VAL CO:R:C:V 545032 ER
District Director
San Diego, CA
RE: Request for Internal Advice concerning the Applicability of
Transaction Value as the Method of Appraisement for Fresh
Produce from Mexico.
Dear Sir:
This is in response to the request for internal advice,
dated June 15, 1992, filed by xxxxxxxxxxxxxxxxxxxx, Customs House
Broker, on behalf its client, xxxxxxxxxxxxxxxxxxxxx (hereinafter
referred to as "xxxxxxx" or "importer") which concerns the
appraisement of fresh produce imported by [the importer] from
xxxxxxxxxxxxxxxxxx (hereinafter referred to as "seller") in
Mexico. The request file was forwarded to this office from you
under separate cover dated June 23, 1992. A Significant
Importation Report from the concerned Field National Import
Specialist ("FNIS") was included and contains an account of his
findings made pursuant to an interview on March 4, 1992, with the
broker, importer and seller. We regret the delay in responding.
FACTS:
A contract exists between the importer and the seller in
which the seller agrees to sell and the importer agrees to buy,
each on an exclusive basis with the other, certain types of fresh
oriental vegetables grown in Mexico. The type of produce is
identified in Appendix A of the contract. The contract provides
that the importer will furnish the seller with all the seed
requirements and will reimburse the seller for the cost of boxes
used for shipment of the produce to the U.S. The terms of sale
are F.O.B. to a city along the United States/Mexican border with
the seller ensuring compliance with all legal requirements and
assuming risk of loss up to the point of delivery. The importer
is responsible for payment of transportation costs, U.S. broker
fees and other fees "relating to the American side of the United
States/Mexican border."
The importer claims that the contract accurately reflects
the price actually paid or payable for the merchandise and hence,
that transaction value is the appropriate method of appraisement.
During a meeting with the FNIS, however, the importer revealed
that $xxx in cash is advanced by the importer to the seller. No
mention of this cash advance is made in the contract and although
a loan agreement was presented to the FNIS during the meeting,
the importer was later unable to provide Customs with a copy of
the agreement or with other documentation evidencing the the
total payment from the importer to the seller.
Because the importer is unable to present Customs with
verifiable data on which to base transaction value, the FNIS
recommends appraisement under deductive value.
ISSUE:
How should imported fresh produce be appraised where the
contract for the sale of the produce does not contain all
information necessary to ascertain the price actually paid or
payable?
LAW AND ANALYSIS:
The primary method of appraising imported merchandise is
transaction value. 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 additions for
packing costs, selling commissions incurred by the buyer,
assists, royalties or license fees, and proceeds of any
subsequent resale that accrue to the seller. Section 402(b) of
the Tariff Act of 1930, as amended by the Trade Agreements Act of
1979 (TAA; 19 U.S.C. 1401a(b)). The term "price actually paid or
payable" is defined in section 402(b)(4)(A) of the TAA as the
"total payment . . . made, or to be made, for imported
merchandise by the buyer to, or for the benefit of, the seller."
To establish transaction value, the amount actually paid or
payable to the seller must be ascertainable. All monies paid to
the foreign seller are generally part of the "price actually paid
or payable" for the imported merchandise. Thus, if the buyer
advances cash amounts to the seller to enable beginning
production of the merchandise, those advances will be treated as
being part of the "price actually paid or payable" for the
imported merchandise. Where a contract exists, and where prices
and the amount and means of recovering the advance are clear,
appraisement under transaction value is acceptable. (See, HRL
544375 dated July 6, 1990)
In the instant case, the amount actually paid or payable to
the seller under transaction value is not ascertainable from the
contract. Even though the contract purportedly contains all the
terms under which the price actually paid or payable is
determined, the importer later revealed that a $xxx cash advance
is provided to the importer by the buyer. Under transaction
value, as discussed in the preceding paragraph, the $xxx cash
advance would constitute part of the price actually paid or
payable. Thus, had Customs relied on the terms of the contract
to appraise the produce, the figure for the price actually paid
or payable would have been incorrect. In the absence of specific
information pertaining to the cash advance and any other amounts
exchanged between the parties, we are unable to confirm that we
have the total payment for the merchandise. Therefore, we have
no authority to appraise the merchandise using transaction value.
In instances where transaction value cannot be determined,
or cannot be used, sections 402(a)(B) and (C) provide for
appraisement under section 402(c) -- transaction value of
identical or of similar merchandise. (The terms "identical
merchandise" and "similar merchandise" are defined in sections
402(h)(2) and 402(h)(4), respectively.) This means of
appraisement is acceptable provided sufficient information is
available in order for Customs to make any adjustment that may be
necessary under section 402(c)(2). No specific information
pertaining to section 402(c) has been submitted to Headquarters.
If in fact a section 402(c) appraisement is possible, this means
of appraisement may not be disregarded by either Customs or the
importer. (HRL 543912 dated April 19, 1988)
Because transaction value cannot be determined and so long
as transaction value of identical or similar merchandise is not
available, then appraisement under deductive value is appropriate
provided the statutory requirements of section 402(d) are met and
that the necessary documentation and information is obtainable.
HOLDING:
Transaction value under section 402(b) does not exist where
Customs is unable to determine the price actually paid or payable
for the imported merchandise. Provided the transaction value of
identical or similar merchandise also cannot be determined, then
appraisement under deductive value is appropriate so long as it
meets the statutory requirements identified in section 402(d) and
that the necessary documentation and information are obtainable.
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,
John Durant, Director
Commercial Rulings Division