HQ 546122 - Application for Further Review of Protest number 5501-95-100325; - United States International Trade Commision Rulings

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HQ 546122

January 11, 1996

RR:IT:VA 546122 RSD

CATEGORY: VALUATION

Port Director
United States Customs Service
1205 Royal Lane
Dallas Ft Worth Airport, Texas 75261

RE: Application for Further Review of Protest number 5501-95-100325;

Dear Sir:

This is in response to the memorandum dated August 21, 1995, from the Assistant District Director, Commercial Operations of the former Dallas/Ft Worth District forwarding the application for further review of Protest number 550195100325 filed on behalf of USA Credo, Inc. by Sekin Transport International. Two sample jackets were sent for our consideration. These samples will be returned under separate cover.

FACTS:

The importer, USA Credo Inc. (hereinafter Credo), entered a shipment of men's water resistant jackets and pants made in Korea. The shipment consisted of factory close-out garments with various defects and imperfections. Credo claims that it realized that it was purchasing substandard merchandise from the manufacturer, at the time it made the purchase.

The jackets were invoiced at $2.24 per piece, and the pants were invoiced at $1.70 per piece. The merchandise was allegedly paid for in cash by the brother of Credo's owner. There were no sales contracts, purchase orders, copies of canceled checks, nor wire transfers. Customs questioned the value of the merchandise. In response, the importer furnished two letters in Korean with English translations from the manufacturers. The translated letters state the number of pieces purchased and the amount of money in Korean currency with a conversion into U.S. dollars that was received for the merchandise.

The district was not satisfied with the evidence of proof of payment and decided that the merchandise could not be appraised under transaction value. Instead the district attempted to appraise the merchandise using a transaction value of identical or similar merchandise. Apparently, no adjustment was made to reflect the fact that the merchandise imported was "substandard". Now your office is proposing to adjust the appraised value to take this into account.

ISSUE:

Whether the protestant has proffered sufficient evidence to prove that Customs unreasonably ascertained the value of the imported merchandise in the circumstances described above?

LAW AND ANALYSIS:

As you know, merchandise imported into the United States is appraised in accordance with ?402 of the Tariff Act of 1930, as amended by the Trade Agreement Act of 1979 (TAA; 19 U.S.C. ? 1401a). The preferred method of appraisement under the TAA is transaction value, defined as the "price actually paid or payable for merchandise when sold for exportation to the United States," plus certain enumerated additions. 19 U.S.C. Section 1500 (section 500 of the Tariff Act of 1930 as amended by the TAA ) provides the general authority for Customs to appraise merchandise. This section states that the appropriate Customs 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 mean in his power, any statement of cost or costs of production in any invoice, affidavit, declaration, other document to the contrary notwithstanding.

With regard to section 500, the Statement of Administrative Action provides:

Section 500 allows Customs to consider the best evidence available in appraising merchandise. It allows Customs to consider the contract between the buyer and the seller, if available, when the information contained in the invoice is either deficient or is known to contain inaccurate figures or calculations. Likewise, a contract which has been outdated by subsequent renegotiations prior to exportation would not be considered when an invoice which reflects these renegotiations is presented. Section 500 authorizes the appraising officer to weigh the nature of the evidence before him in appraising the imported merchandise ... under the constraints of section 402.

In this case, when appraising the imported merchandise, the appraising officer at the port of entry requested evidence of proof of payment from the importer. However, the importer failed to provide adequate evidence of proof payment. No checks, money orders, evidence of wire transfers, bank records, or book keeping records were presented. The importer also did not present actual receipts from the sellers. Instead, the importer submitted letters supposedly written by the sellers, which stated the price of the imported merchandise. There is no way of knowing whether the letters are authentic. Since it is not clear that the sellers actually prepared the letters, or if they accurately reflect the price the importer paid for the imported goods, we find that it was reasonable for the appraising officer to conclude that these letters were not a reliable indicator of
the price of the imported merchandise. It seems highly unusual to pay for a large transaction in cash with virtually no record of it. Accordingly, it was proper for the appraising officer to reject transaction value as the method of appraising the imported merchandise.

Based on the facts presented, especially in light of the fact that the protestant has not provided any other documentation such as contracts, or record keeping to show otherwise, we find that the protestant has not proffered sufficient evidence to prove that Customs employed unreasonable ways and means to ascertain the value of the imported merchandise. The appraising officer, under authority of Section 500, appropriately considered all the evidence made available by the protestant and used "all reasonable ways and means in his power" to appraise the merchandise.

However, at this point, if you conclude that it is appropriate to make adjustments to the appraised value in order to account for the fact that the imported merchandise consisted of factory "seconds", you may do so as long as the procedures used are consistent with the TAA and the applicable Custom regulations.

HOLDING:

The protestant has not proffered sufficient evidence to prove that Customs employed unreasonable ways and means to ascertain the value of the imported goods.

You are instructed to deny the protest, except to the extent reappraisement of the merchandise as indicated above results in a partial allowance. 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

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