HQ 0544630 - Global Apparel Corporation; definition of related party; 19 U.S.C. 1401(g)(1) - United States International Trade Commision Rulings

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HQ 544630

April 15, 1992

VAL-CO:R:C:V 544630 GG

CATEGORY: VALUATION

Leonard L. Rosenberg, Esq.
Sandler, Travis & Rosenberg, P.A.
The Waterford
5200 Blue Lagoon Drive
Miami, Florida 33126-2022

RE: Global Apparel Corporation; definition of related party; 19 U.S.C. 1401(g)(1)

Dear Mr. Rosenberg:

This is in response to the ruling request, dated January 18, 1991, which you made on behalf of your client, Global Apparel Corporation ("Global"). The request asks for confirmation that Global is not related, as defined by the Customs valuation law, to Inducol Ltda. ("Inducol"), the Colombian manufacturer/assembler of the wearing apparel imported by Global.

FACTS:

The facts, as presented by you, are that Global, a wholesaler of wearing apparel, imports garments under heading 9802, Harmonized Tariff Schedule of the United States, from Inducol of Colombia. Global is a Florida corporation, owned by xxxx xxxxx. It negotiates the prices for assembly and other operations directly with Inducol personnel; it has no direct or indirect control or ownership in Inducol, and neither it nor its stockholders, officers, directors or employees own, directly or indirectly, any stock in the Colombian company.

Inducol was purchased by two Japanese companies, Tishan Industries A.V.V. and Fujimara Industries A.V.V., on December 3, 1990. Before that time, the shares of the company had been owned by two trusts, the beneficiaries of which were the children and grandchild of xxxx xxxxxxxxxx. xxxx xxxxxxxxxx was the trustee of one trust and her son, xxxxxx xxxxxxxxxx, xxx, the trustee of the other. Neither the trusts, the trustees, nor the beneficiaries have any remaining ownership or control, either directly or indirectly, in Inducol; they also are not (with possibly one exception, which will be discussed later) employees of Inducol, and have no knowledge of the current books, operating expenses, or other economic data concerning Inducol. Similarly, the Japanese owners of Inducol have no interest, control or direction over Global.

As part of the purchase agreement for Inducol, xxxx xxxxxxxxxx, who was general manager of Inducol, agreed to travel to Colombia to assist the new general manager and to facilitate the transition from one ownership group to another. She was to receive no compensation for this assistance, which was to be offered for approximately one year. Under this arrangement, xxxx xxxxxxxxxx was "totally at the whim of the new owners", who could ask her to leave at any time.
xxxx xxxxxxxxxx is also a salaried employee of Global. Her daughter, xxxxx x. xxxxxxxxxx, works there too. At the time of this ruling request, xxxxx xxxxxxxxxx and her sister xxxxxx were in the process of acquiring a majority stock ownership in Global. xxxx xxxxxxxxxx has no stock ownership in Global.

Tishan Industries A.V.V. and Fujimara Industries A.V.V., Inducol's new owners, are aware of xxxx xxxxxxxxxx'x employment by Global. xxxx xxxxxxxxxx reportedly does not assist Inducol in any way in the setting of prices for production or assembly of Global's work or for any other work performed by Inducol.
xxxx xxxxxxxxxx is part owner of another company, Sumar Inc. ("Sumar"), which used to import apparel produced by Inducol. Sumar no longer imports. At the time of its previous importations, Sumar always declared itself related to Inducol due to the then overlapping control of the producer and the importer.

ISSUE:

Whether Global, the buyer, is related to Inducol, the seller, as defined by Section 402(g)(1) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19

LAW AND ANALYSIS:

The primary method of customs valuation for imported merchandise is transaction value. The transaction value of imported merchandise is the price actually paid or payable for the merchandise when sold for exportation, plus amounts for certain items enumerated in Section 402(b)(1) of the TAA. The transaction value may be subject to special scrutiny and possible rejection in cases involving related parties. Section 402(g)(1) of the TAA defines related parties as follows:

(g)(1) For purposes of this section, the persons specified in any of the following subparagraphs shall be treated as persons who are related:

(A) Members of the same family, including brothers and sisters (whether by whole or half blood), spouse, ancestors, and lineal descendants.

(B) Any officer or director of an organization and such organization.

(C) An officer or director of an organization and an officer or director of another organization, if each such individual is also an officer or director in the other organization.

(D) Partners.

(E) Employer and employee.

(F) Any person directly or indirectly owning, controlling, or holding with power to vote, 5 percent or more of the outstanding voting stock or shares of any organization and such organization.

(G) Two or more persons directly or indirectly controlling, controlled by, or under common control with, any person.

From the facts presented, it appears that Global and Inducol, which are corporations, are not "members of the same family". Neither party is an officer or director of the other organization, and Global and Inducol are not officers or directors of their own corporations who are also officers or directors of the other. They are not partners. And while it can be argued that xxxx xxxxxxxxxx was an employee of both Global and Inducol during the period in which she offered assistance to Inducol (although her status at Inducol was probably that of an independent contractor rather than employee), the law does not consider two companies having the same employee to be related.

When Inducol was sold to the two Japanese companies, the xxxxxxxxxx trusts were divested of any ownership or control in Inducol. Therefore Global, in which xxxxx and xxxxxx xxxxxxxxxx have acquired or are in the process of acquiring a majority interest, does not directly or indirectly own, control, or hold with power to vote, 5 percent or more of the outstanding voting stock or shares of Inducol, or vice versa. Finally, there is no evidence that Global and Inducol control, are controlled by, or are under common control with, any person.

In summary, Inducol and Global are not related as defined by the customs valuation law. This result is reached based on the facts as presented by the importer's counsel; should the facts turn out to be otherwise, then in accordance with 19 CFR 177.9(b)(1), this ruling will have no applicability and may be subject to modification or revocation.

HOLDING:

Global and Inducol are not related as defined by section 402(g)(1) of the TAA.

Sincerely,

John Durant
Director, Commercial

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