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HQ 544635
May 24, 1991

VAL CO:R:C:V 544635 ML

Category: VALUATION

District Director
Seattle, Washington

RE: Decision on Application for Further Review of Protest No. 3001-6-000149

Dear Sir:

This is in further response to a protest filed against your decision in the liquidation of various entries made by --------- ------------ U.S.A., Inc., a machine tool importer. In response to a previous decision on Application for Further Review of Protest N0. 3001-6-000149, HRL# 544469, dated August 16, 1990, Specialist Kent Barnes submitted additional information, dated February 28, 1991, and file APP-1 SE:C:D KB, dated January 8, 1991, respectfully. Based on the additional information received, this office is satisfied that a bona fide sale of the imported merchandise was made to the distributor and that this sale was to an unrelated party, at the first commercial level after importation. The merchandise was manufactured in Japan by pursuant to section 402(d) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (19 U.S.C. 1401a(d); TAA).

FACTS:

The imports in question are machining centers and other machine tools. These machine tools were manufactured in Japan by Inc. (hereinafter referred to as the "importer"). The manufacturer shipped the merchandise either to the importer who warehoused, serviced, and set a final price for the goods to be charged to the ultimate purchaser in the United States, or to an unrelated distributor.

The protestant asserts that the distributor purchased the machinery from the importer at an "adjusted price" then sold the goods to the ultimate purchaser at a "final price". The protestant states that after the merchandise was sold to the ultimate U.S. purchaser, the distributor deducted an 18% commission from the final price paid, and remitted the remainder to either the importer or to the manufacturer. When the manufacturer was given the entire remainder, it later remitted 3% to the importer.

In contrast to the importer's assertions, your office states that the merchandise was sold to the distributor at the "final" price. The distributor's stated terms were FOB Chicago. The FOB Chicago price was arrived at by the addition of 22% to the invoiced price shown on the commercial invoice between the manufacturer and the importer. You state that this 22% was said to contain an 18% dealer's selling commission that was paid by the manufacturer to the distributor (or deducted from the amount remitted by the distributor to the manufacturer). You also state that you have very little documentation confirming that the final price invoiced to the distributor was paid, and that you have no evidence that a 3% remittance was ever paid.

ISSUES:

(1) Whether the commissions paid are those which are usually paid in connection with sales in the United States and would, therefore, be deductible under deductive value?

(2) Whether the actual costs associated with transportation and insurance are deductible with respect to shipments of merchandise from the place of importation to the place of delivery in the United States?

LAW AND ANALYSIS:

Deductive value, the method of appraisement used in connection with the imported merchandise, is defined in section 402(d)(2)(A)(i) and (ii) of the TAA, as the price at which the merchandise concerned is sold in the condition as imported at or about the date of importation of the merchandise being appraised, sold in the greatest aggregate quantity at or about such date, or before the close of the 90th day after the date of such importation. The unit price at which merchandise is sold in the greatest aggregate quantity is the unit price at which such merchandise is sold to unrelated persons, at the first commercial level after importation. The sales price at that level is then reduced by the following amounts specified under section 402(d)(3)(A) of the TAA:

(i) any commission usually paid or agreed to be paid, or the addition usually made for profit and general expenses, in connection with sales in the United States of imported merchandise that is of the same class or kind, regardless of the country of exportation, as the merchandise concerned;

(ii) the actual costs and associated costs of transportation and insurance incurred with respect to international shipment of the merchandise concerned from the country of exportation to the United States;

(iii) the usual costs and associated costs of transportation and insurance incurred with respect to shipments of the merchandise concerned from the place of importation to the place of delivery in the United States, if such costs are not included as a general expense under clause (i);

(iv) the customs duties and other Federal taxes currently payable on the merchandise concerned by reason of its importation, and any Federal excise tax on, or measured by the value of, such merchandise for which vendors in the United State are ordinarily liable,...

Whether the 3% remittance and the 18% distributor commission are the type usually paid or agreed to be paid in connection with sales in the United States of imported merchandise that is of the same class or kind, regardless of the country of exportation, is a question of fact determined by the appraising officer.

As mentioned above, your office stated that the merchandise was sold to the distributor at the "final" price, whereas the importer alleged that the merchandise was sold to the distributor at an "adjusted" price, which was then sold to the ultimate purchaser and a higher, "final" price. A letter from the importer to Customs, dated April 26, 1985, stated that the price to the distributor was arrived at by adding 22% to the consignee's price, thus setting up an FOB Chicago price. The importer stated that the 22% included import duty, charges for importation, handling charges for the freight forwarder, inland freight from Seattle to Chicago, warehousing charges, rigging charges for shipment, and 18% of dealer's commission. This statement is consistent with the import specialist's summary of the facts.

The import specialist is of the opinion that the 18% commission is an amount usually paid in connection with sales in the United States of this kind of merchandise. As regards the additional 3%, the import specialist had no documentary evidence to support whether this 3% was even paid by the manufacturer to the importer. In fact, the importer stated in the above cited acting as a go-between and did not obtain a commission of any kind. Irrespective of this fact, the importer contended in it's protest that the "3% consignee's commission" should be deducted from the dutiable value under section 402(d)(3)(A)(i) of the TAA.

Given the importer's previous statement that it did "not take any profit such as a sales commission", and the lack of documentary evidence in the file to support finding that a "commission" was paid, we have no evidence or authority to grant this deduction.

The second issue to be addressed is the protestant's contention that no deduction was made for the costs and associated costs of transportation and insurance incurred with respect to shipment of the merchandise from the port of Seattle to the importer's warehouse, or to the distributor's warehouse, as provided by section 402(d)(3)(A)(iii) of the TAA.

Section 402(d)(3)(A)(iii) of the TAA provides that the usual costs associated with U.S. inland freight may be deducted from the price of the merchandise. Where the invoices are clear as to the usual costs associated with U.S. inland freight, the appropriate statutory deductions will be made. In contrast, where the invoices state identical cost figures, regardless of whether the merchandise is being shipped to the distributor or directly to the importer's warehouse, it is unclear as to what is the usual cost and therefore, we do not have sufficient evidence to make this adjustment or to say that the import specialist concerned should have made this adjustment.

HOLDING:

Under the facts provided, we conclude that the 18% commission contained in the selling price to the distributor was the only allowable deduction under section 402(d)(3)(A)(i), given the appraising officer's determination that the commission was of the kind usually paid in connection with sales of this kind in the United States.

Further, since sufficient evidence was not submitted to Customs in this case demonstrating "usual costs", we have no basis for making the adjustment set forth in section

Accordingly, you are directed to grant this protest in part and to deny this protest in part. 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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