VAL CO:R:C:V 545144 ph
District Director
101 East Main Street
Norfolk, VA 23510
RE: Application for Further Review of Protest No. 1401-92-100064;
Proper Transaction Value of Imported Merchandise; Sale for
Exportation
Dear Sir:
The above-referenced protest and application for further
review is against your decision regarding the proper transaction
value of certain dolls imported by QVC Network (a television
homeshopping company; hereinafter referred to as "QVC").
FACTS:
According to a November 10, 1992 Customs Protest and Summons
Information Report, and an August 12, 1992 submission from QVC,
QVC was the importer of the merchandise. The imported
merchandise consists of Marie Osmond dolls. QVC ordered 5041
dolls from Knickerbocker Creations Ltd. (hereinafter referred to
as "Knickerbocker"). As indicated by the respective invoices,
Knickerbocker purchased the dolls from Jui Shan Co., Ltd.
(hereinafter referred to as "Jui Shan") in Taiwan, at a total
price of $185,279.00. Knickerbocker, in turn, sold the dolls to
QVC at a total price of $246,537.50, FOB Taiwan. QVC paid for
the merchandise by means of a transferrable open letter of credit
to Knickerbocker. Further, according to a July 22, 1991 letter
from Knickerbocker to QVC, Knickerbocker has a contractual
agreement with Marie Osmond, according to which Knickerbocker
holds the licensing and distribution rights for developing and
marketing a Marie Osmond doll. In response to an inquiry from
the concerned import specialist, QVC stated that they had not
utilized any sales contracts in the transaction with
Knickerbocker. Neither the purchase order from QVC to
Knickerbocker nor the invoice from Knickerbocker to QVC indicates
the sale or transfer of the right to use the "Marie Osmond" name
on the dolls.
ISSUE:
Whether the transaction between Jui Shan and Knickerbocker
or the transaction between Knickerbocker and QVC determines the
"price actually paid or payable" for the merchandise when sold
for exportation.
LAW AND ANALYSIS:
The method of appraisement is transaction value pursuant to
section 402(b) of the Tariff Act of 1930, as amended by the Trade
Agreements Act of 1979 (TAA; 19 U.S.C. 1401a). Section 402(b)(1)
of the TAA provides, in pertinent part, that 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 enumerated additions.
The "price actually paid or payable" is defined in section
402(b)(4)(A) of the TAA as "the total payment (whether direct or
indirect, and exclusive of any costs, charges, or expenses
incurred for transportation, insurance, and related services
incident to the international shipment of the merchandise...)
made,or to be made, for the imported merchandise by the buyer to,
or for the benefit of, the seller."
In Nissho Iwai American Corp. v. United States, No. 92-
1239, slip op. (Fed. Cir. Dec. 28, 1992) and Synergy Sport
International, Ltd. v. United States, No. 93-5, slip op. (Ct.
Int'l. Trade Jan. 12, 1993), the U.S. Court of Appeals for the
Federal Circuit and the Court of International Trade,
respectively, addressed the proper dutiable value of merchandise
imported pursuant to a three-tiered distribution arrangement
involving a foreign manufacturer, a middleman and a U.S.
purchaser. In both cases the middleman was the importer of
record. In each case the court held that the price paid by the
middleman/importer was the proper basis for transaction value.
Each court further stated that in order for a transaction to be
viable under the valuation statute, it must be a sale negotiated
at arm's length, free from any nonmarket influences and involving
goods clearly destined for the United States.
Likewise, we note that in the context of filing an entry,
Customs Form 7501, an importer is required to make a value
declaration. As indicated by the language of CF 7501 and the
language of the valuation statute, there is a presumption that
such transaction value is based on the price paid by the
importer.
In keeping with the the courts' respective holdings and our
own precedent, we will continue to presume that an importer's
declared transaction value is based on the price the importer
paid. In further keeping with the courts' holdings, we note that
in those situations where an importer requests appraisement based
on the price paid by the middleman to the foreign manufacturer
(and the importer is not the middleman), the importer may do so.
However, it will be the importer's responsibility to show that
such price is acceptable under the standard set forth in Nissho
Iwai and Synergy. That is, the importer must present sufficient
evidence that the sale was an "arm's length sale," and that it
was "a sale for export to the United States," within the meaning
of 19 U.S.C. 1401a(b).
In this case, QVC is the importer and, therefore, based on
the above-noted presumption, the appraising officer correctly
based the transaction value of the imported merchandise on the
price that QVC paid to Knickerbocker. With regards to whether or
not transaction value may be based on the transaction between
Knickerbocker and the foreign manufacturer, we note that it is
not clear from the evidence that such transaction was "a sale for
export to the United States," within the standard set forth by
the court. That is, in accordance with the court's standard, the
evidence must establish that at the time Knickerbocker purchased,
or contracted to purchase, the imported goods, they were "clearly
destined for the United States." No such evidence has been
submitted here. In addition, no evidence has been submitted that
goes toward the courts' second requirement, i.e. that the sale
was "at arm's length." That is, the file contains no evidence on
the relationship between Knickerbocker and Jui Shan.
Consequently, we cannot make a determination here that the
transaction of the imported merchandise should be based on the
sale between Jui Shan and Knickerbocker.
Lastly, we note that while it appears from the materials
submitted that the transfer of a royalty (for use of the name
"Marie Osmond") was involved in the transaction between
Knickerbocker and QVC, QVC has stated that a royalty fee was
neither discussed nor contracted for. Therefore, we cannot make
a determination with regard to that issue other than to assume
that any such fee was included in the invoiced price of the
merchandise, from Knickerbocker to QVC.
HOLDING:
Based on the evidence submitted, and for the reasons cited
above, the appraising officer correctly based the transaction
value of the imported merchandise on the price paid by the
importer, QVC, to Knickerbocker. 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 sixty days
from the date of this letter. Any reliquidation of the entry in
accordance with the decision must be accomplished prior to
mailing the 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, Lexis, Freedom of Information Act and other public
access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division