HQ 545447 - Application for Further Review of Protest No. 3004-93- 100116 Concerning Imported Silk Clothing; Sale for Exportation; Price Actually Paid or Payable; Transaction Value; Other Methods of Appraisement. - United States International Trade Commision Rulings

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HQ 545447

May 12, 1994
VAL CO:R:C:V 545447 er

CATEGORY: VALUATION

District Director Seattle (Area/Port of Blaine) 9901 Pacific Highway
Blaine, WA 98230
Attn: Protest Reviewer

RE: Application for Further Review of Protest No. 3004-93- 100116 Concerning Imported Silk Clothing; Sale for Exportation; Price Actually Paid or Payable; Transaction Value; Other Methods of Appraisement.

Dear Sir:

This is in response to your undated memorandum in which you request further review of protest no. 3004-93-100116, dated August 13, 1993, concerning transactions involving Shekou Enterprises Canada, Inc. and Shekou Enterprises USA, Inc. We regret the delay in responding.

FACTS:

The relevant parties to the subject transactions include Shekou Enterprises Canada, Inc. ("Shekou Canada"), Shekou Enterprises USA, Inc. ("Shekou USA") and the ultimate United States buyers. Shekou Canada is the importer of record for merchandise shipped from Shekou Canada to the United States. While Shekou USA is incorporated in New York, it apparently has no facilities or employees. Generally, the merchandise is shipped from Canada directly to the ultimate United States buyers, although in the past, merchandise was sometimes first shipped to a sales agent's showroom in the United States. Invoices to the ultimate United States buyers designate "FOB Vancouver" shipping terms.

Numerous requests for information (CF 28's) were issued to the Shekou Canada requesting (1) information regarding the nature of Shekou USA's operations; (2) purchase orders and invoices to ultimate United States buyers evidencing whether the goods had been sold to these buyers before the merchandise was shipped to the United States; and (3) disclosure of any imported merchandise not sold for exportation. None of the information or documentation requested was provided to Customs.

Protestant claims that the merchandise was sold for exportation from Shekou Canada to Shekou USA at arm's length and that appraisement should proceed under transaction value on the basis the entered values.

You believe that the sale for exportation occurred between Shekou Canada and the ultimate United States buyer and that there was no intervening sale of the merchandise between Shekou Canada and Shekou USA. You appraised the merchandise under transaction value on the basis of invoice price to the United States buyer in those instances where you were able to obtain the invoices. Where you were unable to obtain the invoices to the United States buyer you appraised the merchandise under section 402(f) of the Trade Agreements Act of 1930, as amended ("TAA").

ISSUE:

Whether the transactions between Shekou Canada and Shekou USA and/or Shekou Canada and the ultimate United States buyer, are bona fide sales such that the price actually paid or payable constitutes a valid transaction value.

LAW AND ANALYSIS:

As you know, 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..." Thus, there must be a bona fide sale of the imported merchandise for it to be appraised under transaction value.

The "price actually paid or payable" is defined in section 402(b)(4)(A) of the TAA as "the total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for the imported merchandise by the buyer to, or for the benefit of, the seller."

In J.L. Wood v. U.S., 62 CCPA 25, 33, C.A.D. 1139 (1974), the court defined the term "sale" as the "transfer of property from one party to another for consideration." Similarly, section 2-106(1) of the Uniform Commercial Code ("UCC") defines a "sale" as "the passing of title from the seller to the buyer for a price". Although the J.L. Wood case was decided under the appraisement statute prior to the TAA, Customs has applied this basic concept of what constitutes a sale under the TAA. See, HRL 544658 (March 26, 1991)

In the instant case, there is no evidence that Shekou USA exists, except as a paper corporation, and has the capacity to act as a buyer of the merchandise. All attempts by you to obtain information concerning Shekou USA's alleged operations went unanswered. Under the circumstances there is no proof whatsoever that the merchandise was ever sold from Shekou Canada to Shekou USA. Accordingly, the only possible sale for exportation would be that between Shekou Canada and the ultimate United States buyer.

We are satisfied that a bona fide sale for exportation occured between Shekou Canada and the ultimate United States buyer in those instances where Shekou shipped the merchandise directly to the buyer, FOB Vancouver, with title and risk of loss passing to the buyer at the time the merchandise was placed on the carrier for shipment to the United States. Under these circumstances, so long as you were able to determine the price actually paid or payable, we find that it was proper for you to appraise the merchandise under transaction value. Thus, where you were provided with the invoices to the buyer identifying the amount of payment due, transaction value was appropriate. However, transaction value may not be used unless there is sufficient information available to determine the price actually paid or payable; consequently, in those instances where you were unable to obtain the invoices or other documentation identifying the price actually paid or payable, appraisement under transaction value is precluded. In these instances, you state that you appraised the merchandise under section 402(f) of the TAA. For the reasons later discussed in this response, we are unable to determine whether appraisement under this method was appropriate.

There is no evidence that a sale for exportation existed between Shekou Canada and the ultimate United States buyer on those occasions where the merchandise was first shipped to an agent in the United States. Under these circumstances it is possible that the sale of the merchandise was not contemplated until some time after the goods were imported. As a result, merchandise imported under these conditions must be appraised using a method other than transaction value.

Where invoices to the buyer identifying the price actually paid or payable were unavailable and where it could not be established that a sale for exportation took place prior to the exportation of the goods, transaction value of the merchandise cannot be determined. In instances where transaction value cannot be determined, or cannot be used, sections 402(a)(B) and (C) provide for appraisement under section 402(c) -- transaction value of identical or of similar merchandise. (The terms "identical merchandise" and "similar merchandise" are defined in sections 402(h)(2) and 402(h)(4), respectively.) This means of appraisement is acceptable provided sufficient information is available in order for Customs to make any adjustment that may be necessary under section 402(c)(2). No specific information pertaining to section 402(c) has been submitted to Headquarters. If in fact a section 402(c) appraisement is possible, this means of appraisement may not be disregarded by either Customs or the importer. (HRL 543912 dated April 19, 1988)

So long as transaction value of identical or similar merchandise is not available, then appraisement under deductive value is appropriate provided the statutory requirements of section 402(d) are met and that the necessary documentation and information is obtainable. In the event a section 402(d) appraisement is not possible, then appraisement should proceed under computed value as defined by section 402(e) provided the statutory requirements of this section are satisfied. Only if none of the above methods of appraisement is possible, may you appraise the merchandise in accordance with section 402(f).

HOLDING:

You are instructed to deny this protest. Under the facts presented, we find that no bona fide sale occurred between Shekou Canada and Shekou USA. Where is can be established that a sale for exportation occurred between Shekou Canada and the ultimate United States buyer and the price actually paid or payable for the merchandise is ascertainable, appraisement of the merchandise under transaction value is proper.

In those instances where a sale for exportation between Shekou Canada and the ultimate United States buyer cannot be established or where the price actually paid or payable cannot be ascertained, transaction value under section 402(b) does not exist. Under these circumstances the merchandise must be appraised in accordance with the hierarchal means of appraisement set forth under section 402, as discussed above.

In accordance with section 3A(11) 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 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of 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 public access channels.

Sincerely,

John Durant, Director
Commercial Rulings Division

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