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HQ 546673





March 17, 1998

RR:IT:VA 546673 AJS

CATEGORY: VALUATION

Port Director
U.S. Customs Service
33 New Montgomery Street
San Francisco, CA 94105

RE: Application for Further Review of Protest No. 2809-97-100125; related party transaction; no sale for exportation; no previously accepted transaction value of identical or similar merchandise; computed value.

Dear Sir:

This is in response to the application for further review of the above-referenced protest. The protest was filed on behalf of Heng Ngai Jewelry, Inc. (Heng Ngai), the importer of record, against your decision concerning the appraisement of gold jewelry.

FACTS:

The two entries listed on the Customs Form (CF) 19 were filed on April 9, 1996, and April 20, 1996, and involve the appraisement of gold jewelry imported by Heng Ngai and obtained from its related supplier (i.e., Heng Ngai of Hong Kong). The protestant made entry based on the invoice price. This price consists of a unit price per item plus a 10% addition designated on the invoice as "manufacturers profit". Customs appraised the subject merchandise under computed value using information provided by the protestant. The amount for profit and general expenses was calculated by dividing the manufacturer's total general expenses and gross profit by its sales for the latest year provided. Counsel has not been provided any information to refute the accuracy of this calculation. Transaction value was eliminated as a basis of appraisement based on evidence that the jewelry was not sold for exportation to the U.S. Specifically, there was some evidence that the subject merchandise was only entered for possible sale in trade shows and would be returned to the foreign supplier if not sold. Customs also found insufficient information regarding the transaction value of identical or similar merchandise and no information was furnished pertaining to deductive value.

In the CF 19, the protestant asserts that the subject jewelry should be appraised at either transaction value or transaction value of identical or similar merchandise. On April 10, 1997, counsel for the protestant submitted additional information. In this submission, counsel specifically asserts that the invoice price closely approximates the price paid or payable for identical or similar merchandise sold for export to the U.S. to unrelated parties. This additional information consists of invoices indicating sales by the supplier for merchandise sold to unrelated buyers in the U.S. No entry numbers or other information to indicate that the merchandise represents actual appraised entries was provided for these invoices to unrelated parties. In addition, other than the stock numbers no detailed description of the merchandise is provided.

On September 30, 1997, counsel submitted additional information pursuant to our request. Specifically, this office requested information on actual entries for the invoices provided by counsel in its April 10 submission. Counsel stated that the entries may be difficult to produce since the protestant was not the importer in those instances. Counsel instead submitted various airway bills from Federal Express and Brinks which allegedly reflect the value of goods declared to Customs at other ports of entry. Counsel states that it assumes that the corresponding entries were appraised and liquidated at the same values. However, no specific evidence was provided to support this statement.

ISSUE:

Was the merchandise properly appraised under the circumstances presented.

LAW AND ANALYSIS:

The preferred method of appraisement is transaction value which is defined by 402(b)(1) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA, 19 U.S.C. 1401a(b)) as "the price actually paid or payable for the merchandise when sold for exportation to the United States. . ." plus certain additions specified in section 1401a(b)(1)(A) through (E). The term "price actually paid or payable" is defined in section 1401a(b)(4)(A) as " . . . the total payment (whether direct or indirect . . .) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller." If the buyer and seller are related parties, transaction value is acceptable only if certain tests are satisfied. See 19 U.S.C. 1401a(b)(2)(B). In this case, there was evidence that some of the subject merchandise was entered for possible sale in trade shows. Merchandise not sold at the trade shows would be returned to the foreign supplier. For purposes of determining transaction value in appraising imported merchandise, the sale for exportation to the U.S. must take place at some unspecified time prior to the exportation of the goods. Headquarters Ruling Letter (HRL) 543868 (March 5, 1987). If the sale for exportation does not take place prior to the export of the goods, transaction value is inapplicable as a means
of appraisement. Id. In this case, the evidence does not indicate that the goods were sold for exportation to the U.S. Accordingly, transaction value is not applicable.

Under the TAA it is necessary to proceed sequentially through the remaining bases of appraisement to determine the appropriate valuation method. 19 U.S.C. 1401a(a)(1). The second appraisement method in order of statutory preference is transaction value of identical and similar merchandise under section 1401a(c). This method refers to a previously accepted transaction value of identical or similar merchandise which was exported at or about the same time as the merchandise being valued. Treasury Decision (T.D.) 91-15 (March 29, 1991). In this case, the protestant has provided invoices for claimed sales to unrelated buyers in the U.S. of identical merchandise but no corresponding entry information to determine if these invoices relate to actual appraised entries of merchandise. Counsel has also provided airway bills and corresponding invoices for claimed sales to unrelated buyers in the U.S. of identical merchandise but no corresponding entry information to determine if these airway bills and invoices relate to actual appraised entries of merchandise. Therefore, Customs is unable to determine if this information relates to previously accepted transaction values. Also, counsel has not established that the merchandise in question is in fact identical or similar to the merchandise covered by these documents. Although some of the stock numbers are the same, the descriptions are too general to conclude that the merchandise in these documents is necessarily identical or similar to the subject merchandise. Consequently, the subject merchandise may not be appraised under the transaction value of identical or similar merchandise pursuant to section 1401a(c).

The next method of appraisement in sequential order is deductive value. 19 U.S.C. 1401a(a)(1)(D). Deductive value is based on U.S. sales of imported merchandise. 19 U.S.C. 1401a(d). The importer has not provided information for Customs to make a determination under this method. Therefore, the subject merchandise may not be appraised under the deductive value method pursuant to section 1401a(d).

The next method of appraisement in sequential order is computed value. 19 U.S.C. 1401a(a)(1)(E). Under the computed value method, merchandise is appraised on the basis of the material and processing costs incurred in the production of imported merchandise, plus an amount for profit and general expenses equal to that usually reflected in sales of merchandise of the same class or kind, and the value of any assists and packing costs. 19 U.S.C. 1401a(e)(1)(B). The amount for profit and general expenses shall be based upon the producer's profits and expenses, unless the producer's profits and expenses are inconsistent with those usually reflected in sales of merchandise of the same class or kind as the imported merchandise that are made by producers in the country of exportation for export to the U.S., in which case the amount shall be based on the usual profit and general expenses of such producers in such sales, as determined from sufficient information. 19 U.S.C. 1401a(e)(2)(B). Customs appraised the subject merchandise under the computed value method. The profit and general expense was calculated by dividing the producer's total general expenses and gross profits with sales for the latest year provided. The protestant has not provided any information to refute Customs calculations. Customs has followed the statutory requirements of using the material and processing costs incurred in the production of the subject merchandise. In addition, Customs has followed the requirement that the amount for profit and general expenses shall generally be based on the producer's profit and expenses. We find that this manner of calculating computed value satisfies the requirements of section 1401a(e).

HOLDING:

The protest should be denied. The merchandise was properly appraised using the computed value method.

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 this decision must be accomplished prior to mailing of this 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,


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