VAL R:C:V 545960 EK
District Director
Portland, Maine 10101
RE: Application for Further Review of Protest No. 0101-95-100029; Related Parties;
19 U.S.C. 1401a(f), Value if Other Values Cannot be Determined.
Dear Sir:
This is in response to the application for further review of the protest referenced above.
The protest was filed on behalf of Rainbow Rugs, Inc. (hereinafter referred to as importer) against
your decision in the liquidation of entries of finished and unfinished rugs. The parties are related
within the meaning of section 402(g) of the Tariff Act of 1930, as amended by the Trade
Agreements Act of 1979 (TAA; 19 U.S.C. 1401a(g)).
The imported merchandise was appraised pursuant to section 402(f) of the TAA, i.e., the value if
other methods of appraisement provided for in the TAA cannot be determined.
FACTS:
The importer purchases carpets, both finished and unfinished, from its related party parent
company in Belgium. The finished rugs are packaged separately and are entered into finished
goods inventory for sale. The unfinished rugs are imported in uncut master rolls in various sizes.
The importer then sells the rugs in small quantity sales per order to retailers on an individual store
basis.
Transaction value pursuant to section 402(b) of the TAA was rejected as a means of
appraisement because the importer was unable to prove that the relationship between the parties
did not affect the transfer price. Transaction value of identical and similar merchandise, section
402(c) of the TAA, was inapplicable as well. There was no identical or similar merchandise
available upon which to compare to the importations at issue. In addition, deductive value
pursuant to section 402(d) of the TAA was rejected because Customs determined that the
importer did not sell sufficient
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quantities of merchandise within the time frame criteria set forth under deductive value.
Computed value, section 402(e) of the TAA, was not appropriate since verifying
cost data was not made available to Customs in order to properly appraise pursuant to computed
value. The merchandise was appraised pursuant to section 402(f) of the TAA, a value if other
values cannot be determined.
ISSUE:
Whether the merchandise was properly appraised utilizing section 402(f) of the TAA.
LAW AND ANALYSIS:
Transaction value is defined in section 402(b) of the TAA as the "price actually paid or
payable when sold for exportation to the United States". In a related party sale, the price is
acceptable if an examination of the circumstances of the sale of the imported merchandise
indicates that the relationship between the parties did not influence the price actually paid or
payable, or if the transaction value of the imported merchandise closely approximates a test value,
section 402(b)(2)(B).
As indicated above, transaction value pursuant to section 402(b) of the TAA was rejected
as a means of appraisement. The invoices between the parties indicated a 60 day payment period.
However, according to an audit performed on the company, it was determined that payment was
not made within the 60 days required by the invoices. In fact, the importer did not pay its related
party supplier for the merchandise for an average of 465 days after the invoice date. The importer
was not charged any interest nor did the importer incur any late charges. Subsequent shipments
were not delayed due to such untimely payments. The audit further concluded that the importer
was timely in paying debts owed to unrelated parties. A review of the circumstances of the sale
indicates that the transfer price between the parties was not sufficient to recover all costs plus a
profit that is equivalent to the overall profit of the manufacturer. The related party seller's profit
and general expenses, in unrelated sales of identical or similar rugs, were higher than the profit the
seller claimed to make on sales to the importer.
With regard to the "test value" method of establishing a transaction value, the importer
has submitted computed value data for representative products. There have been no previous
appraisements of identical or similar merchandise on the basis of computed value using the cost
breakdown provided by the importer. A computed value calculation can not serve as a test value
unless that calculation represents an actual appraisement of imported merchandise. See, HQ
543568 dated May 30, 1986; 544686 dated August 31, 1994.
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Since the importer has been unable to demonstrate that the relationship between the
parties did not influence the price actually paid or payable, transaction value is inapplicable.
The next method of appraisement is transaction value of identical or similar merchandise
pursuant to section 402(c) of the TAA. This was rejected due to a lack of identical or similar
rugs to those sold to the importer. The importer has not supplied any evidence of the availability
of a transaction value of identical or similar merchandise.
Deductive value pursuant to section 402(d) of the TAA is the next basis of appraisement.
Essentially, deductive value is the resale price of the goods in the United States, after importation.
However, deductive value was not applicable in this case because the importer did not sell
sufficient quantities of merchandise within the criteria set forth under deductive value. Therefore,
deductive value was inapplicable as well.
The next method of appraisement, computed value under section 402(e) of the TAA, was
rejected due to lack of supporting cost information, i.e., product line profitability statements and
cost and general expenses spread sheets. The importer has not submitted additional information
which would warrant an appraisement pursuant to computed value.
The final method of appraisement is pursuant to section 402(f) of the TAA, i.e., a value if
other values cannot be determined or used. The merchandise was appraised on the basis of a
value derived from the methods set forth in section 402, reasonably adjusted to the extent
necessary to arrive at a value. In accord is 19 CFR 152.107.
While the importer has claimed that the appraisement was contrary to section 402(f)(2) of
the TAA, evidence has not been presented to demonstrate that the appraising officer did other
than to appraise on the basis of a value derived from the
methods set forth in sections 402(b) - (e) of the TAA, reasonably adjusted to the extent necessary
to arrive at a value. (See, section 19 CFR 152.107). Accordingly, we see no basis for concluding
that the merchandise was appraised incorrectly.
HOLDING:
The appraising officer correctly appraised the imported merchandise under section 402(f)
of the TAA. You are directed to DENY this protest in full. In accordance with Section
3A(11)(b) of the Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised
Protest Directive, this decision should be mailed by your office to the
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Protestant no later than 60 days from the date of this letter. Sixty days from the date of this
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