HQ 0554998 - Decision on Application for Further Review of Protest No. 3801-6-001205 - United States International Trade Commision Rulings

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HQ 554998

January 24, 1989

CLA-2 CO:R:CV:V 554998 VLB

CATEGORY: VALUATION

District Director of Customs
Detroit, Michigan 48226-2568

RE: Decision on Application for Further Review of Protest No. 3801-6-001205

Dear Sir:

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

FACTS:

The merchandise in question is waferboard (particle board) that is manufactured in Canadian mills. The valuation of Canadian waferboard is the subject of hundreds of protests arising out of the various importers' manner of doing business.

In correspondence dated March 28, 1988, forwarding the protests, the National Import Specialist lists the following three general methods used to sell the merchandise in question:

(1) A Canadian manufacturer sells to a distributor (a Canadian or a U.S. company) for export to the United States, e.g. F.O.B. mill. All documents, including a through bill of lading, show that the merchandise is to be shipped from point of manufacture or origin to the United States port of importation or beyond.

(2) A Canadian manufacturer sells F.O.B. mill to a distributor (a Canadian or a U.S. company) for shipment to a "storage-reload center" located near the border but on
the Canadian side. In turn, the distributor sells the merchandise from the "storage-reload center" to U.S. buyers for export to the United States (F.O.B. "storage-reload center" or duty paid delivered).

(3) A Canadian manufacturer sells to a distributor (a Canadian or a U.S. company) for export to the United States, e.g. F.O.B. mill. All documents, including a through bill of lading, show that the merchandise is to be shipped from point of manufacture or origin to the United States port of importation or beyond. However, the shipment is routed through a "storage-reload center" in Canada. The only thing that happens at the reload center is either a change in the transportation conveyance or a stop over on the way to the United States. There is no change in quantities or destination.

Finally, each of the three methods described may have variations and the details of each transaction may differ slightly. Therefore, we will examine the documentation submitted by each protestant.
In this case, the distributor has submitted documentation for numerous transactions. There are three relevant documents in each transaction: (1) An Entry Summary Form indicating that the distributor is the ultimate consignee and importer of record; (2) A John V. Carr (Broker) Invoice stating that Newman Terminals and Transportation (Reload Center) is the exporter and that the lumber is sold to the distributor but shipped to the distributor's U.S. customer; (3) The Distributor's Invoice to its U.S. customer.

Documents 1 and 2, presented to Customs at the time of entry, contain the price that the distributor paid to the Canadian manufacturer. Document 3 contains the price that the U.S. customer paid the distributor for the merchandise.

You determined that the transaction value of the merchandise was the price the U.S. customer paid the distributor for the merchandise. The distributor argues that the transaction value is the price it paid to the Canadian manufacturer.

ISSUE:

Whether the sale between the manufacturer and the distributor, or the sale between the distributor and its customer, is the price actually paid or payable for the merchandise when it was sold for exportation to the United States.

LAW AND ANALYSIS:

Transaction value, the preferred method of appraisement, is defined in section 402(b) of the TAA as the "price actually paid or payable for the merchandise when sold for exportation to the United States. . ." (emphasis added). Section 101.1(k) of the Customs Regulations (19 CFR 101.1(k)), defines "exportation" as a severance of goods from the mass of things belonging to this country with the intention of uniting them to the mass of things belonging to some foreign country.

In C.S.D. 84-54 and Headquarters ruling 542928 cited as TAA #57, we held:

. . . the transaction to which the phrase `when sold for exportation to the United States' refers, when there are two or more transactions which might give rise to a transaction value, is the transaction which most directly causes the merchandise to be exported to the United States.

Headquarters also issued ruling 543687 dated May 6, 1986, in response to hypothetical questions posed by a lumber industry trade journal. In that ruling we stated the following:

. . . if sales for exportation to the United States actually occur from the border reload point (in Canada), and these sales are the sales that directly cause the merchandise to be exported from Canada, the transaction value would be based upon those sales. (emphasis added)

Finally, on May 22, 1986, Headquarters issued ruling 543746 involving specific waferboard entries. In that case, a U.S. company purchased and imported waferboard products from various unrelated sources in Canada. The terms of sale were "F.O.B. mill". Therefore, the company took title to the merchandise at the mill.

However, the product was shipped to reload centers in Canada where it was stored and consolidated. The company frequently obtained orders for resale of the product to unrelated U.S. purchasers prior to the consolidation at the staging yards.

Relying on ruling 543687, we held that the sale from the company (distributor) to its U.S. customer most directly caused the merchandise to be exported to the U.S.

The facts of the present case are similar, if not identical
to the facts in ruling 543746. These facts fall under your Scenario 2 that was discussed previously. You argue that under this scenario the sale between the mill and the distributor does not cause the goods to be exported to the U.S., but only to be shipped to the storage-reload centers in Canada. You state that the transaction that most directly causes the waferboard to be exported to the U.S. is the sale that occurs at the storage- reload center. Therefore, you conclude that the sale between the distributor and its customer is the sale for exportation to the U.S. and the appropriate appraisement value.

The documents submitted by the distributor in this protest support your conclusion. The invoices presented to Customs indicate that the reload center is the exporter, not the mill. In addition, the date of the distributor's invoice to its customer contains the same date as the date of exportation or a date shortly after exportation. Therefore, we conclude that the merchandise was sold by the distributor at the reload center. This is the sale that severed the goods from the mass of things belonging to Canada with the intent of uniting them with the mass of goods belonging to the U.S. Thus, this sale directly caused the merchandise to be exported from Canada to the U.S. and is the price actually paid or payable under transaction value.

HOLDING:

The facts in this case fall under Scenario 2 that was discussed previously. We hold that in that factual pattern the sale between the distributor and its U.S. customer is the sale that directly caused the merchandise to be exported from Canada to the U.S. Therefore, the amount of that sale is the price actually paid or payable for the goods under transaction value.

The protest should be denied. 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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