HQ 0544048 - Valuation and admissibility of shirts - United States International Trade Commision Rulings

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HQ 544048

February 22, 1988

CLA-2 CO:R:CV:V 544048 EK

CATEGORY: VALUATION

Robert L. Eisen, Esquire
Coudert Brothers
200 Park Avenue
New York, New York 10166

RE: Valuation and admissibility of shirts

Dear Mr. Eisen:

This is in response to your inquiry of September 30, 1987, regarding the valuation and admissibility of merchandise imported by your client.

FACTS:

You state that your client (importer) intends to purchase shirts, which are manufactured in the Philippines, from an unrelated Hong Kong company (seller). The purchase price for the shirts will be $46.50 per dozen, FOB the Philippines. The Hong Kong seller has purchased the shirts from the Philippine manufacturer, and has obtained a visaed invoice indicating that sales price to the Hong Kong seller as $80.00 per dozen. The seller and the importer are not related within the meaning of section 402(g) of the Tariff Act of 1930, as amended by the Trade Agreements Acts of 1979 (TAA; 19 U.S.C. 1401a(g)). You indicate that in some cases, the Hong Kong seller and the Philippine manufacturer are related.

ISSUE:

Whether the entry documentation is either erroneous or inconsistent so as to warrant their rejection pursuant to T.D. 86-56.

LAW AND ANALYSIS:

The pertinent T.D. precludes the acceptance, by Customs, of entry documents in connection with the importation of merchandise which contain inconsistencies or erroneous information. In such
circumstances, the entry documentation is not accepted and is returned to the importer for correction. Subsequent to the issuance of this T.D., instructions implementing the T.D. were issued by this office (Headquarters Ruling No. 543731 dated May 1, 1986). The instructions indicated that if an importer provides an acceptable explanation for differences in the price or valuation information contained in visaes and invoices, then the entry may be accepted by Customs. Several examples were listed which set forth acceptable scenarios in light of T.D. 86-56. As one example, Customs stated as follows:

U.S. importer I contracts with exporter E located in country A to buy widgets at $10 each. E subcontracts with manufacturer M in country B to actually produce the widgets, and to sell them to E for $8 each. A visa is obtained by M from the government of the country of origin quoting a price of $8 per widget. However, both the commercial invoice from E to I and the consumption entry filed by I cite a price of $10 per widget.

The above-cited example pre-supposes that the sale between the manufacturer and the seller is a bona fide one, and that the subsequent resale from the seller to the U.S. importer is a bona fide sale. The pricing between the parties is logical and completely consistent with commercial realities. The seller and the importer are not related within the meaning of section 402(g) of the TAA.

With respect to the instant case, there are two sales involved in the transaction. The visaed invoice obtained from the Philippine government allegedly covers the sale from the Philippine manufacturer to the Hong Kong seller. The commercial invoice submitted to Customs by the importer represents the transaction as between the Hong Kong seller and the importer.

The pricing between the Philippine manufacturer and the Hong Kong seller is obviously, on its face, questionable. This is a prospective ruling request; therefore, the possibility that the Hong Kong seller made an unprofitable deal and is selling the goods at a loss in order to relieve himself of the goods is not likely.

The information which the importer intends to submit at the time of entry is, on its face, inconsistent. The explanation that the Hong Kong seller is purchasing the goods at a higher price than that which it sells to the importer is not reasonable and is not in accordance with commercial reality.

The importer has the burden of establishing that the entry documentation is accurate in all respects and that it is in compliance with the entry laws. If there are inconsistencies or differences in the information submitted, the importer must adequately explain such inconsistencies.

In submitting the two invoices which are patently inconsistent with no reasonable explanation in accordance with the instructions regarding T.D. 86-56, the importer has not complied with 19 U.S.C. 1481(a)(5) which states:

All invoices of merchandise to be imported into the United States shall set forth . . . [t]he purchase price of each item . . . .

As indicated above, absent a reasonable explanation, the documentation with respect to the entries must be rejected.

HOLDING:

In view of the foregoing, the entry documentation with respect to the shipment will be rejected as being inconsistent or erroneous within the meaning of T.D. 86-56.

Sincerely,

John Durant

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