in such sales, as determined from sufficient information.

In our previous correspondence to you, we provided you with a copy of the valuation statute and the portion of the Customs regulations that pertain to the submission of a request for a ruling. In your resubmission you provided us with some documents but you did not provide any documents which support the claimed cost of manufacturing the merchandise. Because we do not have any of the documents which support appraisement under computed value, we cannot definitively rule that the merchandise should be appraised under computed value. We can only note that based upon the information which you have provided to us, it is likely that appraisement under computed value is proper.

Section 141.88 of the Customs Regulations (19 CFR 141.88) provides the following with regard to computed value:

When the port director determines that information as to computed value is necessary in the appraisement of any class or kind of merchandise, he shall so notify the importer, and thereafter, invoices of such merchandise shall contain a verified statement by the manufacturer or producer of computed value as defined in section 402(e) ...

You, accordingly, must be prepared to provide to Customs, if requested, the documentation which you claim to possess which supports the figures you have provided regarding the cost of manufacturing the merchandise.

HOLDING:

Based on the facts submitted, it appears the subject merchandise should be appraised under computed value (19 U.S.C. 1401a(e)). Accordingly, if so requested, the importer must be prepared to provide to Customs documentation which supports appraisement under the computed value method.

Sincerely,

Acting Director
International Trade Compliance Division

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