Newly Released CBP HQ Rulings Dec. 27-29
The Customs Rulings Online Search System (CROSS) was updated Dec. 27-29 with the following headquarters rulings (ruling revocations and modifications will be detailed elsewhere in a separate article as they are announced in the Customs Bulletin):
H334408: Valuation Treatment of Outdated and Obsolete Leather Provided by Buyer to Sellers at Fair Market Value; Assists
| Ruling: Under the facts as presented, the outdated or obsolete leather will not constitute an assist for purposes of customs valuation. |
| Issue: Whether leather that the importer will sell to suppliers at fair market value for use in the production of imported merchandise constitutes an assist for purposes of customs valuation. |
| Item: “Outdated” or “obsolete” leather left over from canceled production runs of leather products that an importer contracted for from a foreign supplier. The importer typically agrees to purchase the leather at the cost incurred by the supplier, and ownership is then transferred to the importer and the purchase recorded on the importer’s books as the cost of production. The leather becomes less supple and less commercially valuable. As a result, in the ordinary course, the importer’s purchases of outdated or obsolete leather are typically destroyed or sold to third parties at sharply reduced prices. The importer now seeks to sell such leather to suppliers at “fair market value” for use in the production of goods to be purchased by the importer. The importer will establish the fair market value of the outdated or obsolete leather by “contacting one or more unrelated domestic third-party buyers and soliciting bids for the material.” These bids would then be used to establish a “rate card” representing the arm’s-length commodity price for a particular grade of material for a given period of time. The importer would then periodically review and update this price based on market conditions. |
| Reason: Provided that the leather is subsequently sold to producers at a price equal to the highest domestic bid, and that prices are periodically reviewed and appropriately updated to reflect shifts in market conditions, the importer here has established the materials are not sold “at a reduced cost” within the meaning of 19 U.S.C. 1401a(h)(1)(A). As a result, the leather will not constitute an assist for purposes of customs valuation. |
| Ruling Date: Dec. 22, 2023 |
H329090: Protest No. 4601-19-107229; Sufficiency of Documents Submitted to Receive Drawback of Oil Spill Liability Trust Fund Tax; 19 U.S.C. § 1313(p); petroleum derivatives
| Ruling: CBP properly liquidated the drawback entry without drawback of the spill tax. The protest is denied. |
| Issue: Did CBP properly liquidate the drawback entry without refund for the spill tax? |
| Item: A claim made pursuant to 19 U.S.C. § 1313(p) to receive drawback for the duties, fees, and spill tax paid on imported petroleum derivatives. As proof of the spill tax paid, the importer provided an IRS Form 6627 (“Environmental Taxes”) and an IRS Form 720 (“Quarterly Federal Excise Tax Return”) for the two quarters relevant to the entries. Form 6627 declares $23,223.92 on line 6 for spill tax. However, the protestant claims that when carrying the number from Form 720 to 6627, the amount of $23,223.92 was erroneously placed on line 19 for Ozone Depleting Chemicals tax, and no tax liability was listed on line 21 for the spill tax. CBP denied the claim due to line 21 of the Form 720 being blank. The claimant emailed CBP stating that they would send a copy of the Form 720 with handwritten corrections. CBP replied that it would not accept a handwritten corrected Form 720 and instead recommended the claimant to file a 720-amendment Form (“720-X”) with the IRS, protest the liquidation of the drawback entry, and submit the Form 720-X with the protest. The importer protest, instead attaching the original IRS Form 720 with “23,223.92” handwritten in the “Imported petroleum products oil spill tax” block and a strike through the “23,223.92” originally reported under “ODC tax on imported products” along with the protest. |
| Reason: The altered copy does not complete the claim. Handwritten notations cannot be proffered as evidence for these purposes. The alterations made on the Form 720 submitted with the protest don't alter what was filed with the IRS and therefore cannot be used to prove spill tax was paid. There is no requirement stated on the Form 720-X that it must result in a change in total liability. |
| Ruling Date: Oct. 23, 2023 |