HQ 0544292 - Decision on Application for Further Review of Protest No. 3801-6-001165 - United States International Trade Commision Rulings

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HQ 544292

February 21, 1989

CLA-2 CO:R:CV:V 544292 VLB

CATEGORY: VALUATION

District Director of Customs
Detroit, Michigan 48226-2568

RE: Decision on Application for Further Review of Protest No. 3801-6-001165

Dear Sir:

This protest was filed against your decision in the lumber distributor (hereinafter referred to as the "distributor"). The merchandise was appraised pursuant to sections 402(b) and (c) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (19 U.S.C. 1401a(b) and

FACTS:

The merchandise in question is waferboard (particle board) that is manufactured in Canadian mills. The valuation of Canadian waferboard is the subject of numerous protests arising out of the various importers' manner of doing business. In this case the distributor sold the merchandise to Carter Stores (hereinafter referred to as the "U.S. purchaser"), a party related to the distributor under section 402(g) of the TAA.

The import specialist has provided an explanation of the method of appraisement. He states that he considered the sale between the distributor and the related U.S. purchaser to be the sale that most directly caused the merchandise to be exported to the U.S. Then, due to the fact that the distributor/U.S. purchaser sale was a related party transaction, the import specialist examined whether the relationship between the parties influenced the price of the merchandise. Specifically, he compared the distributor/U.S. purchaser sales to other distributor's sales to unrelated U.S. purchasers. If the price
of the related sale approximated the price in the unrelated sales, the distributor's price was accepted.

On the other hand, if there was not a close approximation between the prices, the imported specialist concluded that the relationship had influenced the price of the merchandise. As a result, these entries were appraised under section 402(c) of the TAA, transaction value of identical or similar merchandise. The appraisements were based on sales of similar merchandise by unrelated distributors, less nondutiable charges.

The distributor contends that the merchandise should be appraised under section 402(b) of the TAA. The distributor further alleges that the transaction value for the merchandise is the price the distributor paid the Canadian manufacturer for the goods. The distributor states that the terms of sale between it and the manufacturer are "F.O.B. Mill". The merchandise is then shipped to a reload center in Windsor, Canada "for redistribution and export into the United States".

In addition, according to the distributor, the pro forma invoices submitted to Customs contain prices that represent the cost of the merchandise delivered to the reload center plus a handling charge for the reload center. That is, when the distributor receives the waferboard at the reload center, the actual invoice price of the material (F.O.B. mill), the actual freight in U.S. funds paid to the Canadian railway companies, and the handling charge paid to the reload center are entered. The distributor's computer then computes a daily average cost of material at that point.

Subsequently, the distributor shows this average amount on the pro forma invoices. Then, the rail freight is deducted to arrive at an average mill price for the merchandise. The distributor notes that the average mill price is slightly higher than it originally pays the manufacturer because the freight charges from the nearest mill are deducted on all pro forma transactions.

ISSUE:

Whether transaction value is the proper method of appraisement for the merchandise.

LAW AND ANALYSIS:

The first issue involves what appraisement method should be used to determine the value of the merchandise for duty purposes. Transaction value, the preferred method of appraisement, is defined in section 402(b) of the TAA as the "price actually paid or paid or payable for the merchandise when sold for exportation to the United States. . ." (emphasis added). In Headquarters Ruling 554998 dated January 24, 1989, we held that if the documentation shows that the distributor invoiced its customer at the time the merchandise is exported from the reload center, or shortly thereafter, transaction value is the proper method of appraisement. Moreover, the transaction value is the price that the U.S. customer paid to the distributor for the merchandise.

In the present case, the import specialist initially determined that the price that the U.S. customer paid for the merchandise was the proper transaction value. The distributor has failed to present any evidence, e.g. commercial invoices, that indicates that the import specialist was incorrect.

The import specialist then examined the acceptability of the transaction value because the distributor and the U.S. customer were related parties. Section 402(b)(2)(B) states the following:

The transaction value between a related buyer and seller is acceptable . . . if an examination of the circumstances of the sale of the imported merchandise indicates that the relationship between such buyer and seller did not influence the price actually paid or payable;. . .

In determining whether the relationship between the parties influenced the price of the goods, the buyer and the seller must prove that although they are related, they buy and sell from one another as if they are not related. There are two methods for ascertaining whether the transaction value is acceptable. The first method involves an examination of the circumstances of sale of the imported merchandise to determine if the relationship between the buyer and the seller influenced the price actually paid or payable. The second method involves using a series of test values as a basis of comparison to the transaction value. If the transaction value closely approximates any one of the test values, it will be accepted.

In this case, the import specialist used the second method to determine whether the transaction value was acceptable. As discussed previously, in some entries the transaction value closely approximated the test values and was accepted. However, in many entries the transaction value was unacceptable.

The distributor has not provided any evidence that shows that Customs incorrectly eliminated transaction value as the proper appraisement method. In addition, the distributor has failed to proffer any evidence that the transactions used to appraise the merchandise did not meet the requirements of section 402(c) of the TAA, e.g. different quantities. Therefore, we hold that Customs appraisement of the merchandise was proper.

HOLDING:

Transaction value is the proper method of appraisement in the entries where the price actually paid or payable closely approximates the test values. In those cases, the transaction value is the price that the U.S. customer paid the distributor for the merchandise.

Transaction value is an unacceptable method of appraisement in the entries where the price actually paid or payable did not closely approximate the test values. In those entries, the proper method of appraisement is under section 402(c). The appraisements should be based on previously accepted transaction values for sales between another U.S. purchaser and an unrelated distributor for identical or similar merchandise.

You are directed to deny the protest. A copy of this decision should be attached to Form 19, Notice of Action, to be sent to the protestant.

Sincerely,

John Durant, Director,
Commercial Rulings Division

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