HQ 546161 - Application for Further Review of Protest 2304-95-100108; shelter operation; assembly operation; 19 CFR ?152.103(a)(3)); HRL 544764; insufficient information; transaction value of similar merchandise; ?402(c) and (h)(4); 19 CFR ?152.103(i); commercial level; 19 CFR ?152.108(g); arbitrary and fictitious value - United States International Trade Commision Rulings

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HQ 546161

May 7, 1996

RR:IT:VA 546161 KCC

CATEGORY: VALUATION

Port Director
U.S. Customs Service
P.O. Box 3130
Juarez-Lincoln Bridge
Laredo, Texas 78044-3130

RE: Application for Further Review of Protest 2304-95-100108; shelter operation; assembly operation; 19 CFR ?152.103(a)(3)); HRL 544764; insufficient information; transaction value of similar merchandise; ?402(c) and (h)(4); 19 CFR ?152.103(i); commercial level; 19 CFR ?152.108(g); arbitrary and fictitious value

Dear Port Director:

This is in regard to the Application for Further Review of Protest 2304-95-100108 concerning whether window regulator cable assemblies imported by Capro Incorporated are properly appraised under transaction value of similar merchandise pursuant to Agreements Act of 1979 (TAA); 19 U.S.C. ?1401a(c)).

FACTS:

Capro Incorporated ("Capro"), the importer, had a Shelter Contract from 1992 through 1994 with La Ventaja, Inc.("LVI"), the shelter, to produce window regulator cable assemblies. Capro and LVI are not related to one another. The entries under protest concern those window regulator cable assemblies produced pursuant to the Shelter Contract. The Shelter Contract called for LVI to provide the building space, utilities, personnel, invoicing, transportation, and miscellaneous costs related to production of the window regulator cable assemblies. Capro was to provide the component materials and machinery, along with two employees domiciled in and paid out of the U.S. who were to oversee quality control and general operations. Certain costs, such as square footage rental, profit, and administrative costs were stable, "set costs." Other costs ("pass-thru costs"), such as utilities, worker overtime, and unexpected administrative expenses, varied from month to month and were billed to Capro and paid by Capro on a month by month basis as additions to the set costs. The Shelter Contract, ?5 Payment Terms, sets forth how LVI bills Capro for its services and how Capro pays for LVI's services. Basically, LVI bills Capro weekly for its labor and shelter service which Capro must pay within thirty (30) days. Additionally, LVI bills Capro for "pass-thru" costs for purchases etc., made on behalf of Capro, within approximately forty-five (45) days of the actual expenditure.

The merchandise was appraised under transaction value of similar merchandise pursuant to ?402(c) of the TAA. You chose a previously accepted transaction value from an LVI to OHI Atwood Automotive Corporation ("OHI") entry for merchandise exported at or about the same time as the subject merchandise was exported to Capro as the transaction value of similar merchandise. Additionally, you state that the similar merchandise is of the same commercial level. OHI is a Kentucky based parts supplier of Japanese owned automobile plants in the U.S. According to Capro's and OHI's broker, OHI is an unrelated Capro customer of goods similar to the subject merchandise. Additionally, you state that if there are OHI part numbers that more closely approximate the value of the protested merchandise, Capro has not supplied you with that information.

You state that transaction value pursuant to ?402(b) of the TAA is precluded because there was no sale for export of the window regulator cable assemblies to Capro. You state it appears that LVI never takes title to the window regulator cable assemblies and that LVI only sells a fixed amount of direct labor, administrative support and plant floor space, not window regulator cable assemblies, to Capro. Additionally, you state that the Shelter Contract did not contain a complete costing formula in support of the LVI's proforma invoices to Capro. It is unclear from the formula how the "pass-thru costs" are incorporated into the invoice price. Citing Headquarters Ruling Letter (HRL) 545622 dated April 28, 1994, you state that the price actually paid or payable is not ascertainable under the Shelter Contract formula. Thus, transaction value is precluded.

Capro contends that transaction value is the proper method of appraisement. In the beginning, Capro states it used estimated costs for LVI costs in determining the price actually paid or payable for the imported merchandise. However, Capro states that, for the entries subject to this protest, it used historical data for LVI costs. Capro contends that its declared invoice value is the total payment for the imported merchandise; the invoice value contains all the elements needed for transaction value, including profit realized by LVI. Citing HRL 542106 dated May 15, 1980 (TAA #2), and HRL 544764 dated January 6, 1994, Capro states that transaction value is acceptable for assembly operations. Additionally, Capro cites HRL 542315 dated May 13, 1981 (TAA #25), for the principle that transaction value may exist even if there are price adjustments after importation.

Capro states that Customs appraisement of the imported merchandise under transaction value of similar merchandise is arbitrary and fictitious and, therefore, expressly prohibited from use by ?152.108(g), Customs Regulations (19 CFR transaction value of similar merchandise was derived by taking a single unit value out of seven from a single invoice from OHI and applying it to each of Capro's models on all seven entries under protest. Capro states that OHI is a customer of Capro and their invoice value reflects a sale in the U.S. by Capro to OHI. Capro contends that the difference in value between Capro's invoices and OHI's invoice is due to profit and administrative expenses realized by Capro in the U.S. Moreover, Capro states that the use of a single value to appraise a broad range of models, each with different components and different production costs, is unacceptable. Capro contends that transaction value of similar merchandise is unacceptable. Thus, Customs should proceed to computed or deductive value at their choosing.

ISSUE:

Whether transaction value of similar merchandise was the proper basis of appraisement for the imported merchandise.

LAW AND ANALYSIS:

Merchandise imported into the United States is appraised in accordance with ?402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA), codified at 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 to the United States," plus certain statutorily enumerated additions. 19 U.S.C. ?1401a(b)(1).

You state that transaction value pursuant to ?402(b) of the TAA is precluded because there was no sale for export of the window regulator cable assemblies to Capro. You state it appears that LVI never takes title to the window regulator cable assemblies and that LVI only sells a fixed amount of direct labor, administrative support and plant floor space, not window regulator cable assemblies, to Capro. Although LVI does not actually sell the window regulator cable assemblies to Capro, transaction value is not precluded in this situation. states that:

The price actually paid or payable may represent an amount for the assembly of imported merchandise in which the seller has no interest other than as the assembler. The price actually paid or payable in that case will be calculated by the addition of the value of the components and required adjustments to form the basis for the transaction value.

In HRL 544764, we found that the transaction between the importer and the shelter represented a sale for exportation to the United States as those words are used in ?402(b) of the TAA, and therefore, was the basis for transaction value. Likewise, for this shelter operation, the transaction between Capro and LVI represents a sale for exportation to the U.S. and may be the basis for transaction value provided the price actually paid or payable can be determined.

Based on the evidence submitted, insufficient information is available to ascertain that the invoice price includes the total payment for the imported merchandise. ?402(b) of the TAA states that "[i]f sufficient information is not available, for any reason, with respect to any amount referred to in the proceeding sentence, the transaction value of the imported merchandise concerned shall be treated, for purposes of this section, as one that cannot be determined." In this situation, insufficient information is available to determine the price actually paid or payable. Therefore, the imported merchandise cannot be appraised pursuant to transaction value under ?402(b) of the TAA.

When imported merchandise cannot be appraised on the basis of transaction value, it is appraised in accordance with the remaining methods of valuation, applied in sequential order. bases of appraisement, in order of precedence, are: the transaction value of identical or similar merchandise (?402(c) of the TAA and 19 U.S.C. ?1401a(c)); deductive value (?402(d) of the TAA and 19 U.S.C. ?1401a(d)); computed value (?402(e) of the TAA and 19 U.S.C. ?1401a(e)); and the "fallback" method (?402(f) of the TAA and 19 U.S.C. ?1401a(f)).

The transaction value of identical or similar merchandise is based on sales at the same commercial level and in substantially the same quantity, of merchandise exported to the United States at or about the same time as the merchandise being appraised. is found, sales of identical merchandise or similar merchandise at either a different commercial level or in different quantities, or both, shall be used, but adjusted to take account of any such difference. If two or more transaction values for identical merchandise are determined, such imported merchandise shall be appraised on the basis of the lower or lowest of such values. Id.

You appraised the imported window regulator cable assemblies under transaction value of similar merchandise pursuant to value from an LVI to OHI Atwood Automotive Corporation ("OHI") exported at or about the same time as the subject merchandise was exported to Capro as the transaction value of similar merchandise. Additionally, you state that the similar merchandise is of the same commercial level. OHI is a Kentucky based parts supplier of Japanese owned automobile plants in the U.S. According to Capro's and OHI's broker, OHI is an unrelated Capro customer of goods similar to the subject merchandise. Capro contends that the sale to OHI reflects a sale in the U.S. by Capro to OHI. Capro states that the difference in value between Capro's invoices and OHI's is profit and administrative expenses realized in the U.S. Thus, Capro contends that OHI's invoices are unacceptable for transaction value of similar goods.

Capro has not provided any evidence that OHI is its customer, such as any correspondence, purchase orders or proof of payment. The only information available is the invoice and supporting documentation from LVI showing sale and shipment to OHI dated November 18, 1993, and Customs entry documents. A reference to Capro is not found on any of the available documents. Based on the presented evidence, it does not appear that the sale between LVI and OHI is at a different commercial level than the sales between LVI and Capro.

We do not find that the ascertained appraised value of the imported window regulator cable assemblies to be an arbitrary or fictitious value. The transaction value of similar merchandise was chosen from a previously accepted transaction value, an invoice covering window regulator cable assembles manufactured by LVI for OHI, exported on or about the same time as Capro's imported merchandise. Additionally, there appears to be no dispute that the products are similar as defined by ?402(h)(4) of the TAA, which provides that:

(A) merchandise that-
(i) was produced in the same country and by the same person as the merchandise being appraised, (ii) is like the merchandise being appraised in characteristics and components material, and (iii) is commercially interchangeable with the merchandise being appraised; or
(B) if merchandise meeting the requirements under subparagraph (A) cannot be found (or for purposes of applying subsection (b)(2)(B)(i), regardless of whether merchandise meeting such requirements can be found), merchandise that-
(i) was produced in the same country as, but not produced by the same person as, the merchandise being appraised, and
(ii) meets the requirement set forth in subparagraph (A) (ii) and (iii).
Such term does not include merchandise that incorporates or reflects any engineering, development, artwork, design work, or plan or sketch that- (I) was supplied free or at reduced cost by the buyer of the merchandise for use in connection with the production or the sale for export to the United States of the merchandise; and
(II) is not an assist because undertaken within the United States.

See also, ?152.103(i), Customs Regulations (19 CFR ?152.103(i)). Although we note that Capro states that the similar merchandise is produced with different components and has different production costs, no evidence was presented that the similar merchandise is not "like the merchandise being appraised in characteristics and components material." Additionally, pursuant to a letter from Capro to Customs dated June 5, 1995, and Customs response dated June 9, 1995, Capro knew the method used for the transaction value of similar merchandise, including the OHI entry number and OHI invoice used by Customs. However, Capro has not provided any evidence in support of its contentions, nor have they provided Customs with OHI part numbers that more closely approximate the value of the protested merchandise. Thus, it appears that OHI's imported merchandise meets the definition of similar merchandise in ?402(h)(4) of the TAA.

HOLDING:

The imported window regulator cable assemblies were properly appraised under transaction value of similar merchandise pursuant to ?402(c) of the TAA. You are directed to DENY this protest.

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,

Acting Director
International Trade Compliance
Division

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