HQ 546319 - Reconsideration of HRL 545272 (Internal Advice Number 22/93 ); Sale for Exportation; Related Parties. - United States International Trade Commision Rulings

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HQ 546319

April 18, 1997

RR:IT:VA 546319 er
CATEGORY: VALUATION

Port Director
JFK Airport Area
Bldg. 178
Jamaica, NY 11430

RE: Reconsideration of HRL 545272 (Internal Advice Number 22/93 ); Sale for Exportation; Related Parties.

Dear Sir:

This is in response to counsel’s submission on behalf of its client, Siemens Medical Systems, Inc., (hereinafter referred to as “SMS” or the “importer”) in which it requests reconsideration and modification of the request for internal advice which was issued as HRL 545272 dated August 17, 1995. Counsel’s request for reconsideration is made on the basis of information which it claims was not previously considered in HRL 545272. With the exception of the name of the importer, SMS, counsel’s request for confidential treatment is granted with regard to the names of the other parties to the sales contracts, the products purchased and the purchase prices. Also granted is counsel’s request for confidential treatment for certain financial information obtained by counsel from parties who have requested that the information not be revealed to the importer or to its related party in Germany. All confidential information appearing in this decision is bracketed and will be deleted from the published version. We regret the delay in responding.

FACTS:

The parties involved in the sales and importation of the merchandise which is the subject of this reconsideration are: (i) SMS, the importer/purchaser from[ ] of []; (ii) [], the seller of [] and [] systems to SMS; and (iii) [], the manufacturer and seller to [] and exporter to SMS of the merchandise at issue, [].

SMS, [] and [] are related parties, as defined in section 402(g) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 USC 1401a(g)). SMS purchases the [] systems from []. [], however, does not manufacture all of the [] for the [] systems, but at its discretion, may purchase them from other vendors. In the subject transactions, the [] are manufactured in England by [] for sale to [] and subsequent resale to SMS. The [] are shipped directly from [] to SMS in the U.S.

According to the facts in HRL 545272 dated August 17, 1995, the [] were ordered from [] by [] after receipt of purchase orders from SMS. The shipments of [] from [Oxford] to SMS are accompanied by invoices issued by [] to []. The invoices set forth the amount which [] will receive in payment from [] for the [] and entry was made based on this invoiced price. After importation into the U.S., the [] are incorporated into the [] systems.

The appraisement of the [] was the subject of a response to a request for internal advice, issued as HRL 545272. There the importer claimed that the [] should be appraised under transaction value based on the price reflected on [] invoices to []. Customs determined that there was a bona fide sale between [] and [] and that the [] were clearly destined for exportation to the U.S. when sold by [] to []. However, Customs found that the evidence presented failed to establish that the sales between [] and [] were at arm’s length and that the prices were not affected by the relationship. Customs, accordingly, concluded that the merchandise should be appraised based on the higher price paid by SMS to [].

In ruling that the sale to SMS formed the basis for appraisement in HRL 545272, Customs concluded that the evidence presented regarding the circumstances of the sale between [] and [] failed to satisfy the criteria set forth in section 152.103(l)(1)(i) - (iii), Customs Regulations (19 CFR 152.103(l)(1)(i)-(iii). Specifically, Customs pointed to the absence of evidence to prove that [] prices to [] were consistent with normal pricing practices of the industry or whether [] charged the same prices to unrelated buyers. The ruling also stated that the record lacked financial information indicating that, in pricing the [], [] recovered all costs and realized a profit equivalent to its overall profit in sales of the [] to []. Customs, additionally, pointed out that no information regarding test values, within the meaning of section 152.103(l)(2), was presented.

In its request for reconsideration, counsel presents information which it claims was not previously considered in HRL 545272. Namely, counsel claims that during the same period as the merchandise at issue was imported, [] sold the same merchandise to an unrelated purchaser (“third party”) in the U.S. at prices closely approximating those between [] and []. In support of this claim, counsel submitted additional information, including copies of invoices for the sale of [] between [] and the third party,. The additional information submitted reflects that identical merchandise was sold by [] to the third party and to [] at substantially the same prices and during the same time period. Counsel also submitted a written affirmation from the Director of Finance for [], in which he affirms, under penalty of perjury, that (1) [] and the third party are not related parties and (2) the price appearing on the commercial invoices provided by [] to the third party (copies of which were submitted to this office) represents the whole price charged to the third party for the merchandise described and represents the total payment received by [] for the sale of the imported merchandise.

After receipt of the additional information from counsel, this office asked the import specialist to determine whether any entries had been of made of merchandise which supported counsel’s claim that identical merchandise was sold by [] to the third party at prices closely approximating those between [] and []. The import specialist was able to retrieve entry
documentation which reflects that identical merchandise was sold by [] to the third party during the same time period and at closely approximate prices.

ISSUE:

Based upon information not previously considered, whether upon reconsideration the imported merchandise should be appraised on the basis of transaction value at the prices paid by [] to []?

LAW AND ANALYSIS:

Merchandise imported into the U.S. 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 under the TAA is transaction value, defined as the “price actually paid or payable for the merchandise when sold for exportation to the United States,” plus certain enumerated additions. 19 U.S.C. 1401a(b)(1).

However, imported merchandise is appraised under transaction value only if the buyer and seller are not related, or if related, the transaction value is deemed to be acceptable. Here the parties to the transaction, SMS, [] and [], are related pursuant to section 402(g)(1)of the TAA. 19 U.S.C. 1401a(g)(1).

In HRL 545272 Customs found that a bona fide sale occurred between [] and [] and that at the time the merchandise was sold to [] it was clearly destined for the U.S. What must be reconsidered is whether the additional information presented is sufficient to establish that the relationship between these related parties did not influence the price.

Pursuant to 19 U.S.C. 1401a(b)(2)(B) the transaction value between a related buyer and seller is acceptable for the purposes of appraisement:

[I]f an examination of the circumstances of the sale of the imported merchandise indicates that the relationship between the parties did not influence the price actually paid or payable; or if the transaction value of the imported merchandise closely approximates --

(i) the transaction value of identical merchandise, or of similar merchandise, in sales to unrelated buyer in the United States; or (ii) the deductive value or computed value for identical merchandise or similar merchandise;
but only if each value referred to in clause (i) or (ii) that is used for comparison relates to merchandise that was exported to the United States at or about the same time as the imported merchandise.

19 CFR 152.103(l)(1) and (2) parallels the statutory provision. As provided by statute and by regulation, either test values or the circumstances of sale approach may be used to support the use of transaction value.

The term “test values” refers to values previously determined pursuant to actual appraisements of imported merchandise. The additional information submitted by counsel reveals that during the same time period as the imported merchandise was being imported, [] sold identical merchandise to an unrelated third party. As far as we have been able to ascertain, the invoiced prices between [] and the third party were used as the transaction value of the imported merchandise and appear to closely approximate the prices for identical merchandise sold from [] to []. This information was corroborated by retrieving entry documentation for identical merchandise previously sold by [] to the third party and imported by the third party.

Section 152.103(l)(2)(i) (19 CFR 152.103(l)(2)(i)-(iii) identifies certain factors that will be examined to determine if the transaction value closely approximates a test value and whether any adjustments are necessary. With regard to the merchandise sold by [] to both [] and the third party we have not been presented with any information which indicates that any adjustments are necessary. We accordingly find that the price beween [] and [] was not influenced by their relationship and that the imported merchandise should be appraised under transaction value based on the price actually paid or payable by [] to [].

HOLDING:

Upon reconsideration, based upon the additional information presented by counsel, Customs is satisfied that the relationship between [] and [] did not influence the price of the imported merchandise. Accordingly, the merchandise should be appraised under transaction value based on the price actually paid or payable between [] and [].

This decision should be mailed by your office to the internal advice requester no later than 60 days from the date of this letter. On that date 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, Lexis, Freedom of Information Act and other public access channels.

Sincerely,

Acting Director
International Trade Compliance Division

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