HQ W548679 - Application for Further Review of Protest 3195-04-100158; transaction value; insufficient information; transaction value of similar merchandise - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 2007 HQ Rulings > HQ W116691 - HQ W562827 > HQ W548679

Previous Ruling Next Ruling
HQ W548679

April 20, 2007

OT:RR:CTF:VS 548679 GG

CATEGORY: VALUATION

Port Director
U.S. Customs and Border Protection
605 West Fourth Avenue, Room 2003
Anchorage, AK 99501-2252

RE: Application for Further Review of Protest 3195-04-100158; transaction value; insufficient information; transaction value of similar merchandise

Dear Port Director:

This is our decision on the application for further review of the above referenced protest.

FACTS:

This involves the importation of DVD’s purchased by Mediacopy of El Paso, Texas, from its related seller, Infodisc Korea. In September 2002, FedEx Trade Networks filed five entries on behalf of Mediacopy. FedEx Trade Networks was the importer of record. On May 15, 2003, U.S. Customs and Border Protection (CBP) sent CF 28 Requests for Information to FedEx Trade Networks, asking for payment documents, including copies of purchase orders and bank wire transfers or cancelled checks. CBP issued a CF 29 Notice of Action on October 15, 2003, which indicated that it had not received a response to its previous CF 28’s and proposed a value advance for each of the five entries. On February 24, 2004, CBP issued another CF 29, notifying the importer that it had not received a response to the CF 28’s and that it was value advancing the DVD’s to $5.00 each, based on the transaction value of similar merchandise. The entries were liquidated on March 12, 2004.

Mediacopy sent a letter to CBP dated March 31, 2004, that acknowledged the previous request for information and attached purchase orders with respective invoices and samples of its bank activity log. The company also noted that “Infodisc Technology is the parent company of Mediacopy [and that] therefore, this transaction was done internally.” Mediacopy filed a protest on June 10, 2004, which was the 90th day after liquidation. The protest is of the liquidation of all five entries. The reason Mediacopy gave for its protest is that “per attached invoices and purchase orders DVD value is $0.47, $0.38, $0.55, $0.59 respectively.”

After reviewing the protest, CBP on September 13, 2004 sent new CF 28 Requests for Information. CBP noted that the prices on the purchase orders were higher than the prices on the invoices, and asked for an explanation of the discrepancy. It also requested payment documentation. In addition, CBP asked whether any royalty or license fees were paid for the right to use, produce or sell the DVD’s, and whether there were any other costs associated with the transactions.

Mediacopy responded by letters dated October 14, 2004. It explained that the price discrepancy was due to an internal error in its pricing system, and that the lower invoice prices were the correct prices. The company also enclosed various attachments with each letter, including in some cases proof of authorization of the right to replicate the DVD’s granted by the copyright holder, MGM. Other attachments included sample invoices showing the amounts that Mediacopy charges clients for a “packaged DVD job” or for “a replication of a DVD job.” No further explanation was provided.

On January 6, 2005, CBP issued CF 28’s, indicating that it found the information provided in the protest and the October 14, 2004 letter to be insufficient to substantiate the lower value claims. The protestant was given a further 30 days to provide more information and to answer CBP’s earlier inquiries about the existence of royalties or license fees. The import specialist who was managing the case made a notation on the CF 28 on March 8, 2005 that no response was received.

ISSUE:

Whether the facts and submitted documentation support the use of the transaction value basis of appraisement with respect to the transactions in question.

LAW AND ANALYSIS:

Merchandise imported into the United States is appraised in accordance with section 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 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 additions for packing costs, selling commissions, assists, proceeds of subsequent resale, and “any royalty or license fee related to the imported merchandise that the buyer is required to pay, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the United States.” (19 U.S.C. § 1401a(b)(1)(D)). These additions apply only if they are not already included in the price actually paid or payable.

Additions to the price actually paid or payable will be made only if there is sufficient information to establish the accuracy of the additions and the extent to which they are not included in the price. If sufficient information is not available with respect to any amount, the transaction value of the imported merchandise concerned shall be treated, for purposes of this section, as one that cannot be determined. 19 U.S.C. § 1401a(b)(1); 19 CFR § 152.103(c). In Headquarters Ruling Letter (“HQ”) 547168, dated April 12, 1999, CBP determined that there was insufficient information to appraise imported watermelons under transaction value, because it was unclear if watermelon seed had been supplied by the buyers to the Mexican growers at reduced cost. If supplied at reduced cost the seed would constitute an assist. In HQ 544178, dated September 19, 1988, CBP ruled out the use of transaction value when the amount of a selling commission could not be determined.

In this particular case, there were several factors that suggested that transaction value was an inappropriate appraisement method. Transaction value requires a sale for exportation. Mediacopy did not respond in a timely manner when asked, by CF 28 dated May 15, 2003, to submit purchase orders and payment documents. CBP thus could not verify that sales did, in fact, take place. A further concern about the use of transaction value surfaced when Mediacopy did not respond to CBP’s several inquiries about royalties and license fees, especially considering that Mediacopy disclosed that it had been granted DVD replication rights by a copyright holder. No response to the question of royalties or licenses fees was ever received.

Under these circumstances, transaction value was properly eliminated as a means of appraisement because CBP could not verify that a sale took place and had insufficient information about the existence of royalties or license fees.

HOLDING:

In view of the foregoing, it is our conclusion that transaction value pursuant to section 402(b) was properly rejected as a means of appraisement. The DVD’s were properly appraised using the transaction value of similar merchandise. The protest is DENIED.

In accordance with the Protest/Petition Processing Handbook (CIS HB, June 2002, pp. 18 and 21), you are to mail this decision, together with the Customs Form 19, 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 make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

Myles B. Harmon
Director

Previous Ruling Next Ruling