VAL CO:R:C:V 545447 er
District Director Seattle (Area/Port of Blaine)
9901 Pacific Highway
Blaine, WA 98230
Attn: Protest Reviewer
RE: Application for Further Review of Protest No. 3004-93-
100116 Concerning Imported Silk Clothing; Sale for
Exportation; Price Actually Paid or Payable; Transaction
Value; Other Methods of Appraisement.
Dear Sir:
This is in response to your undated memorandum in which you
request further review of protest no. 3004-93-100116, dated August
13, 1993, concerning transactions involving Shekou Enterprises
Canada, Inc. and Shekou Enterprises USA, Inc. We regret the delay
in responding.
FACTS:
The relevant parties to the subject transactions include
Shekou Enterprises Canada, Inc. ("Shekou Canada"), Shekou
Enterprises USA, Inc. ("Shekou USA") and the ultimate United States
buyers. Shekou Canada is the importer of record for merchandise
shipped from Shekou Canada to the United States. While Shekou USA
is incorporated in New York, it apparently has no facilities or
employees. Generally, the merchandise is shipped from Canada
directly to the ultimate United States buyers, although in the
past, merchandise was sometimes first shipped to a sales agent's
showroom in the United States. Invoices to the ultimate United
States buyers designate "FOB Vancouver" shipping terms.
Numerous requests for information (CF 28's) were issued to the
Shekou Canada requesting (1) information regarding the nature of
Shekou USA's operations; (2) purchase orders and invoices to
ultimate United States buyers evidencing whether the goods had been
sold to these buyers before the merchandise was shipped to the
United States; and (3) disclosure of any imported merchandise not
sold for exportation. None of the information or documentation
requested was provided to Customs.
Protestant claims that the merchandise was sold for
exportation from Shekou Canada to Shekou USA at arm's length and
that appraisement should proceed under transaction value on the
basis the entered values.
You believe that the sale for exportation occurred between
Shekou Canada and the ultimate United States buyer and that there
was no intervening sale of the merchandise between Shekou Canada
and Shekou USA. You appraised the merchandise under transaction
value on the basis of invoice price to the United States buyer in
those instances where you were able to obtain the invoices. Where
you were unable to obtain the invoices to the United States buyer
you appraised the merchandise under section 402(f) of the Trade
Agreements Act of 1930, as amended ("TAA").
ISSUE:
Whether the transactions between Shekou Canada and Shekou USA
and/or Shekou Canada and the ultimate United States buyer, are bona
fide sales such that the price actually paid or payable constitutes
a valid transaction value.
LAW AND ANALYSIS:
As you know, transaction value, the preferred method of
appraisement, is defined in section 402(b) of the TAA as "the price
actually paid or payable for the merchandise when sold for
exportation to the United States..." Thus, there must be a bona
fide sale of the imported merchandise for it to be appraised under
transaction value.
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 from the country of
exportation to the place of importation in the United States) made,
or to be made, for the imported merchandise by the buyer to, or for
the benefit of, the seller."
In J.L. Wood v. U.S., 62 CCPA 25, 33, C.A.D. 1139 (1974), the
court defined the term "sale" as the "transfer of property from one
party to another for consideration." Similarly, section 2-106(1)
of the Uniform Commercial Code ("UCC") defines a "sale" as "the
passing of title from the seller to the buyer for a price".
Although the J.L. Wood case was decided under the appraisement
statute prior to the TAA, Customs has applied this basic concept of
what constitutes a sale under the TAA. See, HRL 544658 (March 26,
1991)
In the instant case, there is no evidence that Shekou USA
exists, except as a paper corporation, and has the capacity to act
as a buyer of the merchandise. All attempts by you to obtain
information concerning Shekou USA's alleged operations went
unanswered. Under the circumstances there is no proof whatsoever
that the merchandise was ever sold from Shekou Canada to Shekou
USA. Accordingly, the only possible sale for exportation would be
that between Shekou Canada and the ultimate United States buyer.
We are satisfied that a bona fide sale for exportation occured
between Shekou Canada and the ultimate United States buyer in those
instances where Shekou shipped the merchandise directly to the
buyer, FOB Vancouver, with title and risk of loss passing to the
buyer at the time the merchandise was placed on the carrier for
shipment to the United States. Under these circumstances, so long
as you were able to determine the price actually paid or payable,
we find that it was proper for you to appraise the merchandise
under transaction value. Thus, where you were provided with the
invoices to the buyer identifying the amount of payment due,
transaction value was appropriate. However, transaction value may
not be used unless there is sufficient information available to
determine the price actually paid or payable; consequently, in
those instances where you were unable to obtain the invoices or
other documentation identifying the price actually paid or payable,
appraisement under transaction value is precluded. In these
instances, you state that you appraised the merchandise under
section 402(f) of the TAA. For the reasons later discussed in this
response, we are unable to determine whether appraisement under
this method was appropriate.
There is no evidence that a sale for exportation existed
between Shekou Canada and the ultimate United States buyer on those
occasions where the merchandise was first shipped to an agent in
the United States. Under these circumstances it is possible that
the sale of the merchandise was not contemplated until some time
after the goods were imported. As a result, merchandise imported
under these conditions must be appraised using a method other than
transaction value.
Where invoices to the buyer identifying the price actually
paid or payable were unavailable and where it could not be
established that a sale for exportation took place prior to the
exportation of the goods, transaction value of the merchandise
cannot be determined. 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)
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. In the event a section 402(d) appraisement is not
possible, then appraisement should proceed under computed value as
defined by section 402(e) provided the statutory requirements of
this section are satisfied. Only if none of the above methods of
appraisement is possible, may you appraise the merchandise in
accordance with section 402(f).
HOLDING:
You are instructed to deny this protest. Under the facts
presented, we find that no bona fide sale occurred between Shekou
Canada and Shekou USA. Where is can be established that a sale for
exportation occurred between Shekou Canada and the ultimate United
States buyer and the price actually paid or payable for the
merchandise is ascertainable, appraisement of the merchandise under
transaction value is proper.
In those instances where a sale for exportation between Shekou
Canada and the ultimate United States buyer cannot be established
or where the price actually paid or payable cannot be ascertained,
transaction value under section 402(b) does not exist. Under these
circumstances the merchandise must be appraised in accordance with
the hierarchal means of appraisement set forth under section 402,
as discussed above.
In accordance with section 3A(11) 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 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
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