HQ 0544643 - Application for Further Review of Protest No. 4909-90- 000131; Appraisement of wrapper tobacco, constructed value, allowable profit - United States International Trade Commision Rulings

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HQ 544643

June 3, 1991

VAL CO:R:C:V 544643 DPS

CATEGORY: VALUATION

District Director
San Juan, Puerto Rico
La Puntilla #1
Old San Juan, PR 00903

RE: Application for Further Review of Protest No. 4909-90- 000131; Appraisement of wrapper tobacco, constructed value, allowable profit

Dear Madam:

The subject protest and application for further review, concerns the appraisement of nine entries of U.S. grown wrapper tobacco, exported to [country of export ] for sorting and stemming, and thereafter returned to the U.S. at the port of San Juan, P.R. The subject entries were made during the period November 23, 1977 through July 3, 1978, and liquidated on June 22, 1990. Similar issues concerning the same parties and identical merchandise are presently before Customs Headquarters on applications for further review of protests (protest no.'s 4909-4-000227 of 11/9/84, and 4909- 4-000292 of 12/26/84) filed at the port of San Juan, P.R.

The subject protest involves merchandise that was entered and liquidated under TSUS item 806.20, dutiable at the column 1 rate provided for in TSUS item 170.15 (stemmed wrapper tobacco). The stemming was performed in [country of export ] by xxxxxxxxxxxx xxxxxxx xxxxxxxxxxx which was a wholly-owned subsidiary ("foreign subsidiary") of the importer, xxxxxxxxxxxx xxxxx xxxxxxxxxxx. The stemmed wrappers and stems were returned to the United States at San Juan, Puerto Rico, where they were used in the manufacture of cigars by another wholly-owned subsidiary, xxxxxxxxxxxx xxxxxx ("domestic subsidiary"), although the parent was actually the importer of record of the returned wrappers and stems. [Foreign subsidiary] never bought nor sold the merchandise. Rather, the stemming was performed on a service contract basis.

The entered value (the value of the alterations) for entries of wrapper tobacco in 1975 and early 1976 was the cost of processing incurred by [foreign subsidiary] as set forth in the entry papers, plus a 5% profit factor. After consultation with Customs' tobacco import specialists in New York and Tampa, the Customs appraising officer advised the importer that the 5% profit factor was too low. After numerous meetings and exchanges of information between the importer, its representatives, and Customs officials, a 9% profit factor was accepted as reasonable by Customs officials at the port of entry. We have assumed for the purposes of this response that the reasonableness of the 9% profit figure is no longer at issue.

It should be noted that the appraisement issues raised by the subject protest (as well as the other protests presently before Headquarters) have been reviewed and addressed by this division on six (6) previous occasions. With regard to the protestant's continuing argument concerning the appraised value of the subject tobacco and counsel's insistence on the use of English market sales figures to determine the market value of the subject xxxxxxxxxxx xxxxx wrapper tobacco, it is apparent that no new information or arguments have been presented by this protest. The arguments presented in the protestant's submission are the same or similar to arguments advanced in the original internal advice decisions (I.A. No. 236/79, 061819, dated May 19, 1981, 542487, dated August 14, 1981 and 543793, dated April 20, 1987) and subsequent reconsideration requests. This office has given thorough consideration to these points in our previous decisions in this case and, as a result, we believe that no useful purpose would be served by addressing them further.

In the above listed I.A. and reconsiderations thereto, and most recently in 542487, dated April 20, 1987, we specifically addressed the issue of determining the value of the materials (wrapper tobacco) exported from the United States for sorting and stemming in [country of export ]. We concluded that the estimated market value of the subject U.S. tobacco cannot be based upon contemporaneous English market sales because the tobacco involved in those sales was not identical to the tobacco shipped to [country of export ]. The English sales involved four different primings (leaf positions on the stalk) while the tobacco sent to [country of export ] consisted of seven different primings. In addition, certain elements of cost included in the English sales were not present in regard to the unsorted tobacco shipped to [country of export ]. Accordingly, we determined that it would be inappropriate to base the "estimated market value" of the subject tobacco on sales of wrapper tobacco to unrelated purchasers in England.

After a thorough review of the purportedly "new information and arguments" submitted by counsel along with the subject protest and application for further review, our position remains unchanged with regard to the use of sales of wrapper tobacco to unrelated purchasers in England. Their use in determining the "estimated market value" of U.S. wrapper tobacco to [country of export ] is inappropriate.

Accordingly, you are directed to deny Protest No. 4909- 90-000131 in all respects. A copy of this decision should be attached to Form 19, Notice of Action, to be sent to the protestant.

Sincerely,

John Durant, Director

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