HQ 546078 - Application for Further Review of Protest Number 2729-95-1000115 - 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 545909 - HQ 546122 > HQ 546078

Previous Ruling Next Ruling
HQ 546078

January 30, 1996
RR:IT:VA 546078 RSD

CATEGORY: VALUATION

Port Director
United States Customs Service
300 S. Ferry Street
Terminal Island, California 90731

RE: Application for Further Review of Protest Number 2729-95-1000115

Dear Director:

This is in response to the memorandum dated July 25, 1995, forwarding the application for further review of Protest number 2729-95-1000115 filed by Nik and Associates on behalf DZ Trading Ltd., (hereinafter DZ) regarding a shipment of sweaters imported from China. On December 2, 1995, a meeting was held at the Office of Regulations and Rulings with a representative from DZ to discuss this matter. Subsequently, DZ has made several additional submissions in support of the protest. The most recent submission was dated January 17, 1996.

FACTS:

The importer, DZ, entered a shipment of women's sweaters made in China on
October 7, 1994. The seller's invoice dated September 26, 1994, shows that 872 dozen sweaters were purchased at a price $95 per dollars per dozen. The visaed invoice also shows that the price of the sweaters was $95 a dozen. The record also contains a sales confirmation dated May 20, 1994, prepared by the seller, China Inner Mongolia, for 1667 dozen at a price of $95 per dozen. Apparently, DZ also made a second entry of sweaters purchased with the same sales confirmation order.

DZ claims that its broker erroneously added a handwritten adjustment of $90,882.56 to account for the payment of the yarn used in making the sweaters. DZ further contends that although it had purchased and paid for the yarn used to produce the sweaters, the amount was already included in the price of the sweaters. While the commercial invoice shows a yarn payment of $90,862.56, DZ claims that this figure was on the commercial invoice in order to comply to a clause in the letter of credit used to pay the seller. In support of its position, DZ points out that in computing the net amount that the seller received for the sweaters, the yarn payment was deducted. This is shown on the letter of credit used to pay the seller.

The letter of credit used to pay the seller for the imported merchandise contains the clause "AS PER PO. 941395, STYLE 5210MA, 17000 PCS AT USD 95.00/DZ . L/C AMOUNT REFLECTS YARN PAYMENT OF 2,161 LBS AT USD 4.10/LB TOTAL OF YARN PAYMENT USD 90,862.56." In addition, the same letter of credit specifies that a "SIGNED COMMERCIAL INVOICE IN TRIPLICATE INDICATING TOTAL CFR VALUE AND SHOWING YARN PAYMENT OF USD 90,862.56."

DZ has presented also two letters from the seller, China Inner Mongolia, dated April 28, 1995, and May 17, 1995. The first letter states that invoice No. CB2494-129 dated 09/26/1994 for USD 82,840 showing a C&F price of USD 95.00/Doz already includes the yarn amount previously prepaid to Loyal Light by DZ Trading, LTD. The letter continues that the relevant shipments invoiced at USD 95.00/Doz for the same style 5210 MA includes the yarn cost. In the May 17, 1995, letter, China Inner Mongolia certifies, that its invoices for all shipments of style 5210 M in 1994, includes the yarn cost. It further states that DZ's L/C instructions clearly state that the yarn amount of $90,882.56 must be deducted from the invoice price of $95/dozen, and that this yarn amount was advanced for them by DZ to the yarn supplier.

ISSUE:

Whether the evidence in the protest file establishes that the yarn payment should not have been added to the price actually paid or payable of the imported sweaters because the yarn payment was already included in the price?

LAW AND ANALYSIS:

As you know merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA: 19 U.S.C. ? 1401a). The preferred method of appraisement is transaction value, which is defined as the "price actually paid or payable for merchandise when sold for exportation for the United States," plus certain enumerated additions including the value of any assist. However, the TAA provides that an addition is proper only to the extent that the amount in question is not otherwise included in the price actually paid or payable of the imported merchandise. The term "price actually paid or payable" is defined in TAA ? 402(b)(4)(A) 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 international shipment of the merchandise from the country of exportation to place of importation in the United States) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller.

In this instance, the importer, DZ, purchased yarn and furnished it to manufacturer in order to produce the sweaters. In determining the transaction value of the sweaters, if the value of the yarn was not already included in the seller's price, the value of yarn would be an addition to the price actually paid or payable, as an assist under the definition found at 19 U.S.C. 1401a(h)(1)(A)(i). However, DZ maintains that the seller already included the yarn payment in the price of the sweaters, and thus, the value of the yarn should not have been added to the price of the sweaters. DZ further claims that their broker misunderstood that the yarn costs were included in the price of the sweaters and mistakenly added the cost of the yarn to the price of the sweaters when the merchandise was entered. Accordingly, the question that must be resolved in this case is whether the broker erred in adding the yarn costs to the price of the sweaters because those costs were already included in the price of the sweaters.

After carefully reviewing the documents and the other evidence submitted with the protest, we conclude that the yarn payment was included in the price of the sweaters. DZ has provided two letters from the seller of the sweaters, which state that the yarn payments were included in the price of the sweaters. Furthermore, the letter of credit states that the letter of credit amount reflects a total yarn payment of $90,862.56. The payment in favor of the beneficiary, shown on the letter of credit is $43,720.76. This amount equals the difference between the price of the merchandise at $95 per dozen multiplied by the quantity of goods, 17,000 pieces (1416.66 dozen) shown on the letter of credit minus the $90,862.56 yarn payment. The letter of credit thus shows that the yarn payment was already included in the $95 per dozen price of the sweaters. Accordingly, we find that the imported merchandise should be appraised based on a price of $95 per dozen and that the broker erred by adding the yarn payment to the price of the sweaters. Thus the $90,862.56 yarn payment should not have been an addition to the price actually paid or payable of the sweaters.

HOLDING:

The evidence in the protest file establishes that the yarn payment of $90,862.56 was already included in the $95 per dozen price that DZ paid the seller for the imported sweaters. Therefore, in determining the transaction value the yarn payment should not have been added to the price actually paid or payable of the imported sweaters.

You are directed to grant the protest. A copy of this decision with the Form 19 should be sent to the protestant. 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 to the public via the Diskette Subscription Service, the Freedom of Information Act and other public access channels.

Sincerely,

Acting Director
International Trade Compliance

Previous Ruling Next Ruling