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HQ 545069

December 23, 1993

VAL CO:R:C:V 545069 ph

CATEGORY: VALUATION

District Director
477 Michigan Avenue
Detroit, MI 48266

RE: Application for Further Review of Protest No. 3801-0-002242

Dear Sir:

The above-referenced application for further review concerns the appraisement of certain imported merchandise, based on invoices that were presented to Customs; the accuracy of such invoices is in doubt due to conflicting documentation. At issue in this protest are all formal entries made by the importer, Ensign Emblem Ltd. (hereinafter "Ensign"), during the years 1986, 1987 and 1988. It is noted that numerous mail entries were made between 1983 and 1986. Those entries are not addressed in this protest. We regret the delay in reply.

FACTS:

According to a Customs Report of Investigation dated February 20, 1991, during the period of January 1983 to January 1988 Ensign presented invoices to Customs for textile emblems imported from Taiwan, which indicated prices for the merchandise that were considerably lower than industry-wide prices. The report indicates that in a June 1986 interview, Ensign's corporate treasurer examined two invoices to Ensign (from two different foreign manufacturers) and stated that the prices indicated on the two invoices were not the prices Ensign paid. In a May 1989 interview this employee and the president of Ensign both stated that it was common practice for Ensign to ignore the invoice that accompanied each shipment, and that payment for the merchandise was made according to a prearranged pricing system established by the foreign manufacturers. Customs was not able to obtain a copy of the price list nor any ledger or record of accounts payable and receivable.

Customs used 19 U.S.C. 1500(a) as the authority for determining the price paid for the imported merchandise.

ISSUE:

Whether the imported merchandise was properly appraised.

LAW AND ANALYSIS:

Section 402(a) through (f) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. 1401a) sets forth the hierarchy of methods used in determining the value of imported merchandise. The preferred method of appraisement is transaction value, set forth in section 402(b) of the TAA, is defined as "the price actually paid or payable" plus certain enumerated additions. Section 402(f) of the TAA provides for a method of determing a value for imported merchandise if other values cannot be determined or used.

Section 500 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA: 19 U.S.C. 1500) is the general authority for Customs to appraise merchandise. Section 500(a) states that the appraising officer shall, under rules and regulations prescribed by the Secretary:
appraise merchandise by ascertaining or estimating the value thereof, under section 1401a of this title, by all reasonable ways and means in his power, any statement of cost of costs of production in any invoice, affidavit, declaration, other document to the contrary notwithstanding...

As noted in the Statement of Administrative Action:
section 500 of the TAA authorizes the appraising officer to weigh the nature of the evidence before him in appraising the imported merchandise. This could be the invoice, the contract between the parties, or even the recordkeeping of either of the parties to the contract. For example, if information contained in an invoice is negated by sworn statements contained in affidavits, the appraising officer has the authority to appraise the merchandise based on information contained in the affidavits.

In this case, an investigation produced statements from employees of the importer that records of accounts payable and receivable were kept; such ledgers were never produced. Transaction value could not be used to appraise the imported merchandise because "the price actually paid or payable" for the imported merchandise could not be acertained. That is, the total number of checks written to its foreign suppliers in 1986,1987 and January of 1988 did not correlate to the invoices submitted. Therefore, utilizing an appraisement method in accordance with 402(f) of the TAA and the authority provided for in section 500 of the TAA, the import specialist ascertained the price actually paid or payable for the imported merchandise in accordance with the amount indicated by the checks written.

We find the import specialist's method of appraisement to be in accordance with the above-referenced statutory authority. The issue of how to appraise the merchandise became an evidentiary one when Customs discovered that the invoices submitted did not correlate to the amount indicated by the checks Ensign wrote to its foreign suppliers. The appraising officer, under authority of section 500, considered all the evidence available, and determined an appropriate and reasonable value for the imported merchandise.

HOLDING:

Based on the circumstances presented, we find that the appraising officer used reasonable ways and means to determine the appropriate value for the imported merchandise. In accordance with Section 3A(11)(b) of Customs Directive 099 3550- 065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the protestant no later than sixty days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings module in ACS and the public via the Diskette Subscription Service, Lexis, Freedom of Information Act and other access channels.

Sincerely,

John Durant, Director
Commercial Rulings Division

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