CBP Rules Against Use of Transaction Value for Reclaimed Wafer Imports

An importer of "reclaimed" silicon wafers is right to use computed value, not the transaction value, for appraisement purposes, CBP ruled in response to an internal advice request (here). The internal advice request from the Port of Portland involved Shin-Etsu Handotai America (SEHA) in relation to a Focused Assessment of the company. Located in Vancouver, Washington, SEHA is a subsidiary of Shin-Etsu Handotai in Japan and makes silicon wafers to sell to semiconductor manufacturers, said CBP.

Questions about how to appraise the transactions came up within a 2010 focused assessment, said CBP. Among SEHA's services is to reclaim wafers that were either rejected or used for testing for potential reuse of the wafers, said CBP. "Both rejected and testing wafers must be reclaimed in order to become useful to the customer," said CBP. The company sought internal advice in 2014 on appraisement and asserted that transaction value isn't applicable because "the price paid or payable for the reclaimed wafers only represents the cost of the reclaiming service and does not include the value of the finished merchandise." The port disagreed and said that SEHA had not "not sufficiently eliminated the transaction value of identical or similar merchandise.”

The actual reclamation is done by a Mimasu Semiconductor Industry Co. of Japan, CBP said. "The price for the reclamation is agreed upon by a negotiation between Mimasu and SEHA’s customers," said CBP. That price is negotiated for each customer, rather than a set price, because each customer has "different needs and the cost of reclamation varies depending on the specific technical requirements," it said. "Mimasu ships finished reclaimed wafers directly to SEHA’s customers and SEHA acts as the importer of record for a vast majority of the transactions." According to the port "there is insufficient information to show that Mimasu makes an independent profit sufficient to establish that it is an arm’s length transaction.”

While SEHA claimed that the unique nature of reclamation make transaction value based on identical or similar merchandise impossible, CBP said that the process isn't as unique as the company claimed. Still, such values must be "previously identified and accepted," it said. "As this information is not easily identified" by the port, "we find that the reclaimed wafers cannot be appraised using transaction value of identical merchandise or similar merchandise," the agency said.

The next best appraisement method would be based on "the market value of the scrap wafers and the costs incurred by Mimasu during the reclamation process," said CBP. That method also poses problems, since SEHA isn't "comfortable" with providing figures that "may be difficult to quantify" for Mimasu's production costs, SEHA told CBP. The company also suggested it uses the "value of the reclamation service agreed upon between Mimasu and the customer as the amount for profit and general expenses," though noted that Mimasu hasn't been forthcoming in response to requests for similar information. "Based on the totality of information presented, we find that SEHA may use computed value as an appropriate basis of appraisement, provided the necessary information can be obtained," the agency ruled.

SEHA should use the deductive value when it's unable to get the necessary data from Mimasu, CBP said. Although SEHA said it can't use the deductive value "because there is no retail value for the reclaimed wafers from which to make the appropriate deductions," CBP pointed to annual industry reports on the worldwide wafer reclaim market and said "SEHA has not sufficiently eliminated deductive value as an appropriate basis of appraisement.”