HQ 0543892 - Internal Advice Request No. 76-86 - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1990 HQ Rulings > HQ 0220042 - HQ 0544048 > HQ 0543892

HQ 543892

March 10, 1988

CLA-2 CO:R:CV:V 543892 EK

CATEGORY: VALUATION

District Director of Customs
Minneapolis, Minnesota 55401

RE: Internal Advice Request No. 76-86

Dear Sir:

This is in reference to Internal Advice Request No. 76-86 initiated on behalf of a certain company (hereinafter referred to as importer), regarding the proper valuation of merchandise pursuant to section 402(b), Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C.

FACTS:

The entries in question occurred between November 1, 1984, and January 15, 1985, and were entered pursuant to computed value, section 402(e) of the TAA. The entry documents submitted to Customs included visaed invoices which indicated an inflated value in order to enable the foreign seller to obtain free quota in Taiwan. At the time, the importer advised Customs that the price information on the visaed invoice was not that which was agreed to between the parties. Copies of import contracts reflecting the actual agreed upon prices were submitted. The difference between the prices on the visaed invoice and the actual prices were reimbursed to the importer.

Customs allowed the importer to make entry at the actual contract price rather than the amount indicated on the visaed invoice. Reconciliation and copies of the cancelled checks received by the importer as reimbursement for the overpayments were received by Customs. However, final liquidation of the entries was to be delayed pending an audit by Customs.

Prior to ordering the merchandise, the importer discussed the effect of the rebate situation with Customs in Minneapolis. At that time, the rebate scenario as outlined above was governed
by Internal Advice 184/81 which indicated that transaction value was not applicable in appraising these entries. Apparently, there existed no transaction value of identical or similar merchandise; therefore, the importer elected computed value as a means of appraisement. The importer agreed to supply the correct figures subsequent to entry.

Subsequently, C.S.D. 85-15 dated September 13, 1984, was issued by this office which stated that in a situation such as that described above, transaction value was in fact applicable in appraising the merchandise. This issuance of this ruling occurred subsequent to the importer meeting with Customs representatives, but prior to entry of the merchandise. Basically, the ruling held that where payment of the original agreed-upon contract price for merchandise is made by payment of a higher invoice price with a subsequent rebate to the importer by the seller, the original agreed-upon price represents the "price actually paid or payable" pursuant to section 402(b) of the TAA.

On September 16, 1985, Customs Headquarters issued C.I.E. 13/85 which limited the evidence which is acceptable as proof of the rebate transactions to direct payments from a seller to an importer. A reimbursement to an importer through the account of a subsidiary of the seller was deemed to be an indirect payment and not acceptable as proof that the "price actually paid or payable" was less than the amount stated on the commercial invoice or visa. The instructions in the ruling were to be applied to entries on which liquidation had not become final.

ISSUE:

Whether the entries should be liquidated as entered, i.e., pursuant to computed value, or if transaction value is applicable, then whether the rebate should be considered in determining the "price actually paid or payable."

LAW AND ANALYSIS:

As indicated above, the entries which are the subject-matter of this Internal Advice request occurred between November, 1984, through January, 1985. At that time, the Customs directive regarding acceptable evidence of proof of rebates had not been issued. The accepted practice at the time of the entries was to appraise the merchandise pursuant to transaction value, i.e., the "price actually paid or payable", taking into account the rebate from the seller to the importer. The instructions regarding the definition of direct payments had not been issued. The importer was receiving a rebate from the
subsidiary of the seller. However, at the time, Customs was accepting these transactions, i.e., appraising pursuant to transaction value with the "price actually paid or payable" at the invoiced amount, less the subsequent rebate. In fact, Customs had approved the reimbursement method employed between this specific importer and seller, that is, the rebate from the seller's subsidiary to the importer. It was not until the subsequent audit and the change in position by Customs regarding the accepted method of reimbursing the importer for the "overpayment" did such become an unacceptable practice.

As indicated above, C.I.E. 13/85 regarding acceptable proof of rebates states that " . . . the instructions in this memorandum should be applied to all entries on which liquidation has not become final. "

In this case, the Import Specialist involved has indicated that he is satisfied that the rebates are in fact traceable, and readily accountable. This fact, coupled with Customs approval of the method in which the transaction was structured, mandates that the entries be liquidated pursuant to transaction value, that is, the invoiced price less the subsequent rebate. At the time of the entries, transaction value was applicable and the "price actually paid or payable" should have been equal to the invoiced amount less any subsequent rebates. The importer relied upon the approval of Customs regarding the rebates. Moreover, the instructions regarding unliquidated entries uses the term "should be" rather than "shall be".

Given the facts and circumstances of this particular case as a whole, retroactive application of C.I.E. 13/85 would be inequitable.

Please note that T.D. 86-56 dated March 6, 1986, eliminated the practice of invoicing at a higher price with a subsequent rebate from the seller to the buyer to arrive at the agreed-upon contract price.

HOLDING:

The entries should be liquidated pursuant to transaction value, section 402(b) of the TAA. The appraisement method should be governed by C.S.D. 85-15 dated September 13, 1985 (Headquarters Ruling No. 543358), which held that the original agreed-upon price between the parties represents the "price actually paid or payable" pursuant to section 402(b) of the TAA. This takes into account the subsequent rebate made by the seller of the merchandise, through its subsidiary, to the buyer.

This conclusion is limited to these particular entries and to this factual scenario. Moreover, pursuant to T.D. 86-56 dated March 6, 1986, Customs no longer accepts documentation with respect to imported merchandise which contains inconsistencies in price or value information.

Sincerely,

John Durant

Previous Ruling Next Ruling