HQ 0544628 - Transaction Value of Imported Merchandise Subject To A Price Renegotiation After Exportation - United States International Trade Commision Rulings

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HQ 544628

March 11, 1992
VAL CO:R:C:V 544628 ML

CATEGORY: VALUATION

Area Director, JFK
New York, New York

RE: Transaction Value of Imported Merchandise Subject To A Price Renegotiation After Exportation

Dear Sir:

This is in response to a memorandum, dated December 28, 1990, regarding file APP-2-K:C:B5 MP, forwarded from your office. We met with counsel for the importer on April 11, 1991, and received additional submissions on April 19, 1991, May 10, 1991, and November 5, 1991. The issue for our review is the appraisement of imported merchandise subject to a price renegotiation after the date of exportation.

FACTS:

The facts, as stated by counsel for the importer in a memorandum, dated December 5, 1990, are that Louise Paris Ltd, (hereinafter referred to as the "importer"), imported ladies wearing apparel from a manufacturer in Taiwan, (hereinafter referred to as the "manufacturer"). The date of exportation agreed on by the parties was February 1, 1990. The letter of credit expired on February 22, 1990. The merchandise was shipped (exported) in bond to New Jersey on October 4, 1990 and arrived in the United States on October 22, 1990. Upon notification by the manufacturer that the merchandise was exported, the importer notified it's bank to refuse payment. Rather than repudiate the contract, the importer negotiated with the manufacturer, seeking a 40% reduction in the invoiced price and allegedly agreeing to a 25% reduction of the invoiced purchase price on October 22, 1990, the day the merchandise arrived in the United States. Entry was made on October 29, 1990. Counsel for the importer stated that the renegotiation of the purchase price was arrived at after the date of exportation, but prior to importation of the merchandise. The merchandise was entered based on the pre-shipment invoices.

ISSUE:

Whether transaction value was the appropriate basis of appraisement for the imported merchandise, and if so, what was the "price actually paid or payable" for the imported merchandise when sold for exportation to the United States.

LAW AND ANALYSIS:

The basis of appraisement used in connection with this merchandise was transaction value. Transaction value, the preferred method of appraisement, is defined in section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. 1401(b)) as "the price actually paid or payable for the merchandise when sold for exportation to the United States", plus certain enumerated additions not relevant here (emphasis added). The term "price actually paid or payable" is defined in section 402(b)(A) of the TAA as:

...the total payment (whether direct or indirect...) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller.

In determining transaction value, a sale for exportation to the United States must take place at some unspecified time prior to the exportation of the merchandise. If the sale for exportation does not take place prior to the export of the goods, transaction value is inapplicable as a means of appraisement. In Headquarters Ruling Letter (HRL) 543868, dated March 5, 1987, the parent company of the importer purchased merchandise from China National Metals and Minerals Import and Export Corp. (China National). The terms of sale were CIF New Orleans. The merchandise was shipped (exported) in October 1981, and arrived at New Orleans on January 29, 1982. While the merchandise was in transit, the parent company sold the merchandise to the importer. Based on the evidence presented, Customs held that the "sale for exportation" to the United States was the sale between China National and the parent company.

In the instant case, the merchandise was sold for exportation to the United States by the manufacturer to the importer. While a term of the contract between the parties may not have been met, i.e., the delivery date, a sale for exportation nonetheless occurred, as the contract was not repudiated. (See HRL 543609, dated October 7, 1985, wherein we held that merchandise which did not meet contractual terms requiring visas for entry were not considered to be "defective goods." This ruling also held that a post-importation price reduction was not considered in determining the price actually paid or payable).

Having concluded that there was a sale for exportation to the United States, we must determine what the "price actually paid or payable" was when the merchandise was sold. In the case at bar, the price actually paid or payable is represented by the invoices submitted to Customs which represent the original contract price. Those invoiced prices were the prices in effect when the merchandise was sold for exportation to the United States. The importer and the manufacturer's renegotiated price of 25% less than the invoiced value of the merchandise was subsequent to exportation.

In HRL 543014, dated February 15, 1983, a seller failed to deliver merchandise to a buyer on a specified delivery date, and the contract for the merchandise provided for a reduction in the invoice price of the goods prior to their shipment. Customs found that the reduced price became the price actually paid or payable for the imported merchandise.

In the instant case, counsel for the importer has not submitted a contract between the parties relating to the merchandise which reduced the price in the event of late delivery. We can only conclude that there was nothing in the agreement between the parties which allowed for a price reduction due to the manufacturer's late delivery. Here, the price was not reduced prior to exportation so the 25% discount will be disregarded in determining transaction value.

HOLDING:

Based upon the information available and viewed in it's entirety we believe transaction value was the appropriate basis of appraisement for the imported merchandise and that the price actually paid or payable for the imported merchandise when sold for exportation was the original invoiced amounts.

Sincerely,

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