HQ 545657 - Application for Further Review of Protest No. 1001-93-106220; transaction value of imported merchandise; sale for exportation - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1996 HQ Rulings > HQ 545272 - HQ 545898 > HQ 545657

Previous Ruling Next Ruling
HQ 545657

May 5, 1995

VAL R:C:V 545657 IOR

CATEGORY: VALUATION

Area Director
Kennedy Airport Area

RE: Application for Further Review of Protest No. 1001-93-106220; transaction value of imported merchandise; sale for exportation

Dear Sir:

The subject protest and application for further review is against your decision regarding the proper transaction value of ladies' wearing apparel imported by Bernard Chaus Inc. (hereinafter referred to as the "protestant"). The protest was timely filed on September 7, 1993. The file was received in Headquarters on March 24, 1994. We regret the delay in responding.

FACTS:

This protest concerns two entries of ladies' wearing apparel imported by the protestant. The merchandise was purchased from Formostar Garment Co., Ltd. (Hereinafter referred to as the "middleman") of Taiwan. The merchandise was manufactured by Formostar Garment (Phil.) Co., Inc. (hereinafter referred to as the "manufacturer") of the Philippines. The merchandise was appraised under transaction value, based on the price paid by the protestant to the middleman. The protestant takes the position that the transaction value of the merchandise should have been based on the price paid by the middleman to the manufacturer.

In support of the protest, the protestant has submitted invoices from the middleman to the protestant and visaed invoices from the manufacturer to the protestant. No invoices, purchase orders, contracts, etc. between the manufacturer and the middleman were submitted. According to the entry documents, the protestant is the importer of record.

ISSUE:

Whether the protestant has established that transaction value for the imported merchandise should be based on the alleged sale between the middleman and the manufacturer.

LAW AND ANALYSIS:

The method of appraisement for the imported merchandise is transaction value pursuant to U.S.C. ?1401a). Section 402(b)(1) of the TAA provides, in pertinent part, that the transaction value of imported merchandise is the "price actually paid or payable for the merchandise when sold for exportation to the United States" plus enumerated additions. The "price actually paid or payable" is defined in ?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...) made, or to be made, for the imported merchandise by the buyer to, or for the benefit of, the seller."

In Nissho Iwai American Corp. v. United States, No. 92- 1239, slip op. (Fed. Cir. Dec. 28, 1992) and Synergy Sport International, Ltd. v. United States, No. 93-5, slip op. (Ct. Int'l. Trade Jan. 12, 1993), the U.S. Court of Appeals for the Federal Circuit and the Court of International Trade, respectively, addressed the proper dutiable value of merchandise imported pursuant to a three-tiered distribution arrangement involving a foreign manufacturer, a middleman and a U.S. purchaser. In both cases the middleman was the importer of record. In each case the court held that the price paid by the middleman/importer was the proper basis for transaction value. Each court further stated that in order for a transaction to be viable under the valuation statute, it must be a sale negotiated at arm's length, free from any nonmarket influences and involving goods clearly destined for the United States.

Likewise, we note that in the context of filing an entry, Customs Form 7501, an importer is required to make a value declaration. As indicated by the language of CF 7501 and the language of the valuation statute, there is a presumption that such transaction value is based on the price paid by the importer. In this regard, field instructions dated March 8, 1993 from the Director of Trade Operations, provide that where an importer requests appraisement based on the price paid by the middleman to the foreign manufacturer (and the importer is not the middleman), the importer may do so. However, it is the importer's responsibility to show that such price is acceptable under the standards set forth in Nissho Iwai and Synergy. That is, the importer must present sufficient evidence that the sale was at "arm's length," and that the goods sold were "clearly destined for the United States," within the meaning of 19 U.S.C. 1401a(b).

In this case, the protestant is the importer and, therefore, based on the above-noted presumption, the appraising officer correctly based the transaction value of the imported merchandise on the price that the protestant paid to the middleman. With regard to whether or not transaction value may be based on the transaction between the middleman and the manufacturer, we note that it is not clear from the evidence presented whether there was a sale between the manufacturer and the middleman. The protestant has provided no information to establish a sale between the manufacturer and middleman. The invoice issued by the manufacturer in the Phillippines is a document used to obtain the appropriate textile export license. Even assuming there was a sale, no evidence was presented that it was at arm's length.

HOLDING:

Since the protestant has not provided sufficient information to establish a sale between the middleman and the manufacturer, we are unable to confirm that a sale for exportation existed other than the sale from the middleman to the protestant. Accordingly, the appraising officer correctly based the transaction value of the imported merchandise on the price paid by the protestant to the middleman.

Consistent with the decision set forth above, you are hereby directed to deny the subject protest. 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 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, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director
Commercial Rulings Division

Previous Ruling Next Ruling