HQ 546031 - Application for Further Review of Protest 2704-92-105264; transaction value of imported merchandise; sale for exportation; Nissho Iwai American Corp; Synergy Sport International, Ltd; HRLs 545144, HRL 545271, HRL 545360, and HRL 545648; J.L. Wood; bona fide arm's length sale; a sale for export to the United States; 19 U.S.C. §1401a(b); sufficiency of evidence; HRL 544775, HRL 543633, and HRL 545474 - United States International Trade Commision Rulings

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HQ 546031

October 12, 1995

VAL R:IT:V 546031 KCC

CATEGORY: VALUATION

Port Director
U.S. Customs Service
300 South Ferry Street
Room 1001
Terminal Island, California

RE: Application for Further Review of Protest 2704-92-105264; transaction value of imported merchandise; sale for exportation; Nissho Iwai American Corp; Synergy Sport International, Ltd; HRLs 545144, HRL 545271, HRL 545360, and HRL 545648; J.L. Wood; bona fide arm's length sale; a sale for export to the United States; 19 U.S.C. §1401a(b); sufficiency of evidence; HRL 544775, HRL 543633, and HRL 545474

Dear Port Director:

This is in regards to Application for Further Review of Protest 2704-92-105264 concerning the proper transaction value, §402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. §1401a(b)), of men's winter jackets imported by Value City Imports.

FACTS:

The imported merchandise was appraised using transaction value, based on the sale between Value City Imports ("Value City") and North American Cornerstone Group, Ltd., Hong Kong ("NACG"). This determination was based on the commercial invoice showing Value City Imports as the purchaser.

In a protest timely filed on December 9, 1992, Counsel for Value City, the importer, contends that the transaction value should be based on the alleged sale between NACG and Nanjing Textiles Import/Export Corp. ("Nanjing"). Counsel for Value City has submitted the ocean bill of lading and textile export license/commercial invoice as evidence that the sale for exportation occurred between NACG and Nanjing.

ISSUE:

Whether the transaction between NACG and Nanjing or the transaction between NACG and Value City determines the "price actually paid or payable" for the merchandise when sold for exportation.

LAW AND ANALYSIS:

§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 numerated 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."

It appears that Counsel for Value City contends that this transaction involved a three-tiered situation involving a U.S. purchaser/importer (Value City), middleman (NACG), and primary-level seller (Nanjing). Thus, Counsel for Value City reasons that two sales took place, one between Nanjing and NACG and the other between NACG and Value City. Counsel for Value City maintains that the sale for exportation took place between NACG and Nanjing.

In Nissho Iwai American Corp. v. United States, 16 C.I.T. 86, 786 F. Supp. 1002, reversed in part, 982 F.2d 505 (1992), and Synergy Sport International, Ltd. v. United States, Slip Op. 93-5 (CIT 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 United States 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 to the manufacturer 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.

We note that in the context of filing an entry, Customs Form 7501, an importer is required to make a value declaration. As indicted by the language of CF 7501 and the language of the valuation statute, there is a presumption that transaction value is based on the price paid by the importer.

In accordance with the Nissho Iwai and Synergy decisions and our own precedent, we presume that transaction value is based on the price paid by the importer. See, Headquarters Ruling Letter (HRL) 545144 dated January 19, 1994, HRL 545271 dated March 4, 1994, HRL 545360 dated May 31, 1994, and HRL 545648 (IA 10/94) dated August 31, 1994. In further keeping with the courts' holdings, we note that in those situations 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 will be the importer's responsibility to show that such price is acceptable under the standard set forth in Nissho Iwai and Synergy. That is, the importer must present sufficient evidence that the alleged sale was a bona fide "arm's length sale," and that it was "a sale for export to the United States," within the meaning of 19 U.S.C. §1401a(b).

We are of the opinion that insufficient evidence was submitted by Value City to show that there was a bona fide sale between Nanjing and NACG. For Customs purposes, the word "sale" generally is defined as a transfer of ownership in property from one party to another for a consideration. J.L. Wood v. United States, 62 CCPA 25, 33; C.A.D. 1139 (1974). While J.L. Wood was decided under the prior appraisement statute, Customs adheres to this definition under the TAA. The primary factors to consider in determining whether there has been a transfer of property or ownership are whether the alleged buyer has assumed the risk of loss, and whether the buyer has acquired title to the imported merchandise. See, HRL 544775 dated April 3, 1992; HRL 543633 dated July 7, 1987. Also relevant is whether, in general, the roles of the parties and circumstance of the transaction indicate that the parties are functioning as buyer and seller. See, HRL 545474 dated August 25, 1995.

We find that the submitted evidence does not establish a bona fide sale between Nanjing and NACG. No commercial documents relating to the alleged sale, such as, a sales contract, a commercial invoice issued by Nanjing to NACG, a purchase order from NACG to Nanjing, evidence of payment by NACG, or correspondence between these parties were submitted. Counsel for Value City did submit the textile export license/commercial invoice and bill of lading as evidence of a bona fide sale between Nanjing and NACG. However, we do not find this evidence compelling. The textile export license/commercial invoice merely lists Nanjing as the exporter and Value City as the consignee. The only reference to NACG in this document is in the "Marks and numbers (description of goods)" section. This document does not prove that NACG purchased the imported goods from Nanjing. Moreover, the bill of lading identifying NACG as the shipper is not evidence of the alleged sale. These two documents indicate that the goods were shipped directly from China to the U.S. but they do not establish that NACG purchased the goods from Nanjing. The submitted documents do not indicate whether there was a transfer of property or ownership from Nanjing to NACG, whether NACG paid for the goods, whether NACG assumed the risk of loss, or whether NACG acquired title to the merchandise. Furthermore, no documentation is available to ascertain the relationship of Nanjing and NACG and whether they functioned as buyer and seller. Therefore, we find that insufficient evidence has been presented to establish a bona fide "arm's length" sale between Nanjing and NACG in order to overcome the presumption that transaction value is based on the price Value City paid to NACG.

HOLDING:

Based on the evidence presented, the price between Value City and North American Cornerstone Group, Ltd. constitutes the price actually paid or payable for purposes of determining the transaction value of the men's feather-filled winter jackets.

The protest should be DENIED. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065 dated August 4, 1993, Subject: Revised Protest Directive, this decision, together with the Customs Form 19, 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 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,

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