VAL CO:R:C:V 544944 ILK
District Director of Customs
10 Causeway St.
Room 603
Boston, MA 02222-1059
RE: Decision on Application for Further Review of Protest No.
0401-91-100727; Adjustment of Price Actually Paid or Payable
for Metals
Dear Sir:
This protest was filed against a Port of Hartford
appraisement decision in the liquidation of an entry pertaining
to the importation of fire refined copper ingot bars purchased by
xxxxx xxxxx xxxxxxxxxxx (hereinafter referred to as "the
importer"). The merchandise was sold by xxxxxxxxxxx xxxxxxxx xxx
xxxxx xx xxxxx (xxxxxxx) (hereinafter referred to as "the
seller"), an unrelated entity, of Chile.
FACTS:
The importer has submitted a purchase contract which is
stated to be between it and the seller, however, the seller is
not identified as a party anywhere in the document and the
document is signed only by the importer. Pursuant to the price
provision of the purchase contract the fire refined copper ingot
bars are:
To be priced basis Comex first position settlement
price average for month following month of shipment
less [seller's] discount.
The importer has also submitted copies of two preliminary
invoices, two final invoices, the April, 1991 average of the
Comex HG 1st Position as shown in Metals Week Journal (the copy
submitted is illegible), and evidence of the importer's payment
to the seller, the seller's transfer of funds to the importer and
duty paid to U.S. Customs.
The two preliminary invoices, each dated February 28, 1991,
indicate a total price of $742,451.32 (hereinafter referred to as
"preliminary invoice price") for the merchandise. The final
invoices, each dated May 3, 1991, indicate a total invoice price
of $698,327.46 (hereinafter referred to as "final invoice
price"). The price per pound on the preliminary invoices is
$1.12700 and $1.12200 and on the final invoices it is $1.05355
and $1.05855. Language on the final invoices states that the
invoices cancel and replace the preliminary invoices. It is
assumed for the purposes of this ruling that the prices per pound
on the final invoices are consistent with the April, 1991 average
of the Comex HG 1st Position as shown in the copy of the Metals
Week Journal provided. As previously noted the page submitted
from Metals Week is illegible with respect to the April average.
The documentation shows that the importer transferred $742,451.32
to the seller, based on the preliminary invoice price, and that
subsequently $44,123.86 was credited to the importer's account
from the seller, based on the final invoice price. The credited
amount equals the difference between the preliminary invoice
price and the final invoice price. The importer has submitted
documentation indicating payment of $8,623.47 to the U.S. Customs
Service, which is the duty fixed based on the preliminary invoice
price of the merchandise.
The importer takes the position that the final invoice price
is arrived at by application of a formula and that the
transaction value of the merchandise should be determined
pursuant to 19 C.F.R. 152.103(a)(1), based on the final invoice
price. The importer states that it has been granted a Protest on
the same issue, pertaining to the same merchandise at the Port of
Newark, however no substantiating documentation has been
submitted.
ISSUE:
Whether the preliminary invoice price as modified subsequent
to importation represents the "price actually paid or payable,"
pursuant to 19 C.F.R. 152.103(a)(1), for the metals sold for
exportation to the United States.
LAW AND ANALYSIS:
There is no dispute that transaction value, pursuant to
section 402(b) of the Tariff Act of 1930, as amended by the Trade
Agreements Act of 1979 (TAA), is applicable. Transaction value
is defined by TAA section 402(b)(1) as "the price actually paid
or payable for the merchandise when sold for exportation to the
United States..." plus certain additions specified in 402(b)(1)
(A) through (E). The importer maintains that the final invoice
price is an adjustment of the preliminary invoice price pursuant
to the application of a formula and that transaction value should
be based on the final invoice price. With the subject entry, the
preliminary invoice price is decreased in accordance with the
price provision in the purchase contract, and money is refunded
to the importer.
Section 402(b)(4)(B) states that:
Any rebate of, or other decrease in, the price actually
paid or payable that is made or otherwise effected
between the buyer and seller after the date of
importation of the merchandise into the United states
shall be disregarded in determining the transaction
value under paragraph (1).
We have ruled that prices subject to an adjustment, either
upward or downward, cannot represent transaction value. See e.g.
Headquarters Ruling Letter (HRL) 543252 dated March 30, 1984.
Those rulings have been made pursuant to section 152.103(a)(1),
Customs Regulations, which provides that:
In determining transaction value, the price
actually paid or payable will be considered without
regard to its method of derivation. It may be the
result of discounts, increases, or negotiations, or may
be arrived at by the application of a formula, such as
the price in effect on the date of export in the London
Commodity Market...(Emphasis added)
Prices which require adjustment, either upward or downward, and
are arrived at by the application of a formula, represent
transaction value under the above-cited section of the
regulations. Since the formula is in existence prior to the date
of exportation, the downward price adjustment, and any ensuing
payment or transfer of funds from the seller to the importer is
not considered a rebate pursuant to TAA section 402(b)(4)(B).
See e.g. HRL 543252 supra.
Customs has distinguished between those circumstances in
which the price is arrived at pursuant to a formula, and those in
which subsequent proceeds to the seller, or a rebate of or other
decrease in the price actually paid or payable is arrived at by a
formula. In TAA No. 47 we ruled that section 152.103(a)(1)
relates solely to a determination of the "price actually paid or
payable" and not to a determination of the amounts specified in
402(b)(1)(A) through (E). In TAA No. 47, the issue involved
amounts payable to the seller that were determined pursuant to a
formula subsequent to importation. It was determined that the
amounts paid to the seller were proceeds which were determined
pursuant to a formula, and that the price actually paid or
payable for the imported merchandise was the base price agreed
upon by the importer and exporter, and was known at the time of
importation. In TAA No. 47 we ruled that where the final price
paid by a buyer to a seller is dependent on the buyer's resale
price in the United States, the transaction value for the
merchandise is the base price, plus any amount ultimately
accruing to the seller as a result of changes in the buyer's
resale price.
Similarly, in the instant case, a base price is agreed upon
between the seller and importer, and a subsequent credit of funds
payable to the importer is determined pursuant to the formula.
The formula basically refers to the published average price of
the imported merchandise subsequent to the importation. The
formula is thus effectively nothing but a reference to the resale
price of the merchandise, and in accordance with TAA No. 47 the
transaction value for the merchandise is the base price, or
preliminary invoice price, as it has been referred to in this
case. The payment to the importer from the seller subsequent to
importation was a rebate of or other decrease in the price paid
or payable made after the date of importation and should thus be
disregarded in determining transaction value, pursuant to TAA
section 402(b)(4)(B).
In the instant case, use of the Comex First Position
Settlement Price average is not a formula for determining the
price actually paid or payable, but rather is a formula for
determining the rebate to the importer. Under the circumstances
of this case, the price actually paid or payable for the fire
refined copper ingot bars is the preliminary invoice price agreed
upon by the importer and exporter, which amount is known at the
time of importation. The preliminary invoice price represents
the price actually paid or payable and forms the basis of
transaction value. The adjustments made to the preliminary
invoice price constitute either rebates or other decreases in the
price actually paid or payable, and duties should be fixed based
on the preliminary invoice price.
HOLDING:
Based on the foregoing, the arrangement contained in the
purchase contract between the importer and seller does not
constitute a formula under 19 CFR 152.103(a)(1), and the
preliminary invoice price represents the price actually paid or
payable.
Consistent with the decision set forth above, you are hereby
directed to deny the subject protest. A copy of this decision
should be attached to Customs Form 19 and mailed to the
protestant as part of the notice of action on the protest.
Sincerely,
John Durant, Director
Commercial Rulings Division