Nov 16 CBP Bulletin Revokes Flower Consignment "Average" Valuation Method
In the November 16, 2011 issue of the U.S. Customs and Border Protection Bulletin (Vol. 45, No. 47), CBP published a notice revoking the use of "average price" to value cut flower imported under consignment that are eligible for duty-free treatment under the Andean Trade Preference Act (ATPA). CBP states this method is the "fallback" method, the last of four possible methods to use, and is not the proper method for valuation purposes.
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Revocation of "Average" Treatment Effective Jan 17, 2012
CBP is revoking any treatment which allowed appraisement of consignment entries using an average price supplied by a flower association. This ruling will become effective for merchandise entered or withdrawn from warehouse for consumption on or after January 17, 2011.
Miami Port Had Allowed Floral Association to Use "Average" Valuation Method
Fresh cut flowers from Columbia, Ecuador and Peru are eligible for duty-free treatment under the ATPA.1 For a considerable period of time, the Port of Miami had allowed the appraised value of cut flowers for which claims for duty-free treatment under the ATPA were made and which were entered under consignment to be calculated by using an average price supplied by a flower association. The average price is derived from the prices of imported flowers from the previous four weeks (per flower and grade), less a percentage for gross margin and international transportation.2
CBP Determined "Average" Method Is Non-Compliant, Must Use Other Methods
While it appears that the merchandise was eligible for duty-free treatment, CBP has determined that this method of appraisement does not comply with the requirements of the Value Statute (19 USC 1401a). Under this statute, CBP states that the preferred method of appraisement is transaction value3. However, to use this method there must be a bona fide sale. If there is no sale, as in the case of merchandise imported under consignment, appraisement must be based on another method provided under this statute.
The four alternative methods that must be considered (in sequential order) include: (1) transaction value of identical or similar merchandise, (2) deductive value, (3) computed value, and (4) the "fallback" method.
Says Port Should Use Transaction Value of Similar Goods or Deductive Value
CBP states that it is possible that there are sales of identical or similar merchandise at the same commercial level and in substantially the same quantity exported to the U.S. at or about the same time as the consignment entries of cut flowers. Additionally, frequent price fluctuations do not preclude the appraisement of perishable products using this method.
If there are no entries of identical or similar flowers on which to base appraisement, then the deductive vale method is applied. The merchandise is appraised on the basis of the price at which it is sold in the U.S. in its condition as imported. CBP states that because merchandise in deductive value refers not only to the actual imported merchandise but also identical or similar merchandise, cut flowers imported under consignment may be appraised either by the transaction value of identical or similar merchandise or the deductive value method.
Says It Is Unlikely or There Is No Reason to Use Other Methods
CBP states that it is unlikely that computed value would be selected before deductive value by an importer as it requires information from the producer that the importer is not likely to have. However, if an importer has the information and chooses this method before deductive value, that is the importer's option.
However, CBP states that it sees no reason to reach the "fallback" method as a value on which to base appraisement should be ascertainable by one of the other previous methods. However, this fallback method is the method being used for consignment entries by certain cut flower importers through the Port of Miami. CBP also notes that the statute shows that the lowest value should be used when more than one alternative value exists for appraisement purposes. CBP states that averaging the values conflicts with this statute.
1The ATPA expired on February 12, 2011, after which flowers from ATPA beneficiary countries became dutiable. However, on October 21, 2011, the President signed the Korea, Panama and Colombia Free Trade Agreement implementing bills. The Colombia FTA has a provision that renewed the ATPA/Andean Trade Promotion and Drug Eradication Act (ATPDEA) programs from November 5, 2011 through July 31, 2013. (See ITT's Online Archives 11102103 for summary.)
On October 27, CBP issued a memo on the procedures for duty refunds for merchandise entered or withdrawn from warehouse for consumption during the period in which the ATPA/ATPDEA programs lapsed (February 13, 2011 through November 4, 2011). (See ITT's Online Archives 11102715 for summary.)
2This average price is made available only to participating flower association members who use it for valuation of flowers they import under consignment.
3Transaction value is defined as the price actually paid or payable for the merchandise when sold for exportation to the U.S., plus certain statutory additions.
(See ITT's Online Archives 11080210 for summary of CBP's proposed revocation of this "average" valuation method for consignments of fresh cut flowers.)
(Ruling letter HQ H165364, dated 11/01/11)