Newly Released CBP HQ Rulings for Sept. 14
The Customs Rulings Online Search System (CROSS) was updated Sept. 14 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):
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H319605: U.S. Government Procurement; Title III, Trade Agreements Act of 1979 (19 U.S.C. 2511); Subpart B, Part 177, CBP Regulations; Country of Origin of Calcitriol Capsules
| Ruling: No substantial transformation occurs during the encapsulation process in India and the country of origin of the final Calcitriol capsules remains Switzerland, a WTO GPA country, where the Calcitriol is produced. |
| Issue: What is the country of origin of the subject Calcitriol capsules for purposes of U.S. Government procurement? |
| Item: Calcitriol capsules used for vitamin D3 deficiency. The raw ingredients originate from Switzerland. The active ingredient is Calcitriol USP. All of the Swiss ingredients are shipped to India where capsules are manufactured. During the manufacturing process, the Calcitriol is dissolved in medium chain triglycerides along with other inactive ingredients to form a clear drug solution. Gelatin is mixed along with purified water and other inactive ingredients under specific temperature and vacuumed with help of a gelatin melter. The resulting gelatin mass is fed into an encapsulation machine to form soft gelatin capsules with drug solution inside. The capsules pass into a tumble dryer to remove excess moisture. After the capsules are dried and polished, they are printed with food grade ink. Finally, the capsules are inspected, packed in containers, and labelled. |
| Reason: No change in name occurs in India because the product is referred to as “Calcitriol” both before and after encapsulation. The Calcitriol is the only active ingredient. After being mixed with the inactive ingredients serving as coloring agents, preservatives, and fillers, it retains its chemical and physical properties and is merely put into a dosage form in India. Finally, no change in use occurs in India because the Calcitriol retains the same predetermined medicinal use for vitamin D3 deficiency. |
| Ruling Date: Aug. 27, 2021 |
H304606: Request for Internal Advice; Deduction of Royalty Payments from United States Sales Price; Fallback Deductive Value Calculation; Prior Disclosure
| Ruling: The amounts identified as “royalty payments” from the importer to a related party “licensor” are not deductible as general expenses under the deductive value method of appraisement. Furthermore, the fallback deductive value method calculation proposed by the importer is flawed and the Office of Regulatory Audit should review this calculation and its acceptability. |
| Issue: Whether the royalty payments at issue are non-deductible costs of production of the articles assembled in the United States from their imported components, the article kits, or are general expenses which are deductible under the deductive value |
| Item: Royalty payments paid by an importer for licensed trademarks and patents related to the assembly in the United States of imported components (article kits) into finished articles |
| Reason: The assembly of the imported components in the United States create the good which is, by its configuration, shape and design, the subject of the trade dress trademarks. Without the right to use the trade dress trademarks, the importer could not assemble the articles in the United States without infringing the registered trade dress in violation of the Lanham Act. The trade dress trademarks referenced in the licensing agreement (which confers the right to assemble the components according to the patents and confers the right to use the trademarks, including the trade dress trademarks, in that assembly), are directly related to the production or assembly of the imported components into the finished articles. |
| Ruling Date: June 24, 2021 |
H310045: Application for Further Review of Protest No. 4909-20-100121; Eligibility of Ultra-Low Sulfur Diesel for Preferential Tariff Treatment under the U.S. - Colombia Trade Promotion Agreement
| Ruling: The ultra-low sulfur diesel fuel is entitled to preferential tariff treatment under the U.S.-Colombia TPA. |
| Issue: Whether the entry of ultra-low sulfur diesel fuel is entitled to preferential tariff treatment under the U.S.-Colombia TPA |
| Item: Ultra-low sulfur diesel, processed at a refinery in Colombia from non-originating crude oil, then shipped to a foreign-trade zone in Puerto Rico |
| Reason: The crude oil which is refined in Colombia is classified in heading 2709 prior to being processed. After processing, the processed product is classified in heading 2710.19. Thus, the tariff shift requirement is met in Colombia such that the non-originating material makes a tariff shift as required by the rule set forth in the U.S.-Colombia TPA. |
| Ruling Date: June 16, 2021 |
H301048: Request for Internal Advice Regarding Deductions from Entered Value of Softwood Lumber; Countervailing Duties; Anti-Dumping Duties
| Ruling: (1) ADD/CVD are allowed to be deducted from the invoice value at the time of entry if they are part of the invoice amount and they are separately identified. (2) ADD/CVD are allowed to be deducted from the entered value via a PSC, but the ADD/CVD must be separately identified. (3) The importer must show in clear detail on the invoice or on an attached statement the computation of all deductions from total invoice value, such as the non-durable charges, and all additions to invoice value which have been made to arrive at the aggregate entered value. In addition, the entered unit value for each article on the invoice must be shown where it is different from the invoiced unit value. (4) While the non-dutiable charges and calculations may be provided on the CF 7501, if the non-dutiable charges are only provided on the CF 7501 and the documentation required by the regulations is not provided at entry summary, the CEE or port may certainly request the information required and the importer should be able to provide it without delay. (5) The deduction is limited to the extent to which the amount of the actual duty paid is included in the invoice price paid by the buyer. In other words, if the estimated duties included in the invoice price are greater than the actual duties assessed, an importer may only deduct the actual duties it pays. |
| Issue: (1) Whether ADD/CVD are allowed to be deducted from the invoice value at the time of entry. (2) Whether ADD/CVD are allowed to be deducted from the entered value via a PSC.(3) Whether specific dollar amounts need to be identified on documents between the parties or is generic wording, such as, “the invoice total includes the following charges: customs brokerage, and whenever applicable, CVD and Anti-Dumping Duties” acceptable. (4) Whether ADD/CVD needs to be identified separately on the invoice between the U.S. buyer and the foreign seller, or may it be identified on any document such as one between the foreign seller (acting as importer of record) and the customs broker. Whether identifying the ADD/CVD separately on the CF 7501 is sufficient. (5) With regard to entries in which ADD/CVD deductions are allowed from the invoice price under transaction value, if the Department of Commerce issues a liquidation rate which is different than the estimated rate in effect at the time of entry, whether such entries are subject to changes to their entered values and, if yes, whether CBP is responsible for editing the entries or it falls to the importer to file a protest after liquidation. |
| Item: Hundreds of Post Summary Corrections (PSCs) for value changes for entries of softwood lumber from Canada involving foreign importers of record who used Delivered Duty Paid (DDP) terms of sale. These PSCs involve either a claim that anti-dumping/countervailing duties (AD/CVD) were inadvertently not deducted from the entered value at the time of entry, or the type 03 entry had either anti-dumping duties (ADD) or countervailing duties (CVD) declared at time of entry, but was missing the other related case. The PSCs result in the submission of the ADD or CVD and a reduction in the entered value as a result of a deduction of these additional duties. The representative entry at issue involves the filing of a PSC claiming that ADD was inadvertently omitted at the time of entry. CVD was declared at the time of entry and deducted from the invoice value. |
| Ruling Date: May 26, 2021 |
H317062: Application for Further Review of Protest 2809-20-107150; U.S. – Israeli Free Trade Agreement; Tahini; Double Substantial Transformation
| Ruling: ADD/CVD are allowed to be deducted from the invoice value at the time of entry if they are part of the invoice amount and they are separately identified. ADD/CVD are allowed to be deducted from the entered value via a PSC, the answer is also yes. On June 24, 2011, the General Notice, “Post-Summary Corrections to Entry Summaries Filed in ACE Pursuant to the ESAR IV Test,” was published. See 76 Federal Register 37136. Clearly, PSCs for ADD/CVD were contemplated as PSCs for these duties are discussed in the notice. However, just as when ADD/CVD deductions from the transaction value price are claimed at entry, when claimed through a PSC, the ADD/CVD must be separately identified. |
| Issue: Whether the raw sesame seeds processed as described above are subject to a double substantial transformation in Israel so that the value of the raw sesame seeds may be considered in calculating the Israeli value content for purposes of meeting the 35 percent value content requirement of the ILFTA. |
| Item: Tahini produced in Israel from raw sesame seeds, in their shells, which are purchased from an Israeli supplier; however, the sesame seeds are grown in Uganda. In Israel, the sesame seeds are cleaned and hulled (i.e., chaffed and de-shelled), and then roasted. The roasting involves the use of seven roasting ovens and takes nearly two hours. The roasting process reduces the moisture content of the sesame seeds from 23 percent to less than 1 percent. After roasting, the sesame seeds are ground by specialized industrial grinding machines (both a coarse grinder followed by a fine grinder) into finished tahini. The finished tahini is then packaged, labeled and exported to the United States from Israel. |
| Reason: In order to meet the 35 percent value requirement, the value of the sesame seeds would need to be included in the calculation. However, the value of the sesame seeds may be included in the required value calculation only if the sesame seeds undergo a double substantial transformation in Israel. They do not. Cleaning, hulling and roasting the sesame seeds do not result in a substantial transformation and the origin of the roasted sesame seeds remains Uganda, i.e., the origin of the raw sesame seeds. |
| Ruling Date: May 21, 2021 |