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HQ 546536





August 29, 1997

RR:IT:VA 546536 KCC

CATEGORY: VALUATION

Port Director
U.S. Customs Service
4735 Oakland Street
Denver, CO 80239

RE: Application for Further Review of Protest 3307-96-100028; timeliness and extension of liquidation under 19 U.S.C. ?1504(a) and (b); sufficiency of protest; 19 U.S.C. ?1514(c)(1); transaction value of similar merchandise; ?402(c) of the TAA

Dear Port Director:

This is in regard to the Application for Further Review of Protest 3307-96-100028 filed by the importer of record's surety, Intercargo Insurance Company, on June 3, 1996, against your decision concerning the entry and appraisement of wearing apparel. The entries were liquidated on December 29, 1995. On March 2, 1996, Customs made formal demand on the surety for payment. By letter dated June 24, 1997, Counsel for the surety, Glad & Ferguson, provided a supplement to the protest. We regret the delay in responding.

FACTS:

The importer of the wearing apparel is Mama & Leon, Inc. of Denver, Colorado and the seller is Mama & Leon in Bali, Indonesia. You indicate that the imported wearing apparel was "high end garments" of the quality sold to elite department stores, such as Niemann-Marcus and Saks Fifth Avenue. Because the importer, who is related to the seller, was unable to furnish payment records supporting the invoice value, you did not appraise the wearing apparel under transaction value, pursuant to Agreements Act of 1979 (TAA), codified at 19 U.S.C. ?1401a. We note that the importer of record did not designated the parties as related on the Entry Summary (Customs Form (CF) 7501). After considering the alternative methods of appraisement, you appraised the wearing apparel based on transaction value of similar merchandise pursuant to ?402(c) of the TAA.

The surety states that the importer is no longer in business and went out of business prior to providing specific documentary or sample evidence in support of the importer's own protests. Surety claims that Customs value advance is too high. Although no documentation was submitted as evidence of the importer's payment to the related seller, surety notes the importer's certification that at the time of entry it did "not have knowledge regarding the presence of or the amount of any export quota charge in the invoice unit price" and that it "did not and will not pay any additional amounts other than the invoice price for the goods." Additionally, surety without benefit of samples, contacted three other companies (Herschelle Courturier Clothing Designers of San Francisco, Accessories International of San Francisco, and the Gap Corporation) regarding the reasonableness of the invoice unit prices. One company opined that the type of garments imported were cheap to produce and in some cases could be obtained at a lower price. Another company found the invoice prices reasonable. The third company thought that the invoice quantities were "piecey" and, therefore, resulted in lower invoice prices. Thus, the company thought that the importer purchased the seller's end run or leftovers.

Additionally, pursuant to 19 U.S.C. ?1504(a) and (b), the surety claims the liquidation of the subject entry was null and void because it was made after the expiration of one year from the date of liquidation and the suspension or extension of liquidation for the subject entry was not properly issued and was improper for citing a reason other than one authorized by statute or regulation.

ISSUE:

1. Whether the entries at issue were liquidated in a timely manner and whether the time period for liquidation properly was extended in accordance with 19 U.S.C. ?1504(a) and (b).

2. Whether the merchandise was appropriately appraised under transaction value of similar merchandise.

LAW AND ANALYSIS:

1. Liquidation pursuant to 19 U.S.C. ?1504

Initially, we note that this protest was timely filed pursuant to 19 U.S.C. ?1514(c)(2)(A). The entries were liquidated on December 29, 1995, formal demand for payments was made on the surety on March 2, 1996, and the surety filed its protest on June 6, 1996. See 19 U.S.C. ?1514(c)(3) providing that a protest by a surety which has an unsatisfied legal claim under its bond may be filed within 90 days from the date of mailing of notice of demand for payment against its bond.

Liquidation has been defined as "the final computation by the Customs Service of all duties (including any antidumping or countervailing duties) accruing on that entry." American Permac, Inc. v. United States, 10 CIT 535, 537 (1986). Generally, an entry of merchandise not liquidated within one year from the date of entry of such merchandise, "shall be deemed liquidated at the rate of duty, value, quantity, and amount of duties asserted at the time of entry by the importer of record." 19 U.S.C. extend this period if: 1) information needed for the proper appraisement or classification of the merchandise is not available to the appropriate customs officer; 2) liquidation is suspended as required by statute or court order; or 3) the importer, consignee, or his agent requests such extension and shows good cause therefor.

In the present matter, Customs had the authority to extend the initial one year time period for liquidation. From the Customs "ACS entry archive" records for the entries at issue, liquidation was extended twice and the notice of extension was given to the importer of record. Surety was notified of the extensions on December 10, 1994 and October 21, 1995, and on October 1, 1994 and September 9, 1995, for the two entries at issue. In this case the extensions were done under Customs code "EXT CDE 01" which meant that "information needed for the proper appraisement or classification of the merchandise is not available to the appropriate customs officer." See 19 U.S.C. Ins. Co. [Carreon] v. United States, 799 F. Supp. 120 (CIT 1992), rev'd, 6 F3d 763 (Fed. Cir. 1993). According to documents in the file, in particular the CF 29s, the extensions of liquidation were proper because there was a question as to the valuation of the merchandise at issue.

2. Appraisement

Before addressing the appraisement issue, we note that pursuant to 19 U.S.C. ?1514(c)(1)(A) through (D) the initial protest is statutorily inadequate. The initial protest, which was timely filed (within 90 days of the demand on the surety) did no more than identify the entries protested, the dates of entry, the dates of liquidation, and the demand date, make the non-collusion statement required by the statute for a surety protest, and provide a string of potential claims as a protective action. In view of the requirement in 19 U.S.C. ?1514 that "[a] protest must set forth distinctly and specifically ... each decision described in [19 U.S.C. ?1514(a)] as to which protest is made ... [and] the nature of each objection and the reasons therefor ....", the initial protest does not appear to be sufficient. See, in regard to the foregoing, Mattel, Inc. v. United States, 72 Cust. Ct. 257, 262, C.D. 4547, 377 F. Supp. 955 (1974), in which the Court summarized prior Court decisions on this issue as follows: "In short, the court, taking a liberal posture, has held that however cryptic, inartistic, or poorly drawn a communication may be, it is sufficient as a protest for purposes of section 514 if it conveys enough information to apprise knowledgeable officials of the importer's intent and the relief sought". It is difficult to see how the initial protest met even this standard.

As to the "supplemental" protest, we note that under 19 U.S.C. ?1514, "[n]ew grounds in support of objections raised by a valid protest or amendment thereto may be presented for consideration in connection with the review of such protest ... at any time prior to the disposition of the protest ...." Also under 19 U.S.C.?1514, a protest may be amended only "prior to the expiration of the time in which such protest could have been filed under [19 U.S.C. ?1514]." Thus, the "supplemental" protest was not timely as an amendment of the initial protest (i.e., it was filed more than 90 days after the demand on the surety) and, accordingly, it could only be considered if it raises new grounds in support of objections raised by a valid protest or amendment. As stated above, the validity of the initial protest is doubtful. Although there are serious procedural problems with this protest, we are addressing the substance of issues related to appraisement raised in the "supplemented" protest.

The preferred method of appraising merchandise imported into the United States is transaction value pursuant to ?402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA), codified at 19 U.S.C. ?1401a. ?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 amounts for certain enumerated additions.

In this case, it is our understanding that the importer and seller are related pursuant to ?402(g)(1) of the TAA. related parties is acceptable only if an examination of the circumstances of the sale indicates that the relationship between the parties does not influence the price actually paid or payable or, if the transaction value of imported merchandise closely approximates the transaction value of identical or similar merchandise in sales to unrelated buyers in the U.S. or the deductive or computed value for identical or similar merchandise. Insofar as no evidence has been presented in this regard which supports the acceptability of transaction value, it is appropriate to proceed sequentially through the subsequent provisions of ?402 of the TAA for an alternative method of appraisement. See, ?402(a)(1) of the TAA. The alternative bases of appraisement, in order of precedence, are: the transaction value of identical or similar merchandise (?402(c) of the TAA); deductive value (?402(d) of the TAA); computed value (?402(e) of the TAA); and the "fallback" method (?402(f)).

?402(c) of the TAA provides that 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. You appraised the wearing apparel pursuant to ?402(c) of the TAA under transaction value of similar merchandise. ?402(h)(4) of the TAA defines "similar merchandise" as:

(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 component 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) of this section, 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

The imported wearing apparel was manufactured in Indonesia. The similar merchandise you used to appraise the wearing apparel was manufactured in Indonesia and exported to the U.S. at or about the same time as the wearing apparel at issue, i.e., December 5, 1993 and April 2, 1994.

The surety contends that the merchandise is correctly appraised at the invoice value between the related seller and the importer based on the declaration made by the importer stating that the invoice price was the total amount paid the manufacturer, the importer's protests filed before it went out of business, and the opinions of independent third parties concerning the reasonableness of the invoice unit price. We do not find that the statements and evidence presented by the surety have controlling evidentiary value.

You stated that Mama & Leon imported garments of the quality sold to elite department stores. Whereas, the opinions gathered by the surety were obtained from companies without benefit of inspecting samples of the imported garments and who import different quality merchandise. Thus, a comparison between different quality garments is inappropriate. Additionally, we do not find the importer's certification compelling without evidence of proof of the invoice price payment. However, even if we were to find the importer's certification was satisfactory proof of payment of the invoice price, this evidence does not prove that the relationship of the related parties did not influence the price of the imported merchandise. It is also our opinion that the fact the importer filed protests is not relevant to the issues under consideration. Based on the evidence presented, the information submitted is insufficient to support the claim that the imported wearing apparel should be appraised at the invoice value between the related seller and the importer. Therefore, based on the evidence presented the imported wearing apparel was appropriately appraised under transaction value of similar merchandise pursuant to ?402(c) of the TAA.

HOLDING:

Based on the evidence submitted, we hold as follows:

1. The entries at issue were liquidated in a timely manner and the time period for liquidation properly was extended in accordance with 19 U.S.C. ?1504(a) and (b).

2. Even if the protest was sufficient and/or timely pursuant to 19 U.S.C. ?1514, the wearing apparel was appropriately appraised under transaction value of similar merchandise pursuant to

The protest is 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,

Acting Director
International Trade Compliance

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