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HQ 544352

July 12, 1990

VAL CO:R:C:V 544352 ML

CATEGORY: VALUATION

Area Director
JFK Airport
New York, New York 10048-0945

RE: Application for Further Review of Protest No. 1001-8-008353

Dear Sir:

This protest and application for further review was filed against your appraisement decision in the liquidation of various distributor. The merchandise was manufactured in Sri Lanka by -- -------------s. The merchandise was appraised pursuant to section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. 1401a(b)).

FACTS:

The merchandise in question is men's shorts and belts. The ----d (hereinafter referred to as "manufacturer"). Orders for Lanka corporation, (hereinafter referred to as the "importer") by distributor"). After several failures by the importer in delivering merchandise to the U.S. distributor, the distributor cancelled it's order with the importer. The importer then shipped a portion of the order, on his own, to the United States, whereupon he asked the U.S. distributor to aid in it's disposal. The importer then sold the merchandise to the U.S. distributor for $35,000 less certain expenses. Pursuant to section 402b of the TAA, the transaction value of the merchandise was used for appraisement purposes.

ISSUE:

(1) Whether transaction value was the proper basis for the appraisement of the imported merchandise.

LAW AND ANALYSIS:

The issue involves whether transaction value was properly used to appraise the imported merchandise. The transaction value of imported merchandise is defined in section 402(b) as "the price actually paid or payable for the merchandise when sold for exportation to the United States," plus amounts for the items enumerated in section 402(b)(1). The term "price actually paid or payable" is defined in section 402(b)(4)(A) as:

...the total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller.

Therefore, the "price actually paid or payable" must be derived from an actual sale. The word "sale" generally is defined as a transfer of ownership in property from one party to another for a price or other consideration. See J.L. Wood v. United States, 62 CCPA 25, C.A.D. 1139 (1974), and J.H. Cottman & Co. v. United States, 20 CCPA 344, T.D. 46114 (1932).

In the factual situation under consideration, it is clear that the distributor and the importer entered into an agreement to purchase men's wearing apparel. It is also clear that the importer failed to make delivery at the contracted for delivery date and subsequent extensions were granted by the distributor. The distributor asserts that the contract was ultimately canceled and that the importer imported the merchandise on his own behalf, only to later request that the distributor aid in its' disposal. No documentation establishing cancellation by the distributor has been submitted. The distributor argues that the letter of credit number 219376 requires shipment no later than January 15, 1987 which they changed to permit shipment before March 31,1987. However, the same documentation states that the negotiation date with the importer was extended to April 21, 1987, the date on which the merchandise was ultimately shipped. It is, therefore, unclear that the importer shipped the merchandise on his own behalf, as the protestant asserts. It should be mentioned that no information regarding the relationship between the manufacturer and the importer has been submitted, and while transaction value is the preferred method of appraisement, specific limitations on it's use occurs when the parties are related (section 402(b)(2)(B) of the TAA). For purposes of this decision, it is assumed that there was no legal impediment to transaction value based on any relationship between the parties.

It is worth mentioning, that even if the distributor had submitted documentation that supported their contention that a sale was never consummated between the parties prior to the merchandise being "sold for exportation to the United States," the merchandise at issue would not necessarily be appraised using the deductive value. The next basis of appraisement under the TAA, in order of statutory precedence, is the previously-accepted transaction value of identical merchandise exported to the United States at or about the same time as the instant merchandise. If identical merchandise cannot be found or an acceptable transaction value for such merchandise does not exist, then the applicable Customs value is the previously-accepted transaction value of similar merchandise exported to the United States at or about the same time as the merchandise being valued. The determination as to whether identical or similar merchandise exists is up to the appropriate import specialist. In the instant case, the import specialist states that the transaction value of similar merchandise does exist and should be used for appraisement purposes.

HOLDING:

From the evidence submitted, the protestant has not satisfactorily established that the original contract was canceled prior to the exportation to the United States of the merchandise under appraisement. If this fact had been clearly established, and transaction value found to be inapplicable as the basis for appraisement, the next basis for appraisement, in order of statutory preference, would have been that of identical or of similar merchandise and appraisement under deductive value would have been inappropriate.

The protest should be denied. A copy of this decision should be attached to the Form 19, Notice of Action, to be sent to the protestant.

Sincerely,

John Durant, Director
Commercial Rulings Division

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